Aegis Peoplesupport, et al. vs. Commissioner of Internal Revenue

DECISION

Page 2 of 29

Petitioner seeks the refund or the issuance of a tax credit certificate (TCC) in the amount of Thirty-Eight Million

Eighty-Seven

Thousand

Eight

Hundred

Fifty-Four and

48/100 Pesos (P38,087,854.48), representing alleged excess payment of corporate income tax for calendar year (CY) 2008.

Petitioner Aegis PeopleSupport, Inc. is a domestic corporation duly organized and existing under the laws of the Republic of the Philippines, with principal office at PeopleSupport Center, Ayala Ave. corner Senator Gil Puyat Ave., Makati City. 3 It is registered with the Bureau ofc

(a) Exclusive original over or appellate jurisdiction to review by appeal the following:

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XXX

(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code or other applicable law provides a specific period for action: Provided, that in case of disputed assessments, the inaction of the Commissioner of Internal Revenue within the one hundred eighty day-period under Section 228 of the National Internal Revenue Code shall be deemed a denial for purposes of allowing the taxpayer to appeal his case to the Court and does not necessarily constitute a formal decision of the Commissioner of Internal Revenue on the tax case; Provided, further, that should the taxpayer opt to await the final decision of the Commissioner of Internal Revenue on the disputed assessments beyond the one hundred eighty day-period abovementioned, the taxpayer may appeal such final decision to the Court under Section 3(a), Rule 8 of these Rules;

XXX

XXX

Rule 8. Sec. 4. Where to appeal; mode of appeal.- (a) An appeal from a decision or ruling or the inaction of the Commissioner of Internal Revenue on disputed assessments or claim for refund of internal revenue taxes erroneously or illegally collected, the decision or ruling of the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade & Industry, the Secretary of Agriculture, and the Regional Trial Court in the exercise of their original jurisdiction, shall be taken to the Court by filing before it a petition for review as provided in Rule 42 of the Rules of Court. The Court in Division shall act on the appeal.

XXX

XXX

Aegis Peoplesupport, Inc. v. CIR

Internal Revenue (BIR) as an income taxpayer under Certificate of Registration No. OCN 8RC00000212864 and as a bona fide

Board

of

Investments

(BOI)-registered enterprise with Certificate of ITH Entitlement CE No. 2008- 000145. 5 Petitioner's primary purpose is to engage in the business of customer support services by providing information and database service on the internet including web-based applications in the Philippines and providing or furnishing any and all forms or types of services, data and facilities relating to providing information on consumer products and services through the internet; and otherwise, to carry on and conduct a general business relating to internet services. 6 It is likewise a Philippine Economic Zone Authority (PEZA)-registered Ecozone IT (Export) Enterprise7 with Registration Certificate No. 03-17-IT8 dated August 12, 2003.

Respondent is the duly appointed Commissioner of the Bureau of Internal Revenue empowered to perform the duties of said office including, among others, the power to decide, approve and grant refunds or tax credits of erroneously or excessively paid taxes, as provided by law. She holds office at the BIR National Office Building, Agham Road, Diliman, Quezon City.

Petitioner and

PEZA

entered into a

Registration

Agreement9 for the establishment of a contact center at

Asiatown

IT Park

on

August

12, 2003 and several Supplemental Agreements10 for the creation of new contact centers at PeopleSupport Center 6780 Ayala, at the 2nd, 3rd, 4th, and 5th Floors of Skyrise Plaza, Asiatown IT Park, and at the 11th and 12th Floors of 6780 Ayala on July 14, 2005, May 15, 2007, and June 4, 2009, respectively. As such, PEZA issued Notice of Approval of SCO No. 07-130 on Septemberc

Aegis Peoplesupport, Inc. v. CIR

7, 2007, 11 Notice of Approval of SCO No. 07-173 on December 11, 2007/2 Notice of Approval of SCO No. 08-008 on January 21, 2008, 13 Notice of ITH Extension Approval No. 08-015 on March 7, 2008, 14 Notice of Approval of SCO NO. 10-087 on September 17, 2010/5 and a Letter dated June 20, 2006. 16 Petitioner derived its service fees from services rendered to United States (US)-based clients of its mother company, PeopleSupport, Inc. (PSI-US). The functional currency of these clients is denominated in US Dollar (USD). Since USD was the currency that mainly influences the source of revenues of petitioner, it changed its functional currency from Philippine Peso to USD in calendar year 2007. 17 On July 20, 2007, the Securities and

Exchange

Commission (SEC) noted petitioner's Filing of Functional Currency Financial Statements. 18 On December 3, 2008, petitioner amended its Articles of Incorporation changing its name from PeopleSupport (Philippines), Inc. to Aegis PeopleSupport, Inc. 19 Petitioner filed its 1st, 2nd, and 3rd Quarterly Income Tax Returns for calendar year 2008 through Electronic Filing and Payment System (eFPS) on May 28, 2008, August 29, 2008, and November 27, 2008, respectively. 20 Payments were made through Authorized Agent Banks (AABs) for the 1st and 2nd quarters, while payment for the 3rd quarter was mad through Tax Debit Memo (TDM). 21 Further, it submitted it

Aegis Peoplesupport, Inc. v. CIR

Annual Income Tax Return through eFPS on April 13, 2009,22 and amended it twice on April 30, 2009 and May 29, 2009. 23 On April 11, 2011, petitioner claimed a refund for the alleged erroneous or illegal payment of its income tax for calendar year 2008 with the BIR. 24 Due to the inaction of respondent on the administrative claim, petitioner was constrained to file this instant Petition for Review on April 13, 2011. 25 Respondent filed her Answer26 on June 7, 2011, interposing the following special and affirmative defenses: "9.

