CBK Power Company Limited vs. Commissioner of Internal Revenue

DECISION

I I Before Us is a Petition for Review filed on April 18, 2005 by petitioner CBK Power Company Limited, against respondent Commissioner of Internal Revenue, for the issuance of a tax credit certificate in the amount of TWO

HUNDRED NINETY FIVE MILLION NINE HUNDRED NINETY FOUR

' .

THOUSAND FIVE HUNDRED EIGHTEEN PESOS (P295,994,518.00) allegedly representing unutilized input taxes on local purchases of goods and services attrib[.1table to zero-rated sales for the period covering January 1, 2003 to December 31, 2003 . .. tf"128

THE FACTS

Culled from the parties Joint Stipulation of Facts and Issues (JSFI) submitted on August 10, 2005,¹ these are the facts of the case. Petitioner 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 (NPC) 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. He holds office at the Bureau of Internal Revenue (SIR) National Office Building, Diliman, Quezon City. Petitioner is a special purpose entity and was formed for the sole purpose of engaging in all aspects of (a) the design, financing, construction, testing, commissioning, operation, maintenance, management and ownership 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. It is registered as a valued-added tax (VAT) entity since April 10, 2000, with Tax Identification Nurpber (TIN)NAT No. 205-760-474-000 and BIR Certificate of Registration 1 RC00001 95405. 12D

I

I I

On January 2, 2003, petitioner filed an Application for VAT zero-rate with the BIR which was duly approved on January 29, 2003 pursuant to VAT Review Committee Ruling No. 018-03. During the period from January 1, 2003 to December 31, 2003, petitioner filed with the BIR its Monthly VAT Declarations and Quarterly VAT I Returns. It filed its Original Quarterly VAT Returns for the first, second, third, and fourth quarters of calendar year 2003 on the following dates:2 Quarter Date filed First A12ril 24, 2003 Secofld July 25, 2003 Third October 24, 2003 Fourth January 26, 2004 Subsequently, petitioner amended its Monthly VAT Declarations and · Quarterly VAT Returns for calendar year 2003, wherein the Amended Quarterly VAT Returns reflected unutilized/excess input taxes amounting to P298,430,362.42. Petitioner filed its Amended Quarterly VAT Returns on the following dates:3 Quarter Date filed First June 10, 2003 and March 23, 2005 Second " I March 23, 2005 Third March 23, _2005 Fourth March 23, 2005 On March 29, 2005, petitioner filed with the BIR Revenue District Office (ROO) No. 55 of Laguna an administrative claim for the issuance of a tax credit certificate for a total amount of P295,994,518.00 for its unutilized input taxes on the purchase of capital goods for calendar y 1~ar 2003, amounting to P278,669.281 .1 7, and on its unutilized input taxes on its local purchase of 2 Par. 6, Facts Admitted, Joint Stipulation of Facts and Issues (JSFI); 1Jocket, pp. 304-305. 3 Par. 7, Ibid.; Docket, p. 305. 130 I goods and· services, other than capital goods for calendar year 2003, amounting to P17,325,236.83, attributable to its zero-rated sales.4 To toll the running of the two-year prescriptive period to judicially claim . a tax refund/credit, petitioner filed the instant Petition for Review on April 18, 2005 pursuant to Section 229 of the National Internal Revenue Code (NIRC) of1997.

Respondent, in his Answer filed on June 3, 2005, raised the following Special and Affirmative Defenses: "4. Petitipner's alleged ! claim for refund is subject to administrative routinary investigation/examination by respondent's Bureau;

5. The amount of P295, 994,518.00 being claimed by petitioner as alleged unutilized input taxes for the period January 1, 2003 to December 31 , 2003 was not properly documented;

6. In an action for refund/credit, 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;

7. Petitioner must show that it has complied with the provisions of Sections 204 (C) and 229 of the 1997 Tax Code on the prescriptive period for claiming tax refund/credit;

8. Claims for refund are construed strictly against the claimant for the same partake the 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. Commission,er of Internal Revenue, 124 SCRA 1211)." To support its claim, petitioner pre sen ~ed testin 10nial and documentary evidence. Respondent, on the other hand, submitted the case for decision based on the pleadings as there was no report of investigation in this case. 51 4 Par. 8, Id.; Docket, p. 305. 5 Minutes of the hearing held on January 16, 2008; Docket, p. 94 - •< 131 .

On February 7, 2008, respondent filed his Memorandum, while petitioner filed its Memorandum on March 14, 2008. On March 26, 2008, this case was deemed submitted for decision.6

THE ISSUES

As jointly stipulated by the parties' counsel, these are the issues for this Court's resolution:

"1. Whether or not Petiti'oner is entitl'ed to a tax credit certificate in the amount of P278,669,281 .17 representing unutilized input taxes paid or incurred on its purchases of capital goods for the period January 1, 2003 to December 31 , 2003;

2. Whether or not the unutilized input taxes amounting to P278,669,281 .17 paid or incurred by Petitioner for the period January 1, 2003 to December 31 , 2003 were related to payments to its contractors for the construction of the hydroelectric power plants in L a gur:~a , as well as all related expenditures in pursuance of the rehabilitation, construction and operation of the power plant complex;

3. Whether or not Petitioner is entitled to a tax credit certificate in the amount of P17,325,236. 83 representing unutilized input taxes paid or incurred on its local purchase of goods and services, 'other than capital goods, attributable to Petitioner's zeta-rated sales to the National Power I Corporation (NPC) for the period January 1, 2003 to December 31, 2p03;

4. Whether or not Petitioher's unutilized input taxes amounting to P17,325,236.83 representing unutilized input taxes paid or incurred on its local purchases of goods and services, other than capital goods, for the period January 1, 2003 to December 31 , 2003, were attributable to Petitioner's zero- rated sales for the period January 1, 2003 to December 31 , 2003;

5. Whether or not Petitioner has duly substantiated its claim for the issuance of a tax credit certificate for unutilized input taxes amounting to P278,669,281.17 paid or incurred on its purchases of capital goods for t11e period January 1, 2003 to December 31 , 2003 and for its unutilized input taxes • R"olotion .::do~~:::,,t:

0 :.;1~~~k:: ·:::,:3 representi rig un utilized input~ 13 2 taxes paid or incurred on its local purchases of goods and services, other than capital goods, attributable to its zero- rated sales for the period January 1, 2003 to December 31, 2003;

6. Whether or not the unutilized input taxes amounting to P278,669,281 .17 paid: or incurred by Petitioner on its purchases of capital goods for .the period January 1, 2003 to December 31, 2003 and the unutilized input taxes amounting to P17,325,236.83 representing unutilized input taxes paid or incurred by Petitioner on its local purchases of goods and services, other than capital goods, for the period January 1, 2003 to December 31 , 2003 have not been carried over to the succeeding guarters and have not been utilized against any output ta·x;

7. If any portion of Petitioner's unutilized input taxes paid or incurred on its purchases of capital goods amounting to P278,669,281 .17 for the period January 1, 2003 to December 31, 2003, is disallowed for not falling under the category of 'capital goods' under Section 112(B) of the Tax Code, whether or not Petitioner is entitled to claim the same as a tax credit under Section 112(A) of the Tax Code, as unutilized/excess input taxes paid or incurred on its local purchases of goods and services for the period January 1, 2003 to December 31, 2003 attributable to its zero-rated sales for the same period;

8. Whether or not Petitioner had timely and duly filed its administrative claims for refund or issuance of tax credit certificates amounting to P27S,669,281 .17 representing unutilized input taxes paid or incurred on its purchases of capital goods for the period January 1, 2003 to December 31, 2003; and for P17,325,236. 83 representing unutilized input taxes paid or incurred on its local purchase of goods and services, other than capital goods, attributable to Petitioner's zero-rated sales to the National Power Corporation (NPC) for the period January 1, 2003 to December 31 , 2003, respectively; and

9. Whether or not Petitioner is entitled to a tax credit certificate in the total amount of Two Hundred Ninety Five Million Nine Hundred Ninety Four Thousand Five Hundred Eighteen Pesos (P295,994,518.00) representing unutilized input taxes for the period January 1, 2003 to December 31, 2003."7 1 Issues to be Tried or Resolved, JSFf; Docket, pp. 306-307. 133 The foregoing issues can be summarized as follows: whether or not petitioner is entitled to the issuance of a tax credit in its favor in the amount of Two Hundred Ninety Five Million Nine Hundred Ninety Four Thousand Five Hundred Eighteen Pesos (P295,994,51 8.00), representing unutilized input taxes on its domestic purchases ·of capital goods and services for the period from January 1, 2003 to December 31 , 2003. Thus, We shall discuss all the foregoing stipulated issuesjointly.

THE COURT'S RULING

At the outset, it bears stressing that based on the records of this case, petitioner filed with the Bl R its Quarterly VAT Returns declaring zero-rated sales in the amount of P3,560,865,265.70 and input VAT of P243,043,717.78 on domestic purchases of capital goods and other goods and services for the four quarters of calendar year 2003, detailed as follows: I Taxable Date of Original Exhibit Quarter Filing Zero-rated .Sales Input VAT I 1st Quarter 4/24/2003 p 846,754,206.25 p 89,337,364.16 L 2nd Quarter 7/25/2003 824,090,126.80 39,124,833.77 N 3rd Quarter 10/24/2003 874,449,852.69 109,637,087.89 p 4th Quarter 1/26/2004 1,015,571,079.96 49,444,319.56 Total p 3,560,865,265. 70 p 287,543,605.38 The VAT Return for the first quarter was aJllended on June 10, 2003,8 and was further amended on March 23, 2005 along with the remaining VAT Returns, showing the following: Taxable .·Exhibit Quarter Date of Filing Zero-rated Sales Input VAT K 1st Quarter 3/23/2005 p 846,754,206.25 p 113 795,651.09 M 2nd Quarter 3/23/2005 824,090,126.80 23,823,726.33 0 3rd Quarter 3/23/2005 874,449,852.69 109,637,087.89 Q 4th Quarter 3/23/2005 1.015,571,079.96 49,268,644.26 Total p 3,560,865,265. 70 p 296,525,109.57 8 Exhibit "J".

,,

·Page 8 of22 Out of the reported input VAT of P296,525, 109.57, only the amount of P295,994,518.00 is the subject of the present claim which allegedly consisted of the following:

Input VAT Domestic purchases-Capital Goods p 278,669,281 .17 Domestic purchases-Other Goods/Services 17,325,236.83 TOTAL p 295,994,518.00 Now proceeding with the discussion on the merits of this case, petitioner anchors its claim on Sections 11 O(B) and 112(A) and (B) of the NIRC of 1997, quoted hereunder for ready reference: "SEC. 110. Tax Credits. - (A) Creditable Input Tax. -

(1) Any input tax evidenced by a VAT invoice or official receipt issued in accordance witl1 Section 113 hereof on the following transactions shall be creditable against the output tax: XXX XXX XXX (B) Excess Output or Input Tax. - If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the VAT-registered person. 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 may at his option be refunded or credited I against other internal revenue taxes, subject to the provisions of Section 112."

"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) yea'rs 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 b~en applied against output tax: Provided, however, That in the case of zero- - 13:l I' rated sales under Section 1 06(A)(2)(a)(1 ),(2) and (B) and Section 1 08(8)(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 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 volume of sales. ~ {B) Capital Goods. - A VAT-registered person may apply for the issuante of a tax credit certificate or refund of input taxes paid on capital goods imported or locally purchased, to the extent that such input taxes have not been applied against output taxes. The application may be made only within two (2) years after the close of the taxable quarter when the importation or purchase was made." Petitioner avers that if ever any portion of its tax credit claim for unutilized input taxes on the purchase of capital goods for calendar year 2003 amounting to P278,669,281 .17 is disallowed for not falling under the category of "capital goods" under Section 112(8) of the NI RC of 1997, petitioner is entitled to claim the same as a tax crediUrefund undm Section 112(A) of the NIRC of 1997 because these unutilized input taxes of P278,669,281 .17 were also attributable to petitioner's effectively zero-rated sales to the NPC for calendar year 2003. 9 In this regard, the Court deems it appropriate to first .

I discuss petitioner's claimed input taxes on domestic purchases of capital goods in the amount of P278,669,281 .17. Under Section 112(8) of the NIRC of H ~97, in order to be entitled to a refund or tax credit of input tax on dom, •;'cic purchases of capital goods, petitioner must prove the following:

1. that it is a VAT-registered entity; ) 9 Par. 37, Petitioner's Memorandum; Docket, p. 991. 136

2. that input taxes were paid on capital goods imported or locally purchased;

3. that such input taxes were not applied against. any output VAT liability; and

4. that the claim for refund was filed within the two-year prescriptive period.

It is an admitted fact that petitioner is a VAT-registered entity.10 And in order to prove that it incurred input taxes in the amount of P278,669,281 .17 on capital goods purchased, petitioner submitted a schedule of capital goods 11 and suppliers' official receipts, 12 which were examined by the Court-commissioned Independent CPA, Uy Singson Abella & Co, through its partner, Ms. Milagros F. Padernal. Based on the Report13 of Ms. Padernal, petitioner's claim for refund of . input taxes on purchases of capital goods in the aggregate amount of P278,669,281 .17 is broken down qS follows: I Quarter I Input Tax First p 109,227,373.86 Second 20,798;387.69 Third 104,974,132.54 Fourth 43,669,387.08 TOTAL p 278,669,281.17 The foregoing allegedly represents payments to the following local contractors for the construction of hydroelectric power plants in Laguna (Caliraya, Botocan, Kalayaan I and Kalayaan II):

1. IMPSA Construction Corporation - for the design, engineering, procurement, supply of all plants and materials, rehabilitation, commissioning, testing, completion and handover of the power 10 Par. 5, Facts Admitted, JSFI; Docket, p. 304. II Exhibit "JJJJJJ".

plants, together with the civil structures, access roads and other works·14 '

2. EME Philippine Services Corporation - for the administration and oversight of the engineering, procurement, rehabilitation, construction, commissioning, testing and completion and start up of the power plants; and 15

3. Asian Insights, Inc. - for the review of all land acquisition documents of NPC covering the entire lots comprising the site of such power plants aad other related services.16 According to Ms. Padernal, during the construction period, all billings received from these contractors were booked as "Construction in Progress (CIP)", consisting of the following accounts in the general ledger: (a) Constructio'n Work in Progress, which ,was used for billings from IMPSA Construction Corporation; and (b) Project Cost, which was used for billings from other contractors. Cl P was reflected under Property, Plant and Equipment in the financial statements. Once a particular power plant unit was completed, the accumulated amount reflected in the related CIP was transferred to the Power Plants account under Property, Plant and Equipment and depreciated over a period of 25 years.17 I Petitioner submitted a schedule showing how the purchases of capital goods were recorded in the general ledger.18 And this was explained by Mr. I Joey L. Polintan, petitioner's Accounting Manager, in the following manner: "14. The payments to Petitioner's contractors and/or billings by its contractors and/or suppliers of capital goods were reflected under the Property, Plant and Equipment (PPE) of P22,727,867,516 in the Statement of Assets, Liabilities and Partners' Capital as of Oe'cember 31, 2003 xxx of the Audited 14 Exhibit "E".

15 Exhibit "F".

16 Exhibit "G".

17 Exhibit "N6", Summary of Findings, par. 13. 18 Exhibits "JJJJJJ" to "JJJJJJ-5 1 ". 138

Financial Statements for the Period Ending December 31, 2003, previously marked as Exhibit 'MM', and in Note 5 to the said Audited Financial Statements under the Power Plants of P23,277,889,825.