Petitioner's alleged claim for refund is subject to administrative routinary investigation/examination by the Bureau of Internal Revenue.

10. Petitioner miserably failed to show that the amount of Thirty Eight Million Eighty-Seven Thousand

Eight

Hundred

Fifty-Four

and 48/100

Pesos

(Php38,087,854.48) being claimed by petitioner pertains to income tax erroneously and/or excessively paid on the realized foreign gains, which is the subject of this claim for refund.

11. Taxes paid and collected are presumed to have been paid in accordance with law; hence, not refundable.

12. Petitioner must prove that it has complied with the provisions of Section 229, in relation to Section 204, of the National Internal Revenue Code (NIRC) of 1997, as amended, quoted hereunder, to wit:

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XXX

22 Exhibit "J", Docket, p. 391.

23 Exhibit " K" and "L", Docket, pp. 398-400 and 401-403. 24 Exhibit "GG, Docket, pp. 473-480. 25 Petition for Review, Docket, pp. 4-21. 26 Docket, p. 117- 122.

xxx. C

Aegis Peoplesupport, Inc. v. CIR

13. Petitioner must prove that the alleged excess income tax payments were erroneously or illegally collected.

14. Moreover, 'claims for refund or tax credit,' to say the least, 'are strictly construed 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. COMMISSIONER OF INTERNAL REVENUE, 124 SCRA 121).

15. In an action for refund/tax credit, the onus probandi is on the taxpayer to establish its right to refund/tax credit, and failure to sustain the burden is fatal to its claim for refund/tax credit (ASIATIC PETROLEUM CO. VS. LLANES, 49 PHIL. 466 cited in

COLLECTOR

OF INTERNAL

REVENUE

VS.

MANILA JOCKEY CLUB, INC. 98 PHIL. 670).

XXX

XXX

XXX."

Petitioner filed its Pre-Trial Brief27 on July 18, 2011; while Respondent's Pre-Trial Brief28 was filed on July 20, 2011.

On August 15, 2011, the parties submitted their Joint Stipulation of Facts and Issues29 and the Court approved it on August 17, 2011. 30 On the same date, the Court terminated the pre-trial and ordered the parties to proceed with the trial proper.

During trial, petitioner presented Ariel Carpio, Maria Ciara A. Locsin, Katherine 0. Constantino, and Atty. Ray-An Francis V. Baybay as its witnesses. c

Aegis Peoplesupport, Inc. v. CIR

Petitioner formally offered Exhibits "A" to "EEEE-1", which the Court admitted except Exhibits "UU-1" to "UU-4",

"EEE-17" "EEE-18"

and "VVV-17" to "VVV-116" as per

' ' Resolution 31 dated May 21, 2012. On June 7, 2012, petitioner filed a motion for the reconsideration of the Resolution dated May 21, 2012 and to re-open the case. Acting on the said motion and considering respondent's comment thereto, the Court resolved to grant the reopening of the case and to recall petitioner's witness; thus, the resolution of petitioner's Motion for Reconsideration was held in abeyance. 32 On August 30, 2012, petitioner filed its Supplemental Formal Offer of Evidence. Subsequently, the Court granted petitioner's Motion for Reconsideration and admitted the aforesaid denied exhibits on September 19, 2012. 33 Petitioner filed anew the Motion for Leave to Re-open Case34 on October 19, 2012, which the Court granted in its Resolution35 dated December 19, 2012. Petitioner then presented additional witnesses, namely: Arsyl Tolentino and Genly Manrisa. Petitioner also submitted a Second Supplemental Formal Offer of Evidence on March 5, 2013.

The Court, in its Resolution36 dated March 27, 2013, admitted all the pieces of evidence submitted by way of its Supplemental Formal Offer of

Evidence

except Exhibits "GGGG-9", "GGGG-10", and "GGGG-39".

Petitioner's documentary exhibits are as follows:

Exhibit

Description

A

Petitioner's Amended Articles of Incorporation

dated

December

3, 2008 with

Certificate of Filing of Amended

31 Resolution dated May 21, 2012, Docket, pp. 519-520. 32 Resolution dated July 30, 2012, Docket, pp. 572-574. 33 Resolution dated September 19, 2012, Docket, pp. 596-598. 34 Docket, pp. 601-607.