15. The said payments to Petitioner's contractors and/or suppliers of capital goods for the rehabilitation and construction of (Petitioner's) Power PIC~nt in Laguna, excluding VAT, are ·initially recorded under the asset account Construction Work in . Progress, more sp~cifically under CWIP-I<alayaan I Unit 1, Kalayaan I Unit 2, Kalayaan II, Kalayaan II Unit 1, Kalayaan II Unit 2, Caliraya, Caliraya Unit ·1, Caliraya Unit 2, Botocan, Botocan Unit 1, Botocan Unit 2, Botocan Unit 3, and Civil Structures. xxx" 19 For easy reference, Note 5 to petitioner's audited financial statements for the period ending December 31, 200320 is shown below: Net Additions/ 2003 (Transfers_}_ 2002 Power plants p 23,277,889,825 p 17,197,618,984 p 6,080,270,841 Transportation equipment 10,674,926 668,183 10,006,743 Computer equipment 7,660,876 1,784,554 5,876,322 Leasehold improvements 2,656,992 - 2,656,992 Furniture & fixtures 657,034 192,720 464,314 Power plant tools & equipment 456,383 224,983 231,400 ..

p 23,299,996,036 p 17,200,489,424 p 6,099,506,612 Accumulated Depreciation 572,128,520 380,481,500 191 ,647,020 p 22,727,867,516 p 16,820,007,924 p 5,907,859,592 Construction in progress: Kalayaan -

p. (10,613,089,004) p 10,613,089,004 Botocan - (1 ,941 ,364,225) 1,941,364,225 Civil works - (595,491 ,498) 595,491 ,498 - p (13,149,944,727) p 13,149,944,727 p 22,727,867,516 p 3,670,063,197 p 19,057,804,319 Mr. Polintan also stated that upon completion of each unit of the power plants, the CWIP accounts were closed and subsequently transferred to petitioner's PPE accounts. Thereafter, recognition of depreciation expenses commenced. The corresponding accumulated depreciation were recorded in 19 Exhibit "UUUUUU".

20 Exhibit "MM", p. 6. 139 petitioner's general ledger under Accumulated pepreciation-Kalayaan I Unit 1, Kalayaan I Unit 2, Kalayaan II, Caliraya Unit 1, Caliraya Unit 2, Botocan, and Civil Structures. 21 A scrutiny of the documents presented revealed that petitioner's total payments to and/or billings by its contractors and/or suppliers of capital goods for the rehabilitation and construction of its power plants in the year 2003 amounted to P2,786,692,811.84. The foregoing payments to contractors were verified to have been properly recorded as assets in petitioner's general ledger. However, the Court could not ascertain whether such payments were indeed reported in the financial statements. Petitioner failed to provide a detailed schedule of each of its account under "Property, Plant and I Equipment" so that the correspbnding payments to and/or billings by its contractors and/or suppliers of capital goods could be accounted for and reconciled.

The Independent CPA likewise found that the claimed input tax on purchase of capital goods in the amount of P1 ,407,094.56 22 should be disallowed for petitioner's failure to present VAT official receipts as supporting documents.

Hence, even if petitioner's remaining claimed input VAT on capital goods in the amount of P277,262, 186.61 23 is duly substantiated with VAT official receipts, the same shall be denied because petitioner failed to prove that the related purchases formed part of the account under "Property, Plant and Equipment" as reflected in its audited financial statements for calendar year 2003.

2 1 Exhibits "PPPPPP" and "QQQQQQ". 22 Exhibit "DDDDDD".

23 Exhibit "N6", Summary o.f Findings, par. 12. :

\ 4 0 .

Nevertheless, as correctly pointed out by petitioner, petitioner may still claim the substantiated input taxes on purchases of capital goods under Section 112(A) of the NIRC of 1997, since the said input taxes are also attributable to petitioner's z;ero-:~ted sales f?r calendar year 2003. The Court shall now determine whether petitioner complied with the requisites under Section 112(A) of the NIRC of 1997, in o_rder to be entitled to a refund or tax credit of input VAT payments attributable to its zero-rated sales, to wit: 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.

Anent the first requisite, there is no argument that the sale of electricity by a VAT registered taxpayer, li~e herein petitioner, to the NPC is subject to zero percent (0%) VAT pursuant to Section 108(8)(3) of the NIRC of 1997. This Issue has been well-settled in the case of Maceda vs. Macaraig, G.R. No. 88291, May 31, 1991, where the Supreme Court held that: ~ "The NPC is a non-profit public corporation created for the general good and welfare, wholly owned by the government of the Republic of the Philippines. From the very beginning of its corporate existence, the NPC enjoyed preferential tax treatment, 'to enable the Corporation to pay the indebtedness and obligation and in furtherance and effective implementation of the policy enunciated in Section one of Republic Act No.

6395' XXX

XXX XXX XXX Presidential Decree No. 938 amended the tax exemption by simplifying the s·ame law in general terms. It ~;uccinct ly exempts NPC from 'all forms of taxes, duties, fees, imposts, as well as 14 1 costs and service fees including filing fees, appeal bonds, supersedeas bonds, in any, court or administrative proceedings'. I .

The use of the phrase 'all forms' of taxes demonstrate the intention of the law to give NPC all the tax exemptions it has been enjoying before. The rationale for this exemption is that being non-profit the NPC 'shall devote all its returns from its capital investment as well as excess revenues of its operation, for expansion. xxx' XXX XXX XXX It is evident from the provisions of P. D. No. 938 that its purpose is to maintain the tax exemption of NPC from all forms of taxes including indirect taxes as provided for under R.A. No. 6395 and P.O. No. 380 if it is to attain its goals." (Underscoring supplied) Moreover, in the same case, NPC's tax exemption was affirmed and further explained as follows: "A chronological review of the NPC laws will show that it has been the lawmaker's intention that the NPC was to be completely tax-exempt from all forms of taxes - direct or indirect.

XXX XXX XXX One common theme in all these laws is that the NPC must' be enabled to pay its indebtedness which, as of P.O. No. 938 was P1 2 Billion in total domestic indebtedness, at any one time, and US$4 Billion in total foreign loans at any one time. The NPC ·must be and has to be exempt from all forms of taxes if this goal is to be achieved." 24 As a matter of fact, the Secretary of Finance, in his Memorandum to the CIR dated January 26, 1998, upheld NPC's exemption from both direct and indirect taxes, and said that purchases by NPC of electricity from independent power producers are subject t~ VAT at zero-rate. From the foregoing jurisprudence, the Court has consistently ruled that the NPC is an entity with a special charter, which categorically makes it I

exempt from payment of 911 taxes, whether direct or indirect, including VAT. Hence, by virtue of the said charter, services rendered by a VAT-registered entity, like herein petitioner, to NPC are effectively subject to zero percent (0%) VAT.

Moreover, the BIR itselfapproved petitioner's application for zero-rating on January 29, 2003.25 It was also established that petitioner entered into a Second Accession Undertaking with the NPC and its affiliates, lndustrias Metalurgicas · Pescarmona S.A. (IMPSA) and CBK Power Corporation (CBK Power) on September 20, 2000, 26 wherein petitioner · became a party to a Build- · I Rehabilitate-Operate-Transfer (BF~.OT) Agreement dated November 6, 1998 to rehabilitate, construct, operate, and maintain the Caliraya, Botocan, and Kalayaan hydroelectric power plants in tile Province of Laguna. 27 Under the BROT Agreement, petitioner shall generate and supply electricity to NPC and shall receive fees in consideration thereof. 28 Likewise, in its Amended VAT Returns for the four quarters of calendar year 2003, petitioner's reported zero-rated sales/receipts amounted to P3,560,865,265.70. 29 In order to support this, petitioner presented a Schedule of Zero-rated Sales and Collections for calendar year 2003 30 with the corresponding invoices,31 bank credit advices, 32 and official receipts.

33 A

25 Exhibits "JJ" and "KK"; par. 10; Facts Admitled, JSFI; Docket, p. 305. j 26 Exhibit "D".

27 Exhibit "C".

28 Exhibit "C-6".

29 Exhibits "K", "M", "0 ", and "Q". 30 Exhibit "BBBBBB".

31 ExJ1ibits "BBBBBB-1 " to "BBBBBB-160": 32 Ex.J1ibits "BBBBBB-la" to "BBBBBB- IOa". 33 Exhibits "BBBBBB-lb" to "B13BBBB-114b". 142 !

·) y

I scrutiny of the foregoing documents shows th.at the official receipts issued by petitioner to NPC amounting to P115,561 ,550.82 do not bear the word "zero- rated" 34 in violation of the substantiation requirements under Section 4.108-1 of Revenue Regulations No. 7-95 in relation to Sections 113 and 237 of the " NIRC of 1997, quoted hereunder as follows: "SECTION 4.108-1. Invoicing Requirements- All VAT registered persons shall, for every sale or lease of goods or properties or services, issue duly registered receipts or sales or commercial invoices which must show:

1. the name, TIN and address of seller;

2. date of transaction;

3. quantity, unit ·cost and description of merchanqise or nature of service;

4. the name, TIN , business style, if any, and address of tile VAT -registered purchaser, customer or client;

5. the word 'zero-rated' imprinted on the invoice covering zero-rated sales; and

6. the invoice value or consideration. XXX XXX XXX Only VAT -registered persons are required to print their TIN followed by the word 'VAT' in their invoice or receipts and this shall be considered as a 'VAT Invoice'. All purchases covered by invoices other than 'VAT Invoice' shall not give rise to any input tax.

If the taxable person is engaged in exempt operations, he should issue separate invoices or receipts for the taxable and exempt operations. A 'VAT Invoice' shall be issued only for sales of goods, properties or services subject to VAT imposed in Section 1 00 and 1 02 of the Code. " "SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons.- (A) Invoicing Requirements. - A VAT -registered person shall, for every sale, issue an invoice or receipt. In addition to the information required under Section 237, the following information shall. be indicated in the invoice or receipt: 34 Seedetails perAnnex"A- l". 143 #'

(1) A statement that the seller is a VAT-registered person, followed by his taxpayer's identification number (TIN); and I

(2) The total a moun~ which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax." "SEC.

237.

Issuance of Receipts or Sales or Commercial Invoices. - All persons subject to an internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service. xxx" Hence, said amount shall be disallowed. Only the reported zero-rated receipts in the amount P2,651 ,928,988.85 is duly substantiated with VAT zero-rated official receipts. 35 Therefore, only a portion of the input VAT claim attributable to the substantiated zero-rated receipts will be considered for refund. The rate to be applied is comp.uted as follows:

Supported zero-rated receipts p 2,651,928,988.85 Divided by total declared zero-rated receipts + p 3 560 865 265.70 Rate of supported zero-rated receipts 14:.41% Regarding the second requisite, petitioner submitted invoices and official receipts to support its purchases of goods other than capital goods and services for calendar year 2003, with corresponding input VAT in the aggregate amount of P17,325,236.83. Upon verification of the said documents, the Court-commissioned Independent CPA noted the following exceptions:36 35 See detai ls f..er Annex "A-2". 14 4

,

Finqings Exhibit Purchase of services Amount VAT ORs not dated within the period of claim EEEEEE-246 and EEEEEE-915 to 927 p 68,492.06 VAT ORs issued not in the name of Petitioner' FFFFFF No VAT ORs were presented Purchase of goods No VAT invoices were presented TOTAL GGGGGG

IIIII I

36,249.87 1 ,310,614.00 196 083.80 p 1.611,4J.W Further evaluation of petitioner's suppliers' official receipts and invoices revealed that the following aqditional input taxes in the amount of P2,928,631 ~ 58 should be disallowed for the following reasons: 37 Purchase of Services 1.) Supported by ORs issued not in the name of Petitioner P 2,037,868.38 2.) Supported by OR with TAN , not registered with the BIR or with no indicated date 183,471.03 I 3.) Supported by documents other than ORs Purchase of Goods 4.) Supported by invoices issued not in the name of Petitioner 5.) Supported by invoices with TIN-V instead of TIN-VAT 6.) Supported by invoices with stamped VAT registration only 7.) Supported by non-VAT invoices or BIR unregistered invoices 8.) Purchase of services included in the schedule and no official receipts were presented TOTAL 85,191 .30 46,570.63 68,377.49 61,865.76 385 ,558.21 59 728.78 Accordingly, petitioner's claim should be reduced by P5,947, 165.87, detailed as follows:

Disallowances per CPA report Purchase of capital goods: No VAT ORs were presented Purchase of services: ORs not dated within the period of claim ORs issued not in the name of Petitioner No VAT ORs were presented Purchase of goods other than capital goods: No VAT invoices were pr.esenteci · Add'l Disallowances per this Court's-verification Purchase of Services: Supported by ORs issued not in the name of Petition .er Supported by OR with TAN, not registered with 1.he 37 See details per Annex "B". 145 p 1,407,094.56 68,492.06 36,249.87 1,310,614.00 196 083.80 p 2,037,868.38 p 3,018,534.29

BIR, or with no indicated date Supported by documents other than ORs Purchase of Goods:

Supported by invoices issued not in the name of Petitioner · Supported by invoices with TIN-V instead of TIN-VAT Supported by invoices with stamped VAT registration only Supported by non-VAT invoices or .I?IR unregisterep invoices Purchase of services included in the schedule and no official receipts were presented TOTAL 183,471.03 85, 191.30 46,570.63 68,377.49 61,865.76 385,558.21 59 728.78 2 928 631.58 p 5.947 165.87 As regards the third and fourth requisites, the Court finds that all of petitioner's · input taxes are attributable to its zero-rated sales. All of petitioner's sales were zero-ratecj, 38 and there was no output VAT thereon; thus, the input taxes were not applied against any output VAT liability. The said unutilized input VAT was not carried over to the succeeding taxable quarters, as evidenced by its VAT Returns for the four quarters of calendar year 2004.39 Finally, with respect to the fifth requisite, petitioner filed its administrative claim for refund With the BIR on March 29, 2005 40 and this Petition for Review on April 18, 2005. Both dates of filing are within the two- . year period from the respective dates when petitioner filed its Original First, Second, Third, and Fourth Quarterly VAT Returns on April 24, 2003, July 25, 2003, October 24, 2003, and January 26, 2004, respectively. 41 In sum, petitioner has sufficiently proven its entitlement to the issuance I of a tax credit certificate, representing unutilized excess input VAT on local pLJ.rcllases of goods and services attributable to zero-rated sales for the period 38 Exhibits "K", "M", "0", "Q", and "LL". 39 ExJ1ibits "CCC" "ODD" "000" "PPP" "QQQ" " IUUZ" "SSS" and "TTT" 40 Exhibit "A".

' ' , , ' , ' .

covering January 1, 2003 to December 31, 2003, but in the reduced amount of P215,998,263.13, computed as follows: Amount of Input VAT Claim p 295,994 518.00 Less: Disallowances 5 947 165.87 Validly supported Input VAT p 290,047,352.13 Rate of supported zero-rated sales 74.47% Valid input VAT attributable to zero-rated sales p 215 .9.98..263.13

WHEREFORE, -premises considered, the instant Petition for Review is PARTIALLY GRANTED. Accordingly, r~ spondent is hereby ORDERED to ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the reduced amount of TWO HUNDRED FIFTEEN MILLION NINE HUNDRED NINETY EIGHT THOUSAND TWO HUNDRED SIXTY THREE PESOS and 13/100 (P215,998,263.13), representing unutilized input value-added tax on local purchases of goods and services attributable to zero-rated sales for the period covering January 1, 2003 to December 31, 2003.

WE CONCUR:

Q~~~ c. C~cA Cl.

<tuA.NIIo c. cAS'TANEDA, JR-.- Associate Justice 147 ~RIQUEZ Associate Justice

I >

ATTESTATION I attest that the conclusions in til e above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

~~C-~~Sl..

WANITO C. CASTANEDA, ffR .. Associate Justice Chairperson CERTIFICATION I Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, it is hereby ce rti~ed 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. 148 ~lp_. ~ ERNESTO D. ACOSTA Presiding Justice CBK Power Company Ltd. vs CIR

A1mex A-1 Page I of I OFFICIAL RECEIPTS THAT DO NOT BEAR THE 'VORD "ZERO-RATED" Exhibit OR Number OR Date Amount BBBBBB-54b 349 6/3/2003 p 632,676.73 BBBBBB-56b 339 6/2/2003 632,676.73 BBBBBB-57b 348 6/2/2003 9,878,638.37 BBBBBB-59b 346 6/2/2003 9,864,333.76 BBBBBB-60b 340 6/2/2003 640,346.72 BBBBBB-61b 342 6/2/2003 640,876.59 BBBBBB-62b 343 6/2/2003 640,876.59 BBBBBB-64b 344 6/2/2003 9,473,195.09 BBBBBB-65b 345 6/2/2003 9,528,076.81 BBBBBB-66b 336 6/2/2003 9,391,345.83 BBBBBB-67b 338 6/2/2003 9,391,345.83 BBBBBB-68b 337 6/2/2003 631,379.81 BBBBBB-69b 335 6/2/2003 631,679.81 BBBBBB-70b 353 6/25/2003 .