35 Resolution dated December 19, 2012, Docket, pp. 619-621. 36 Docket, pp. 934-935.

attached

Articles of

Aegis Peoplesupport, Inc. v. CIR

Incorporation issued by the Securities and Exchange Commission (SEC) on December 24, 2008

B

Petitioner's Amended Certificate of Registration

issued by the Bureau of Internal Revenue (BIR) c

Certificate of Income

Tax

Holiday

(ITH)

Entitlement No. 2008-000145 dated March 24, 2008, issued by the Board of Investments

(BOI)

D

Petitioner's Amended Certificate of Registration

No. 03-17-IT, dated January 29, 2010, issued

by the Philippine Economic Zone Authority

(PEZA)

E

Certification dated January 21, 2008 signed by Ms. Mary Harriet 0. Abordo, PEZA's Deputy

Director General for Operations

F

Letter

from the

Office

of the

General

Accountant of the Securities and Exchange

Commission (SEC) dated July 20, 2007

G

Memorandum Circular No.

2005-032 dated September 15, 2005 issued by the Philippine

Economic Zone Authority

H

BIR Ruling No. DA-195-08, dated March 25, 2008

I

BIR Ruling No. DA-375-08, dated June 20, 2008

J

Petitioner's Original Annual Income Tax Return

(ITR) for CY 2008, filed via BIR's electronic filing and payment system (eFPS) on April 13, 2009 with

Filing

Reference

No.

120900002892804

K

Petitioner's First Amended Annual ITR for CY

2008, filed via BIR's eFPS on April 30, 2009 with Filing Reference No. 120900002932998

L

Petitioner's Second Amended Annual ITR for CY

2008, filed via BIR's eFPS on May 29, 2009 with Filing Reference No. 120900002995372

N

Registration Agreement dated August 12, 2003 between PEZA and Petitioner 0 Supplemental Agreement between PEZA and Petitioner dated June 6, 2007 p Supplemental Agreement between PEZA and Petitioner dated May 15 2007

Q

Supplemental Agreement between PEZA and Petitioner dated May 15, 2007

R

Supplemental Agreement between PEZA and Petitioner notarized on July 14, 2005 s Supplemental Agreement between PEZA and Petitioner dated June 4, 2009

T

Notice of ITH Extension Approval No. 08-015 dated March 07, 2008, issued by PEZA u

Notice of Approval of Start of Commercial

Operations (SCO) 07-173 dated December 11,

Aegis Peoplesupport, Inc. v. CIR

2007, issued by PEZA v Notice of Approval of sea 07-130 dated September 7, 2007, issued by PEZA w Notice of Approval of SCO No. 08-008, dated January 21, 2008, issued by PEZA

X

Letter from Ms.

Mary Harriet 0 . Abordo,

Deputy Director General for Operations of

PEZA, dated June 20, 2006, addressed to Mr. Noel Legaspi, Finance Director of the Petitioner y Notice of Approval of sea 10-087 dated September 17, 2010, issued by PEZA z Amended Sworn Statement of Mr. Ariel Carpio to questions propounded by Atty.

Ray-an

Francis V. Baybay dated September 22, 2011

Z-1

Signature of Mr. Ariel Carpio

AA

Petitioner's Quarterly ITR for the 1st quarter of CY 2008, filed via BIR's eFPS on May 28, 2008

BB

Petitioner's Quarterly ITR for the 2nd quarter of CY 2008, filed via BIR's eFPS on August 29, 2008 cc Petitioner's Quarterly ITR for the 3rd quarter of CY 2008, filed via BIR's eFPS on November 27, 2008

DD

eFPS Payment Details with Filing Reference No. 130800002264768

GG

Petitioner's administrative claim for refund of erroneously or illegally paid income tax for CY 2008 filed with the BIR's Large Taxpayers Services (BIR-LTS) on April 11, 2011

GG-1

Signature of " Martin Ignacio D. Mijares"

HH

Sworn Statement of Ms. Maria Ciara A. Locsin to questions propounded by Atty.

Ray-an

Francis V. Baybay dated October 12, 2011

II

Report of the Independent Certified Public

Accountant

(!CPA) commissioned by the

Honorable Court

JJ

Amended Annual ITR for CY 2008, together with

Audited

Financial

Statements

and

Statement of Reconciliation of Net Income per

Books against Taxable Income, manually filed on May 5, 2009

KK

Reconciliation of service fees of Expedia, Inc. reported in the general ledger and amount shown in the detailed schedule

LL

Petitioner's

Permit to Adopt

Computerized

Books of Account

MM

Petitioner's trial balance for CY 2008 (in US Dollars with Philippine translation) 00-1 to Credit advices issued by Citibank N.A. 00-4 pp

Schedule of Gain/Loss on Forward Exchange

Contracts settlement

QQ

General

Ledger/Trial

Balance

on

Foreign

Aegis Peoplesupport, Inc. v. CIR

Exchange Gain realized from hedging

RR

General Ledger/Trial Balance on unrealized foreign exchange loss on hedging ss

Petitioner's Bank Statement for CY 2008 (in US

Dollar)

TT

Petitioner's Bank Statement for CY 2008 (in

Philippine Peso)

UU-1 to

Documents supporting the Spot Rates used in

UU-4

calendar year (CY) 2008 vv

General

Ledger of service revenues from PeopleSupport, Inc.

ww General Ledger of service revenues from JP Morgan Chase Bank, N.A.