10,069,326.10 BBBBBB-71b 355 6/25/2003 1,076,870.41 BBBBBB-72b 354 6/25/2003 1,078,089.68 BBBBBB-73b 359 7/25/2003 9,635,095.77 BBBBBB-74b 360 7/25/2003 9,635,095.77 BBB~BB-75b 357 7/25/2003 648,074.89 BBBBBB-76b 358 7/25/2003 648,074.89 I BBBl3BB-80b 365 8/27/2003 9,741,505.13 BBBBBB-81b 362 8/27/2003 9,741,505.13 BBBBBB-82b 363 ' 8/27/2003 655,232.19 BBBl3BB-83b 364 8/27/2003 655 232.19 TOTAL p 115,561,550.82 t CBK Power Company Ltd. vs CIR Annex A-2

SUBSTANTIATED ZERO-RATED SALES

I OR Amount Exhibit Number OR Date US Dollars Ph Peso BBBBBB-1b 43 2/27/2003 $ 2,160,410.63 p 116,227,931.48 BBBBBB-2b 44 2/27/2003 2,153,775.89 115,870,9~9.11 BBBBBB-3b 50 6/3/2003 1,073,048.00 57,728,9Q9.36 BBBBBB-4b 54 6/11/2003 1,034,818.96 55,672,225.18 BBBBBB-5b 53 6/3/2003 12,090,830.96 657,076,208.53 BBBBBB-6b 107 10/16/2003 10,240.35 556,511.82 .

BBBBBB-7b 55 6/11/2003 :

:

804,558.39 43,723,725.72 BBBBBB-8b 108 10/16/2003 12,509.70 669,669.26 BBBBBB-9b 56 6/25/2003 2,171,823.16 115,719,081.61 BBBBBB-10b 57 6/25/2003 2,130,158.28 113,498,827.06 BBBBBB-11b 58 6/25/2003 227,810.58 12,138,203.32 BBBBBB-12b 59 6/25/2003 228,068.52 12,151,946.88 BBBBBB-13b 60 7/25/2003 1,994,160.00 107,098,356.96 BBBBBB-14b 61 7/25/2003 1,994,160.00 107,098,356.96 BBBBBB-15b 62 7/25/2003 134,131.00 7,203,639.49 BBBBBB-16b 63 7/25/2003 134,131.00 71203,639.49 BBBBBB-17b 68 9/10/2003 17,474.62 938,491.94 BBBBBB-18b 69 9/10/2003 17,373.72 933,073.00 BBBBBB-19b 70 9/10/2003 124.24 6,672.43 .

I BBBBBB-20b 74 9/22/2003 104,847.71 5,734,016.41 BBBBBB-21b 75 9/?,2/2003 104,242.34 5,700,909.33 BBBBBB-22b 76 9/22/2003 1,863.59 101,917.87 BBBBBB-23b 84 9/25/2003 1,994,160.00 110,161,386.72 BBBBBB-24b 85 9/25/2003 1,994,160.00 110,161,386.72 BBBBBB-25b 86 9/25/2003 134,131.00 7,409,664.70 BBBBBB-26b 87 9/25/2003 134,131.00 7,409,664.70 BBBBBB-27b 88 9/25/2003 104,847.71 5,791,997.19 BBBBBB-28b 89 9/25/2003 104,242.34 5,758,555.34 BBBBBB-29b 90 9/25/2003 1,863.59 102,948.43 BBBBBB-30b 100 10/28/2003 1,9()4,160.00 109,766,543.04 BBBBBB-31b 101 10/28/2003 1,994,160.00 109,766,543.04 .

BBBBBB-32b 102 10/28/2003 1 34,131.00 7,383,106.76 l BBBBBB-33b 103 10/28/2003 'L34, 131.QQ 7,383,106.76 BBBBBB-34b 104 10/28/2003 104,847.71 5,771,237.35 BBBBBB-35b 105 10/28/2003 104,242.34 5,737,915.36 BBBBBB-36b 106 10/28(2003 1,863.59 102,579.45 BBBBBB-37b 116 11/28/2003 1,994,160.00 110,360,802.72 BBBBBB-38b 122 12/1/2003 1,994,160.00 110,360,802.72 BBBBBB-39b 117 11/28/2003 134,131.00 7,423,077.80 BBBBBB-40b 118 11/28/2003 134,131.00 7,423,077.80 BBBBBB-41b 119 11/28/2003 104,847.71 5,802,481.97 BBBBBB-42b 120 11/28/2003 104,242.34 5,768,979.58 BBBBBB-43b 121 11/28/2003 1,863.59 103,134.80 BBBBBB-44b 130 12/29/2003 1,994,160.00 110,973,009.84 BBBBBB-45b 131 12/29/2003 1,994,160.00 110,973,009.84 .

BBBBBB-46b 132 12/29/2003 134,131.00 7,464,256.02 t I 150;

CBK Power Company Ltd. vs CIR Annex A-2

Exhibit OR Amount Number OR Date US Dollars Ph Peso BBBBBB-47b 133 12/29/2003 134,131.00 7,464,256.02 BBBBBB-48b 134 12/29/2003 104,847.71 5,834,670.21 BBBBBB-49b 135 12/29/2003 104,242.34 5,800,981.98 BBBBBB-SOb 136 12/29/2003 1,863.59 103,7q6.92 BBBBBB-51b 52 6/6/2003 4,884,7q5.45 BBBBBB-52b 41 2/27/2003 10,190,347.68 BBBBBB-53b 42 2/ 27/2003 10,155,052.58 BBBBBB-55b 51 6/6/2003 3,775,136.99 BBBBBB-58b 91 10/20/2003 48,887.82 BBBBBB-63b 92 10/20/2003 59,771.23 BBBBBB-77b 65 9/10/2003 84,431.34 BBBBBB-78b 66 9/10/2003 83,943.85 BBBBBB-79b 67 9/10/2003 600.28 BBBBBB-84b I 71 9/17/2003 512,182.83 .

BBBBBB-85b 72 9/17/2003 509,225.58 BBBBBB-86b 73 9/17/2003 9,103.67 BBBBBB-87b 83 9/25/2003 10,033,632.00 BBBBBBc88b 77 9/25/2003 10,033,632.00 .

BBBBBB-89b 78 9/25/(003 674,881.20 BBBBBB-90b 79 9/25/2003 674,881.20 BBBBBB-91b 80 9/25/2003 527,542.09 BBBBBB-92b 82 9/25/2003 524,496.17 BBBBBB-93b 81 9/25/2003 9,376.67 BBBBBB-94b 98 10/27/2003 9,988,629.68 BBBBBB-95b 99 10/27/2003 9,988,629.68 BBBBBB-96b 96 10/27/2003 671,854.26 BBBBBB-97b 97 10/27/2003 671,854.26 BBBBBB-98b 93 10/27/2003 525,175.99 .

BBBBBB-99b 94 10/27/2003 522,143.73 BBBBBB-100b 95 10/27/2003 9,334.61 BBBBBB-101b 109 11/17/2003 10,051,795.05 BBBBBB-102b 110 11/27/2003 10,051,795.05 BBBBBB-103b 115 11/27/2003 676,102.88 BBBBBB-104b 114 11/27/2003 676,102.88 BBBBBB-105b 113 11/27/2003 528,497.06 BBBBBB-106b 112 11/27/2003 525,445.62 BBBBBB-107b 111 11/27/2003 9,393.64 BBBBBB-108b 123 12/30/2003 10,098,701.36 BBBBBB-109b 124 12/30/2003 10,098,701.36 BBBBBB-110b 128 12/30/2003 679,257.89 BBBBBB-111b 129 12/30/2003 679,257.89 BBBBBB-112b 125 12/30/2.003 530,963.27 BBBBBB-113b 126 12/30/2003 527,897.59 BBBBBB-114 b 127 12/ 30/2003 9 437.48 TOTAL p 2,651,928,988.85 ;

15 1 CBK Power Company Ltd. vs CIR

DISALLOWANCES PER COURT'S VERIFICATION

OR[Invoice Ex h.

Date Supplier Purchase of Services 1.) Supported by ORs issued not in the name of Petitioner EEEEEE-55 1/27/2003 PLDl' p EEEEEE-69 2/10/2003 SMART Moves Consulting EEEEEE-162 3/14/2003 Mondial Tours & Travel EEEEEE-179 3/21/2003 Mondial Tours & Travel EEEEEE-286 4/22/2003 High Grip Auto Center EEEEEE-307 4/30/2003 Servicio Filipino, Inc: EEEEEE-370 5/21/2003 Sycip, Salazar, Hernandez & Gatmaitan EEEEEE-371 5/21/2003 Sycip, Salazar, Hernandez & Gatmaitan EEEEEE-372 5/21/2003 Sycip, Salazar, Hernandez & Gatmaitan EEEEEE-373 5/21/2003 Sycip, Salazar, Hernandez & Gatmaitan EEEEEE-377 5/23/2003 Makati Shangri-La, Manila EEEEEE-379 5/23/2003 Webpower Internet Service Provider EEEEEE-380 5/23/2003 Webpower Internet Service Provider EEEEEE-381 5/23/2003 Webpower Internet Service Provider EEEEEE-382 5/23/2003 Webpower Internet Service Provider EEEEEE-383 5/23/2003 Webpower Internet Service Provider EEEEEE-384 5/23/2003 Webpower Internet Service Provider EEEEEE-385 5/25/2003 Banahaw Telephone Corp. EEEEEE-454 6/18/2003 Sycip, Salazar, Hernandez & Gatmaitan EEEEEE-455 6/18/2003 Sycip, Salazar, Hernandez & Gatmaitan EEEEEE-456 6/18/2003 Sycip, Salazar, Hernandez & Gatmaitan EEEEEE-469 6/25/2003 Pagsanjan Rapids Hotel EEEEEE-470 6/25/2003 Pagsanjan Rapids Hotel EEEEEE-486 7/1/2003 Pacific Internet EEEEEE-488 7/2/2003 Servicio Filipino, Inc. EEEEEE-490 7/3/2003 Pagsanjan Rapids Hotel EEEEEE-491 7/3/2003 Pagsanjan Rapids Hotel EEEEEE-540 7/16/2003 Servicio Filipino, Inc. EEEEEE-564 7/24/2003 Banahaw Telephone Corp. EEEEEE-570 7/28/2003 Sycip, Salazar, Hernandez & Gatmaitan EEEEEE-571 7/28/2003 Sycip, Salazar, Hernandez & Gatmaitan EEEEEE-584 7/30/2003 Pacific Internet EEEEEE-601 8/7/2003 Reign - ~an Sales Industry EEEEEE-616 8/18/2003 Sycip, Salazar, Hernandez & Gatmaitan EEEEEE-617 8/18/2003 Sycip, Salazar, Hernandez & Gatmaitan EEEEEE-618 8/18/2003 Sycip, Salazar, Hernandez & Gatmaitan EEEEEE-619 8/18/2003 Sycip, Salazar, Hernandez & Gatmaitan EEEEEE-623 8/19/2003 Reign-Nan Sales Industry EEEEEE-685 9/12/2003 Mapecon Philippines, Inc. EEEEEE-686 9/12/2003 Mondial Tours & Travel EEEEEE-741 9/30/2003.

Mondial Tours & Travel EEEEEE·742 9/30/2003 Pacific Internet EEEEEE-745 9/30/2003 1 Sycip, Salazar, Hernandez & Gatmaitan EEEEEE-746 9/30/2003 Sycip, Salazar, Hernandez & Gatmaitan EEEEEE-747 9/30/2003 Sycip, Salazar, Hernandez & Gatmaitan EEEEEE-748 9/30/2003 Sycip, Salazar, He1nandez & Gatmaitan 152 Annex B Page 1 of7 I nput VAT 262.43 25,000.00 14,429.82 32,406.14 575.91 24,395.45 263,921.97 917.09 3,676.00 270.50 4,330.27 180.00 130.00 180.00 130.00 302.47 180.00 65.48 596.35 95,811.12 119,409.73 2,656.23 419.50 5,346.50 32,527.27 33.48 3.60 17,962.92 65.48 79,147.75 25,706.38 5,346.50 12,890.00 4,569.35 31,035.99 326,424.17 6,762.12 6,561.22 18,181.82 17,307.11 17,307.11 5,346.50 24,216.54 15,660.71 1,735.28 33,,05.4' t AnnexB Page 2 of7 I EEEEEE-758 10/2/2003 Pagsanjan Rapids Hotel 163.64 EEEEEE-766 10/20/2003 Pagsanjan Rapids Hotel 58.68 EEEEEE-774 10/10/2003 Manila Bulletin 1,798.40 EEEEEE-781 10/22/2003 Infinity Security & Investigation Services 60,908.38 EEEEEE-782 10/22/2003 Sycip, Salazar, Hernandez & Gatmaitan 189,635.63 EEEEEE-783 10/22/2003 Sycip, Salazar, Hernandez & Gatmaitan 3,081.12 EEEEEE-784 10/22/2003 Sycip, Salazar, Hernandez & Gatmaitan 10/989.75 EEEEEE-811 11/6/2003.

Infinity Security & Investigation Services 66,568.23 EEEEEE-813 11/7/2003 Explorer Freight Corporation 4,873.12 EEEEEE-829 11/24/2003 Sycip, Salazar/ Hernandez & Gatmaitan 9,134.99 EEEEEE-830 11/24/2003 Sycip1 Salazar/ Hernanqez & Gatmaitan 39,957.67 EEEEEE-831 11/24/2003 Sycip1 Salazar/ Hernandez & Gatmaitan 482.68 EEEEEE-850 11/28/2003 Webpower Internet.Service Provider 180.00 EEEEEE-851 11/28/2003 Webpower Internet Service Provider 180.00 EEEEEE-852 11/28/2003 Webpower Internet Service Provider 180.00 EEEEEE-853 11/28/2003 Webpower Internet Service Provider 214.10 EEEEEE-854 11/28/2003 Webpower Internet Service Provider 180.00 EEEEEE-855 1:)./28/2003 Webpower Internet Service Provider 180.00 EEEEEE-856 11/28/2003 Mondial Tours & Travel 5,288.44 EEEEEE-865 12/2/2003 Pacific Internet 5,346.50 EEEEEE-886 12/15/2003 Sycip, Salazar, Hernandez & Gatmaitan 277,035.96 EEEEEE-887 12/15/2003 Sycip 1 Salazar, Hernandez & Gatmaitan 964.69 EEEEEE-888 12/15/2003 Sycip, Salazar, Hernandez & Gatmaitan 6,011.04 EEEEEE-889 12/15/2003 Sycir,>, Salazar, Hernardez & Gatmaitan 13.76 EEEEEE-890 12/15/2003 Sycip 1 Salazar, Hernandez & Gatmaitan 6,003.33 EEEEEE-891 12/15/2003 Mondial Tours & Travel 6,505.06 EEEEEE-902 12/22/2003 Infinity Security &'Investigation Services 22,784.12 EEEEEE-903 12/22/2003 Infinity Security & Investigation Services 9,812.87 EEEEEE-904 12/22/2003 Infinity Security & Investigation Services 21,323.40 EEEEEE-905 12/22/2003 Infinity Security & Investigation Services 10 223.12 TOTAL p 2,037,868.38 2.) Supported by DRs with TAN unregistered OR (without BIR authority to print number) or undated OR EEEEEE-67 2/5/2003 R. Samonte Enterprises p 8,016.58 EEEEEE-137 3/4/2003 R. Samonte Enterprises 5,454.55 EEEEEE-229 3/31/2003 R. Samonte Enterprises 18,705.36 EEEEEE-301 4/28/2003 R. Samonte Enterprises 12,727.27 EEEEEE-244 4/16/2003 Rockwell Land Corp.