XX

General

Ledger of service revenues from Expedia, Inc.

yy

General Ledger of Commission Income

zz

Schedule

of service fees paid by PeopleSupport Inc. to Petitioner

AAA

Schedule of service fees paid by JP Morgan Chase Bank, N.A. to Petitioner

BBB

Schedule of service fees paid by Expedia, Inc.

to Petitioner

CCC-1

Service

agreements executed between

to CCC-

Petitioner and its customers, namely: 3

(a) PeopleSupport, Inc.;

(b) J.P. Morgan Chase Bank, N.A.; and

(c) Expedia, Inc.

DDD-1

Sales invoices for CY 2008

to DDD-

208

EEE-1

Credit Memos for CY 2008 issued by Petitioner

to EEE-

16

EEE-17

Credit Memo No.

CRM0000120

issued on August 19, 2008

EEE-18

Credit Memo

No.

CRM0000121

issued on August 19, 2008

EEE-19

Credit Memo for CY 2008 issued by Petitioner

FFF- 1 to

Certificate of inward remittances and customer

FFF-30

advices of remittance, issued by Citibank, N.A.

GGG

Petitioner's Quarterly Value-Added Tax (VAT)

Return for the 1st quarter of CY 2008

HHH

Petitioner's Quarterly VAT Return for the 2nd quarter of CY 2008

III

Petitioner's Quarterly VAT Return for the 3rd quarter of CY 2008

JJJ

Petitioner's Quarterly VAT Return for the 4th quarter of CY 2008

KKK

Summary of payments made by Petitioner in the 1st quarter of CY 2008 denominated in

Philippines Peso

LLL

Summary of payments made by Petitioner in the 2nd quarter of CY 2008 denominated in <

Aegis Peoplesupport, Inc. v. CIR

Philippine Peso

MMM

Summary of payments made by Petitioner in the 3rd quarter of CY 2008 denominated in Philippine peso

NNN

Summary of payments made by Petitioner in the 4th quarter of CY 2008 denominated in

Philippine Peso

000-1

Supporting

documents of significant to 000- disbursements for CY 2008 295 ppp Income statement per location denominated in

US Dollar

QQQ

Income statement per location denominated in

Philippine Peso

RRR

Income statement of JAKA Building 6th to 8th floors denominated in US Dollars sss Income statement of JAKA Building 6th to 8th floors denominated in Philippine Peso

TIT

Annual ITR for CY 2008 manually filed with the BIRon April 15, 2009 uuu Journal entries to support audit adjustments

VVV-1

General ledger of salaries and wages of the to vvv- travel agency 16 www Reconciliation of net income per books against taxable income for CY 2008

XXX-1

Supporting documents for Petitioner's travel

to XXX-

agency activity 191

YYY-1 to

Supporting

documents for

Petitioner's

YYY-26

commission income zzz Supplemental report of the Independent CPA submitted on November 29 2011

AAAA

Supplemental Sworn Statement of Ms. Maria Clara A. Locsin to questions propounded by Atty.

Ray-an

Francis v.

Bay bay dated November 16, 2011

AAAA-1

Signature of Ms. Maria Clara A. Locsin

BBBB

Sworn

Statement

of Ms.

Katherine

0.

Constantino to Questions Propounded by Atty. Ray-an Francis V. Baybay dated December 2, 2011

BBBB-1

Signature of Ms. Katherine 0. Constantino ecce Certification from the

Revenue Accounting

Division of the BIR dated November 29, 2011

DODD

Letter addressed to the Revenue Accounting Division of the BIR dated November 16, 2011

DDDD-1

Signature of "Jerome Joseph B. Arnaldo"

DDDD-2

Signature of Ray-an Francis V. Baybay"

EEEE

Sworn Statement of Atty. Ray-an Francis V. Bay bay to Questions Propounded by Atty. Jerome B. Arnaldo dated January 20 2012

EEEE-1

Signature of Atty. Ray-an Francis V. Bay bay

Aegis Peoplesupport, Inc. v. CIR

FFFF

Supplemental

Sworn

Statement

of Ms.

Katherine

0 .

Constantino

to

Questions

Propounded by Atty. Ray-an Francis V. Baybay dated August 13, 2012

FFFF-1

Signature of Ms. Katherine 0 . Constantino

FFFF

Petitioner's

Financial

Statements

for the calendar years (CY) ending December 31, 2007 and December 31, 2008

FFFF-1

Petitioner's Statements of Income for the CY

ending December 31, 2007 and December 31, 2008

FFFF-2

Petitioner's Statements of Cash Flow for the CY

ending December 31, 2007 and December 31, 2008

GGGG-1

Original print outs of Journal Vouchers for CY to 2008

GGGG-

8,

GGGG-

11-

GGGG-

38,

GGGG-

40-

GGGG-

43

HHHH

Sworn Statement of Ms. Arsyl Tolentino to Questions Propounded by Atty. Ray-an Francis V. Baybay dated February 11, 2013