135,567.27 EEEEEE-648 Punongbayan & Araullo 3 000.00 TOTAL p 183,471.03 3.) Supported by other documents other than an OR EEEEEE-48 1/27/2003 Globe Telecom p 215.47 EEEEEE-49 1/27/2003 Globe Telecom 88.75 EEEEEE-50 1/27/2003 1 Globe Telecom 87.74 EEEEEE-51 1/27/2003 Globe Telecom 205.42 EEEEEE-52 1/27/2003 Globe Telecom 395.55 EEEEEE-53 1/27/2003 Globe Telecom 476.78 EEEEEE-54 1/27/2003 Globe Telecom 10229;

EEEEEE-96 2/17/2003 Globe Telecom 262.82 15 3' AnnexB Page 3 of7 EEEEEE-97 2/17/2003 Globe Telecom 72.60 EEEEEE-104 2/20/2003 Globe Telecom 528.36 EEEEEE-105 2/20/2003 Globe Telecom 251.83 EEEEEE-106 2/20/2003 Globe Telecom 86.15 EEEEEE-107 2/20/2003 Globe Telecom 220.68 EEEEEE-108 2/20/2003 Globe Telecom 266.68 EEEEEE-125 2/28/2003 PLDT 2,813.00 EEEEEE-126 2/28/2003 PLOT 2,527.29 EEEEEE-127 2/28/2003 PLOT 136.52 EEEEEE-128 2/28/2003 PLOT 136.52 EEEEEE-129 2/28/2003 PLOT 136.52 EEEEEE-130 2/28/2003 PLOT 189.69 EEEEEE-150 3/11/2003 Globe Telecom 72.60 EEEEEE-165 3/20/2003 Globe Telecom 72.60 EEEEEE-166 3/20/2003 Globe Telecom 342.92 EEE!=EE-167 3/20/2003 Globe Telecom 287.94 EEE~EE-168 3/20/2003 Globe Telecom 209.36 EEEEEE-182 3/24/2003 Globe Telecom 105.65 EEEEEE-183 3/24/2003 Globe ~elecom 72.60 EEEEEE-184 3/24/2003 Globe Telecom 274.34 EEEEEE-185 3/24/2003 Globe Telecom 186.28 EEEEEE-186 3/24/2003 Globe Telecom 504.68 EEEEEE-187 3/24/2003 Globe Telecom 270.79 EEEEEE-188 3/24/2003 Globe Telecom 368.84 EEEEEE-223 3/31/2003 Globe Telecom 72.60 EEEEEE-224 3/31/2003 PLOT 135.27 EEEEEE-225 3/31/2003.

PLOT 135.27 E~EEEE-226 3/31/2003 PLOT 135.27 EEEEEE-227 3/31/2003 PLOT 175.35 EEEEEE-228 3/31/2003 PLOT 1,899.94 EEEEEE-233 4/3/2003 Globe Telecom 121.00 EEEEEE-234 4/3/2003 Globe Telecom 346.86 EEEEEE-247 . 4/4/2003 Globe Telecom 83.71 EEEEEE-281 4/21/2003 Globe Telecom 72.60 EEEEEE-282 4/21/2003 Globe Telecom 226.16 EEEEEE-283 4/21/2003 Globe Telecom 169.00 EEEEEE-288 4/24/2003 Globe Telecom 143.70 EEEEEE-289 4/24/2003 Globe Telecom 131.56 EEEEEE-290 4/24/2003 Globe Telecom 239.19 EEEEEE-291 4/24/2003 Globe Telecom 233.09 EEEEEE-292 4/24/2003 Globe Telecom 154.00 EEEEEE-293 4/24/2003 Globe Telecom 72.60 EEEEEE-294 4/24/2003 Glob~ Telecom 91.22 EEEEEE-295 4/24/2003 1 Globe Telecom 64.96 EEEEEE-296 4/25/2003 PLOT 2,813.00 EEEEEE-308 5/5/2003 Globe Telecom 72.60 EEEEEE-309 5/5/2003 Globe Telecom 161.66 EEEEEE-310 5/5/2003 PLOT 2,386.76 EEEEEE-311 5/5/2003 PLOT 137.14 EEEEEE-312 5/5/2003 PLOT 176.61 EEEEEE-313 5/5/2003 PLOT 154 137.14 I \ ' Annex B Page 4 of7 EEEEEE-314 5/5/ 2003 PLOT 137.14 EEEEEE-351 5/16/2003 Globe Telecom 177.87 EEEEEE-352 5/16/2003 Globe Telecom 193.06 EEEEEE-353 5/16/2003 Globe Telecom 187.96 EEEEEE-354 5/16/2003 Globe Telecom 72.60 EEEEEE-356 5/20/2003 Globe Telecom 161.20 EEEEEE-357 5/20/ 2003 Glooe Telecom 216.35 EEEEEE-358 5/20/2003 Globe Telecom 230.94 EEEEEE-359 5/20/ 2003 Globe Telecom 135.55 EEEEEE-360 5/20/ 2003 Globe Telecom 199.00 EEEEEE-:361 5/20/2003 Globe Telecom 77.69 EEEEEE-362 5/20/2003 Globe Telecom 81.79 EEEEEE-363 5/20/2003 Globe Telecom 160.29 EEEEEE-364 5/20/2003 Globe Telecom 74.10 EEEEEE-390 5/26/ 2003 PLOT 2,813.00 EEEEEE-407 6/3/2003 Globe Telecom 72.60 EEEEEE-408 6/3/ 2003 Globe Telecom 186.76 EEEEEE-409 6/3/2003 PLOT 1,973.60 EEEEEE-410 6/3/2003 PLOT 323.48 EEEEEE-411 6/3/2003 PLOT 134.11 EEEEEE-412 6/3/2003 PLOT 173.18 EEEEEE-413 6/3/2003 PLOT 134.11 EEEEEE-421 6/17/2003 Globe Telecom 362.49 EEEEEE-422 6/ 17/2003 Globe Telecom 72.60 EEEEEE-423 6/17/2003 Globe Telecom 239.55 EEEEEE-459 6/ 24/2003 Globe Telecom 173.95 EEEEEE-460 6/ 24/2003 PLOT 2,813.00 EEEEEE-461 6/24/ 2003 PLOT !

2,522.12 EEEEEE-462 6/24/2003 PLOT 183.26 EEEEEE~463 6/24/2003 PLOT 130.02 EEEEEE-464 6/24/2003 PLOT 130.02 EEEEEE-465 6/24/ 2003 PLOT 130.02 EEEEEE-476 6/30/2003 Globe Telecom 261.21 EEEEEE-477 6/30/2003 Globe Telecom 213.95 EEEEEE-478 6/30/2003 Globe Telecom 325.58 EEEEEE-479 6/30/2003 Globe Telecom 280.96 EEEEEE-480 6/30/2003 Globe Telecom 137.57 EEEEEE-481 6/30/2003 Globe Telecom 291.12 I EEEEEE-482 6/30/2003 Globe 1 elecom 80.87 EEEEEE-483 6/30/ 2003 Globe Telecom 72.60 EEEEEE-484 6/30/2003 Globe Telecom 198.90 EEEEEE-500 7/8/ 2003 Globe Telecom 218.37 EEEEEE-501 7/8/2003 Globe Telecom 72.60 EEEEEE-541 7/17/2003 Globe Telecom 265.79 EEEEEE-542 7/17/2003 Globe Telecom 223.51 EEEEEE-543 7/17/2003 I Globe Telecom 123.44 EEEEEE-544 7/ 17/2003 Globe Telecom 72.60 EEEEEE-567 7/25/2003 PLOT 2,813.00 EEEEEE-572 7/29/2003 Globe Telecom 278.02 EEEEEE-573 7/29/2003 Globe Telecom 243.79 EEEEEE-574 7/29/2003 Globe Telecom 422.98 t 15 5 I I AnnexB Page 5 of7 EEEEEE-575 7/29/2003 Globe Telecom 365.97 EEEEEE-576 7/29/2003 Globe Telecom 322.17 EEEEEE-577 7/29/2003 Globe felecom 289.58 EEEEEE-578 7/29/2003 Globe Telecom 72.60 EEEEEE-579 7/29/2003 Globe Telecom 72.60 EEEEEE-580 7/29/2003 Globe Telecom 160.44 EEEEEE-587 8/4/2003 PLOT 132.73 EEEEEE-588 8/4/2003 PLOT 132.73 EEEEEE-589 8/4/2003 PLOT 132.73 EEEEEE-590 8/4/2003 .