HHHH-1

Signature of Mr. Arsyl Tolentino !III Sworn Statement of Mr. Genly Manrisa to Questions Propounded by Atty. Ray-an Francis V. Baybay dated February 18 2013

IIII -1

Signature of Mr. Genly Manrisa On

February

18, 2013, respondent's counsel manifested that respondent would no longer present any witness and would submit the instant case for decision. Thus, the parties were given thirty (30) days from notice within which to file their respective Memoranda. On July 2, 2013, the instant case was deemed submitted for decision considering respondent's Memorandum37 filed on May 2, 2013 and petitioner's Memorandum38 filed on May 31, 2013. 39 {

Aegis Peoplesu pport, Inc. v. CIR

The parties presented the following issues40 to be resolved by this Court:

"8. Whether or not petitioner is entitled to the refund or issuance of a tax credit certificate in the amount of Php38,087,854.48, representing the alleged excessive corporate income tax erroneously paid by the petitioner for CY 2008; 9.

Whether or not petitioner derived income in the gross amount of One Hundred Eight Million Eight

Hundred Twenty Two Thousand Four Hundred Forty

One

Pesos

(Php108,822,441.00) as a foreign exchange gain for CY 2008;

10. Whether or not foreign exchange gain of Php108,822,441.00 derived by petitioner was included in its taxable income subjected to RCIT at the rate of thirty-five percent (35°/o);

11.

Whether or not the regular corporate income tax (RCIT) on petitioner's foreign exchange gain for CY 2008, amounting to Thirty Eight Million

Eighty Seven Thousand Eight Hundred Fifty Four and

48/100 Pesos (Php38,087 ,854.48) was remitted and paid to the BIR;

12. Whether or not the foreign exchange gain of Php108,822,441.00 derived by petitioner is attributable to its activities registered with the BOI and PEZA;

13.

Whether or not the foreign exchange derived by petitioner is exempt from RCIT under Section 27(A), Tax Code;

14.

Whether or not petitioner exhausted all administrative remedies before filing the instant petition before this Honorable Court; and(

Aegis Peoplesupport, Inc. v . CIR

15.

Whether or not petitioner complied with Section 229 in relation to Section 204, Tax Code." Petitioner contends that it filed its Annual Income Tax Return on April 13, 2009.

Thus, it had two years or until April 13, 2011 within which to file its administrative and judicial claims for refund. Further, it filed its administrative and judicial claims on April 11, 2011 and April 13, 2011, respectively.

Petitioner asserts that it complied with the mandatory periods under Sections 204(C) and 229 of the NIRC of 1997.

Respondent counter-argues that petitioner failed to exhaust administrative remedies and the latter's judicial claim for refund was filed prematurely. She points out that the Petition for Review was filed two (2) days after the filing of the administrative claim.

Evidently, petitioner did not give respondent the opportunity to examine and evaluate its claim for refund.

In effect, petitioner failed to exhaust administrative remedies.

Respondent emphasizes that it is basic to resort first to the appropriate administrative authorities in the resolution of a controversy falling under their jurisdiction before the same may be elevated to the courts of justice for review.

The non-observance of the doctrine will result in lack of cause of action which is one of the grounds allowed by the Rules of Court for the dismissal of the complaint.

Section 204(C) of the National Internal Revenue Code

of 1997, as amended, provides:

"SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. - The Commissioner may -

XXX

XXX

XXX

(C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused ~

Aegis Peoplesupport, Inc. v. CIR stamps that have been rendered unfit for use and refund their value upon proof of destruction.

No

credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2} years after the payment of the tax or penalty: Provided, however, That a return filed showing an overpayment shall be considered as a written claim for credit or refund."

(Emphasis

supplied) In relation thereto, Section 229 of the NIRC of 1997, as amended, reads:

"SEC. 229. Recovery of Tax Erroneously or Illegally Collected. - No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress.

In any case, no such suit or proceeding shall be filed after the expiration of two (2} years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid." (Emphasis supplied) Section 204(C) applies to administrative claims filed with the BIR; while Section 229 refers to judicial actions for the recovery of the tax.

The settled rule is that both the claim for refund with the BIR and the subsequent appeal to'" Aegis Peoplesupport, Inc. v . CIR the Court of Tax Appeals must be filed within the two-year period from the date of payment of the tax. In the instant claim, petitioner's corporate income taxes were remitted through eFPS on April 13, 2009. 41 Counting from this date, petitioner had until April 13, 2011 within which to file its administrative and judicial claims for refund.

Apparently, petitioner's administrative claim for refund filed before the Commissioner of Internal Revenue on April 11, 2011 and the subsequent appeal before this Court by way of a Petition for Review filed on April 13, 2011 fell within the two-year prescriptive period . Respondent further alleges that petitioner failed to submit complete documents pursuant to

Revenue

Memorandum Order (RMO) No. 53-98 dated June 1, 1998. However, records prove that petitioner forwarded its Letter dated April 11, 2011 42 to respondent requesting the refund or the issuance of a tax credit certificate with the attached supporting documents.

It is a rule that a tax examiner cannot demand what type of supporting documents should be submitted; otherwise, the taxpayer will be at the mercy of the examiner, who may require the production of documents that the taxpayer cannot submit. Moreover, it is basic that respondent ought to know the tax records of all taxpayers. 43 Finding petitioner's claim to have been timely filed, the merits of the instant Petition for Review are discussed hereunder.

Petitioner's primary purpose is "to engage in the business of customer support services by providing information and database service on the Internet including web-based applications in the Philippines and providing or furnishing any and all forms or types of services, data and facilities relating to providing information on consumer products and services through the internet; and otherwise, ~ 41 Exhibit "J".

42 Exhibit " GG".

43 Oiageo Philippines, Inc. vs. Commissioner of Internal Revenue, CTA Case Nos. 7846 and 7865, January 16, 2012.

Aegis Peoplesupport, Inc. v. CIR to carry on and conduct a general business relating to internet services. "44 Records show that petitioner is registered with the Board of Investments under its former name PeopleSupport (Philippines) Inc., with Certificate of Registration No. 2003- 059 dated April 22, 2003, as a new and pioneer IT Export Service Firm in the Field of Customer Contact Center pursuant to BOI Certificate of ITH Entitlement CE No. 2008- 000145.45 Petitioner is likewise registered with PEZA under its former name PeopleSupport (Philippines) Inc. (PSPI) as an Ecozone IT Enterprise engaged in the establishment of a contact center that will provide outsourced customer care services and business process outsourcing (BPO) services under the Amended Certificate of Registration No. 03-17- IT.46 Petitioner's registrations with the BOI and PEZA for its various operating locations are summarized as follows:

Project as per

Certificate of

No. of years

Income Tax

Registration

Registration

with

Holiday (ITH)

Agreement/ Certificate

Income Tax

Period/Starting of Registration

Holiday

Date for the

Incentive

Availment of the

ITH

PeopleSupport

2003-59 under 6 years April 22, 2003 to (Philippines) Inc.

BOI dated April 29, 2009 (petitioner's former April 22, 2003 name) Cebu Contact Center, 4 years plus October 1, 2003 to Asia Town IT Park, Cebu 1 bonus year September 30, 2008

SM Baguio Cyberzone

6 years May 2007 (start of Bldg.

commercial operation)

6780 Ayala

6 years

December 2006

03-17 IT

(start of commercial under PEZA operation) 2nd, 3rd, 4th & 5th Firs., dated August 6 years March 2006 (start of Skyrise Plaza, Asiatown 12, 2003 commercial

IT Park

operation)

New Project with Base

4 years

June 2005 to May

Figure, PeopleSupport 2009

Center

6780 Ayala Ave (11th & 4 years August 1, 2007 to 12th Firs) July 31, 2011 44 Par. 4, Admitted Facts, JSFI, Docket, p. 153; Exhibit "A", Docket, p. 366. 45 Exhibit "C", Docket, p. 377.

46 Exhibits " D" and "E", Docket, pp. 378 to 380.

Reference

Exhibit "C"

Exhibits

" N" and

"T"

Exhibits

"0 " and

"U"

Exhibits

" P" and

"V"

Exhibits

"Q" and

"W"

Exhibits

" R" and

"X"

Exhibits

"S" and

"Y"

Aegis Peoplesupport, Inc. v. CIR

Petitioner contends that as a BOI and PEZA-registered enterprise, it is entitled to the income tax holiday incentive which is based on Section 23 of Republic Act No. 7916 otherwise known as "The Special Economic Zone Act of 1995" ("PEZA Law"), which provides: "SECTION

23. Fiscal Incentives. -

Business

establishments operating within the ECOZONES shall be entitled to the fiscal incentives as provided for under Presidential Decree No. 66, the law creating the Export Processing Zone Authority, or those provided for under Book VI of Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987."

The fiscal incentives granted to registered enterprise under Book VI of Executive Order (EO) No. 226 otherwise known as the "Omnibus Investments Code of 1987", as amended, in relation to Article 39(a)(1) thereof include income tax holiday for four (4) to six (6) years, depending on whether the enterprise is registered as pioneer or non- pioneer firm, to wit:

"ARTICLE 39.

Incentives

to

Registered

Enterprises. - All registered enterprises shall be granted the following incentives to the extent engaged in a preferred area of investment; (a) Income Tax Holiday. - (1) For six (6) years from commercial operation for pioneer firms and four ( 4) years for non-pioneer firms, new registered firms shall be fully exempt from income taxes levied by the National Government. Subject to such guidelines as may be prescribed by the Board, the income tax exemption will be extended for another year in each of the following cases:" (Emphasis supplied)c Aegis Peoplesupport, Inc. v. CIR However, the tax incentives to which an ECOZONE Enterprise is entitled do not necessarily include all kinds of income that it may receive during the period of entitlement. The Rules and Regulations Implementing RA No. 7916 read in part:

"PART VII

Incentives to ECOZONE Enterprises

XXX

Rule XIII

Application and Entitlement

XXX

XXX

SECTION 2. Scope of Entitlement -

New or

expanding ECOZONE Developers/Operators, Export, Free Trade, Domestic Market, Utilities, Facilities and

Tourism

Enterprises, except

ECOZONE

Service

Enterprises as defined under Section 2(p), Rule I of these Rules, registered on or after the effectivity of these Rules, shall be entitled to the fiscal incentives provided in Sections 24 and 42 of the Act.