PLOT 172.31 EEEEEE-591 8/4/2003 PLOT 2,394.45 EEEEEE-593 8/5/2003 Globe Telecom 90.20 EEEEEE-598 8/7/2003 Globe Telecom 72.60 EEEEEE-599 8/7/2003 Globe Telecom 118.92 EEEEEE-609 8/15/2003 Globe Telecom 215.75 EEEEEE-610 8/15/2003 Globe Telecom 183.38 EEEEEE-611 8/15/2003 Globe Telecom 72.60 EEEEEE-612 8/15/2003 Globe Telecom 247.52 EEEEEE-624 8/20/2003 Globe Telecom 100.81 EEEEEE-625 8/20/2003 Globe Telecom 330.88 EEEEEE-626 8/20/2003 Globe Telecom 276.84 EEEEEE-627 8/20/2003 Globe Telecom 233.48 EEEEEE-628 8/20/2003 Globe Telecom 649.74 EEEEEE-629 8/20/2003 Globe Telecom 277.03 EEEEEE-630 8/20/2003 Globe Telecom 91.84 EEEEEE-631 8/20/2003 Gloqr; Telecom 93.61 EEEEEE-632 8/20/2003 Globe Telecom 154.97 EEEEEE-634 8/21/2003 Globe Telecom 125.25 EEEEEE-639 8/26/2003 PLOT 2,813.00 EEEEEE-660 9/3/2003 Globe Telecom 125.56 EEEEEE-663 9/5/2003 PLOT 136.09 EEEEEE-664 9/5/2003 PLOT 136.09 EEEEEE-665 9/5/2003 PLOT 136.09 EEEEEE-666 9/5/2003 PLOT 177.04 EEEEEE-667 9/5/2003 PLOT 2,161.36 EEEEEE-669 9/9/2003 Globe Telecom 72.60 EEEEEE-694 9/17/2003 Globe Telecom 248.38 EEEEEE-718 9/18/2003 Globe Telecom 109.14 EEEEEE-719 9/18/2003 Globe Telecom 152.75 EEEEEE-724 9/23/2003 Globe Telecom 60.47 EEEEEE-725 9/23/2003 Globe Telecom 72.60 EEEEEE-726 9/23/2003 Globe Telecom 123.05 EEEEEE-738 9/26/2003 PLOT 2,813.00 EEEEEE-760 10/3/2003 PLOT 2,402.37 EEEEEE-761 10/3/2003 PLOT 185.80 EEEEEE-762 10/3/2003 PLOT 137.11 EEEEEE-763 10/3/2003 PLOT 137.11 EEEEEE-764 10/3/2003 PLOT .

137.11 EEEEEE-798 11/5/2003 Globe Telecom 223.13 EEEEEE-799 11/5/2003 Globe Telecom 183.92 EEEEEE-800 11/5/2003 Globe Telecom 109.30 EEEEEE-801 11/5/2003 PLOT 2,813.00 15G j I .' Annex B Page 6 of7 EEEEEE-802 11/5/2003 PLDT 138.99 EEEEEE-803 11/5/2003 PLDT 138.99 EEEEEE-804 11/5/2003 PLDT 207.24 EEEEEE-805 11/5/2003 PLPT 2,2(51.68 EEEEEE-806 11/5/2003 PLDT 138.99 EEEEEE-834 11/25/2003 Globe Telecom 172.54 EEEEEE-835 11/25/2003 PLDT 5,813.00 EEEEEE-862 12/2/2003 PLDT 138.79 EEEEEE-863 12/2/2003 PLDT 207.04 EEEEEE-864 12/2/2003 PLDT , 2,384.47 EEEEEE-866 12/5/2003 Globe Telecom 269.46 EEEEEE-876 12/10/2003 Globe Telec9m 41.83 EEEEEE-877 12/10/2003 Globe Telecom 215.07 EEEEEE-897 12/19/2003 Globe Telecom 151.70 EEEEEE-898 12/19/2003 PLDT 2,600.60 EEE~EE-899 12/19/2003 PLDT 2,813.00 EEEEEE-900 12/19/2003 PLDT 138.07 EEEEEE-901 12/19/2003 PLDT 222.25 TOTAL p 85,191.30 Purchase of Goods I 4.) Supported by invoices issued not in the name of Petitioner HHHHHH-7 1/7/2003 Earth Gold Mdse Const. Supply p 640.91 HHHHHH-141 6/9/2003 Martin's Car Accessories 1,740.00 HHHHHH-229 7/31/2003 VMA Home Appliances Co. 4~5.45 HHHHHH-256 8/25/2003 Workstation Designers Center 17,288.64 HHHHHH-257 8/25/2003 Workstation Designers Center 4,637.45 HHHHHH-262 8/28/2003 Gencars-San P\'lblo, Inc. 21 818.18 TOTAL p 46,570.63 5.) Supported by invoices with TIN-Vonly HHHHHH-137 6/2/2003 HMN Unlimited Company p 16,734.45 HHHHHH-171 3/26/2003 HMN Unlimited Company 670.00 HHHHHH-254 8/25/2003 HMN Unlimited Company 377.09 HHHHHH-273 9/4/2003 HMN Unlimited Company 18,186.36 HHHHHH-276 9/8/2003 HMN Unlimited Company 337.82 HHHHHH-347 6/30/2003 HMN Unlimited Company 635.91 HHHHHH-421 12/5/2003 HMN Unlimited Company 785.46 HHHHHH-437 12/15/2003 HMN Unlimited Company 17,150.40 HHHHHH-461 8/15/2003 Arvir Aluminum & Glass 13 500.00 TOTAL p 68,377.49 6.) Supported by invoices with stamped VAT registration only HHHHHH-64 2/12/2003 RVG Merchandising p 6,363.64 HHHHHH-85 4/2/2003 RVG Merchandising 790.91 HHHHHH-248 8/18/2003 1 RVG Merchandising 263.64 HHHHHH-271 9/2/2003 RVGMerchandising 3,822.73 HHHHHH-272 9/2/2003 RVG Merchandising 8,150.00 HHHHHH-283 9/23/2003 RVG Merchandising 2,481.82 HHHHHH-323 6/18/2003 RVG Merchandising 2,636.36 HHHHHH-324 6/18/2003 RVG Merchandising 12,318.18 HHHHHH-339 6/23/2003 RVG Merchandising 743.02 HHHHHH-348 6/30/2003 RVG Merchandising 527.27 HHHHHH-354 10/8/2003 RVG Merchandising 3,454.55 rJ' 157 / HHHHHH-386 10/28/2003 RVG Merchandising HHHHHH-398 11/10/2003 RVG Merchandising HHHHHH-402 11/12/2003 RVG Merchandising HHHHHH-412 11/24/2003 RVG Merchandising HHHHHH-418 12/1/2003 RVG Merchandising HHHHHH-504 9/24/2003 RVG Merchandising TOTAL 7.) Supported by non-VAT invoices or with no BIR authority to print number (not duly registered) HHHHHH-207 7/14/2003 FFC Equipment Parts Supply, Inc. HHHHHH-Z95 5/14/2003 FFC Equipment P<!rts Supply, Inc. HHHHHH-345 6/26/2003 FFC Equipment Pa1ts Supply, Inc. HHHHHH-259 8/27/2003 SFM Sales Corporation HHHHHH-261 8/28/2003 Business Profiles In<;. HHHHHH-414 11/27/2003 Business Profiles Inc. TOTAL 8.) Purchase of services included in the schedule and no official receipts were presented HHHHHH-33 HHHHHH-230 HHHHHH-277 +!23/2003 8/ 1/2003 9/9/2003 Reign-Nan Sales Industry Rodier Engineering & Supplies Poly-Core Elect. Cons. Corp. TOTAL

TOTAL DISALLOWANCE PER COURT'S VERI FICATION

158 AnnexB Page7of7 1,472.73 2,727.27 4,909.09 2,181.82 2,545.46 6 477.27 p 611865.76 p 10,040.45 1,554.55 57,832.73 66,818.18 88,346.76 160 965.54 p 3851558.21 p 12,890.00 29,909.92 16 928.86 p 591728.78 p 2,9281631.58 rl'