XXX

XXX

XXX

SECTION

5.

Limitation of Entitlement

to Incentives. - Incentives granted by the PEZA shall apply only to registered operations of the ECOZONE Enterprises and only during the period of its registration with PEZA." (Emphasis supplied) Revenue Regulations No. 20-02 has clarified the tax treatment of income earned from unregistered activities in this wise:

"SECTION 1. Tax Treatment. - Income derived by an enterprise registered with the Subic Bay

Metropolitan

Authority

(SBMA), the

Clark

Development Authority (CDA), or the Philippine

Economic

Zone

Authority

(PEZA}

from its registered activity /ies shall be subject to such ~-·

Aegis Peoplesupport, Inc. v. CIR tax treatment as may be specified in its terms of registration (i.e., the 5°/o preferential tax rate, the income tax holiday, or the regular income tax rate, as the case may be). Nonetheless, whatever the tax treatment of said enterprise with respect to its registered activity/ies, income realized by such registered enterprise that is not related to its registered activity/ies shall be subject to the regular internal revenue taxes, such as the 20°/o final income tax on interest from Philippine Currency bank deposits and yield or any other monetary benefit from deposit substitutes, and from trust funds and similar arrangements, the 7.5°/o tax on foreign currency deposits and the 5°/o/10°/o capital gains tax or 1/2°/o stock transaction tax, as the case may be, on the sale of shares of stock." (Emphasis supplied) Clearly, to enjoy the incentives granted under the PEZA law, the taxpayer's income must be effectively related to the conduct of its registered trade or business. Executive Order No. 226 also provides that the incentives granted under the said law shall only be "to the extent engaged in a preferred area of investment."

Therefore, in order for petitioner to enjoy the income tax holiday incentive provided under the PEZA law and EO No. 226, petitioner's income must be effectively related to the conduct of its registered trade or business.

An effectively related income may be interpreted to mean as those income derived from the business activity in which the corporation is engaged in, considering that a taxpayer may also receive income not directly connected or related to its business activity. Consequently, petitioner must also establish that its income relating to the subject tax refund is actually gained or received by it in relation to the conduct of its registered business activity. 47 Petitioner cited PEZA Memorandum Circular No. 2005- 03248 dated September 15, 2005, which clarifies the tax ( 47 Aegis PeopleSupport Inc. [Formerly PeopleSupport (Philippines), Inc. vs. Commissioner of Internal Revenue, CTA Case No. 8085, July 9, 2012.

Aegis Peoplesupport, Inc. v. CIR treatment of foreign exchange gains by ECOZONE Export Enterprises; a portion of which states: "The tax treatment of foreign exchange (forex) gains shall depend on the activities from which these arise. Thus, if the forex gain is attributed to an activity with income tax incentive (Income Tax Holiday or 5°/o Gross Income Tax), said forex gain shall be covered by the same income tax incentive. On the other hand, if the forex gain is attributed to an activity without income tax incentive, said forex gain shall likewise be without income tax incentive, i.e., therefore, subject to normal corporate income tax."

Following the issuance of the above-mentioned PEZA Memorandum Circular are BIR Rulings interpreting the tax treatment of forex gains of PEZA/BOI-registered entities, where the BIR consistently held that the realized forex gains are exempt from income tax provided that they are attributable, connected or intimately related to its registered activities which enjoy similar incentive.49 Therefore, petitioner has the burden of proving that the foreign exchange gain of P108,822,410.00 is attributable to its registered activity with the BOI and PEZA, specifically, the establishment of a contact center which will provide outsourced customer care services and business process outsourcing.

According to petitioner, it substantially derives its service fees by servicing US-based clients of its mother company, PeopleSupport, Inc. (PSI-US). The functional currency of these clients is denominated in US Dollar.

Since the USD

is the currency that mainly influences the Company's source of revenue, the Company changed its functional currency from Philippine Peso to USD in CY 2007. However, while the Company's income was principally denominated in USD, the bulk of its expenses (i.e., payroll, rent, and utilities) were denominated in Philippine Pesos. As a consequence, the Company's ability to meet its primaryc 49 BIR Ruling Nos. DA-195-08, DA-375-08, DA-(IL-011) 107-08, DA-(C-295) 723-09, and DA-(IL-009) 089- 10.

Aegis Peoplesupport, Inc. v. CIR obligations to its employees, lessors, utility providers (e.g., electricity, water, and communication service providers), etc. was primarily dependent upon the conversion of some of its USD income to Philippine Peso. In 2008, the Company sold its USD at rates which were higher than the average prevailing forex rate.

So for 2008, the Company recognized forex gains which were subjected to regular corporate income tax. so In relation to the conversion of its dollars to pesos, petitioner allegedly entered into an

Agreements 1

with Citibank N.A. to partially offset the effect of the declining value of the USD against the Philippine Peso.

Due to the

improvement of the Philippine Peso in CY 2008 and the transactions entered into with Citibank N.A., petitioner realized forex gain of P108,822,441.00. In its amended Annual Income Tax Returns2 filed on May 29, 2009 through eFPS, petitioner reflected taxable income of P114,457,362.00 and a corresponding income tax due of P40,060,076. 70 using the regular corporate income tax rate of 35°/o, as follows:

Sales/Revenues/Receipts/Fees

p -

Cost of Sales/Services

4,792,707.00 Gross Income from Operations p (4,792,707.00)

Add: Non-Operating & Taxable Other

120,286,161.00

Income

Total Gross Income

p 115,493,454.00

Less: Deductions

1,036,092.00

Taxable Income

p 114,457,362.00 Tax Rate (except MCIT rate) 35% Income tax due p 40,060,076.70 The realized foreign exchange gains on hedging in the amount of P108,822,441.00 were reported as part of the total

Non-Operating

and

Taxable

Other

Incomes3

of P120,286,161.00, broken down as follows:c

Aegis Peoplesupport, Inc. v. CIR

Commission Income

Interest income from Loan

Other Income

Realized Forex Gain from

Hedge

Total

Page 23 of 29

p 31,392.00 9,769,484.00 1,662,844.00 108,822,441.00 p 120,286,161.00 Included in the total income tax due of P40,060,076. 70 is the amount of P38,087,854.35 (P108,822,441 x 35°/o) pertaining to the alleged income tax erroneously and/or excessively paid on the realized exchange gains on hedging. Petitioner provided a Schedule of Computation of Gain on Forward Exchange Contracts54 with a total amount of P109,654,130.56, which differs from the amount of P108,822,441.00 reported in the ITR; thus, a discrepancy in the amount of P831,558.62:

(a) (b) (c) (d) (e) (f) (g) [(b-c)*a] [(b-d)*a] (e-f)

Forward

Dollar Amount

Forward

Spot

Spot

Foreign

Foreign

Difference

Exchange

Sold

Rate at

Rate per

Rate

Exchange Gain

Exchange Gain

Contract

Maturity

Schedule

Upon

Computed Based

Computed Based

Reference

Booking on Schedule on Spot Rate per

No.

Booking

1337026022 $ 3,000,000.00 49.00000 41.32500 41.45482 p 23,025,000.00 p 22,635,538.86 p 389,461.14 1337029015 2,000,000.00 49.02500 41.32500 41.45524 15,400,000.00 15,139,513.72 260,486.28 1337060001 5,000,000.00 48.34680 40.64300 40.67826 38,519,000.00 38,342,720.42 176,279.58 1337093002 5,000,000.00 48.30500 41.76300 41.76407 32,710,000.00 32,704,668.38 5,331.62 $15,000,000.00 P109,654,000.00 P108,822,441.38 P831,558.62 The Court-commissioned Independent CPA, Katherine

0. Constantino, noted that the difference in amount is due to the difference in the spot rate used by petitioner in preparing the schedule and spot rate used in recording the transaction in the books.

The foreign exchange gain on hedging was computed using the spot rate per booking as follows: 55(

Aegis Peoplesupport, Inc. v . CIR

A

b

Dollar Amount

Maturity

Forward

Sold

Date

Rate at

Maturity

$ 3,000,000.00 1/23/2008 49.00000 2,000,000.00 1/23/2008 49.02500 5,000,000.00 2/22/2008 48.34680 5,000,000.00 3/28/2008 48.30500 $15,000,000.00

Page 24 of 29

c

D

e (b-e) (d*a)

Spot Rate

Difference

Foreign Exchange per Books in Rates

Gain on Hedging per Computation

41.45482 7.54518 p 22,635,538.86 41.45524 7.56976 15,139,513.72 40.67826 7.66854 38,342,720.42 41.76407 6.54093 32,704,668.38 p 108,822,441.38 Petitioner submitted documents to support Spot Rate used, 56 System Generated General Ledger, 57 Citibank N .A.'s credit advices, 58 Schedule of Gain/Loss on Foreign Exchange Contracts, 59 Service Agreements between petitioner and its customers, 60

Schedules

of

Service

Revenues, 61

Sales

Invoices, 62 Certificate of Inward Remittances and customer advices, 63 General Ledger of Service Revenues, 64 Bank Statements-peso and dollar,65 and Credit Memos issued by petitioner66 to support its service revenues. It also submitted

Summary

of

Payments67

and supporting documents covering disbursements68 to support its expenses.

Even

though the Independent CPA matched the revenues with inward remittances, 69 showed the movement of petitioner's Citibank N.A. dollar account for the revenues70 and provided schedules of some of the significant expenses, 71 petitioner still failed to establish that thet"

Aegis Peoplesupport, Inc. v. CIR foreign exchange gain of P108,822,441.00 is attributable to its registered activity. Further, a perusal of the movement of petitioner's Citibank N.A. dollar account shows other credits which can be part of the source of the realized foreign exchange gain on hedging that is not directly attributable to petitioner's registered activity with the BOI and the PEZA.

Ergo, a determination of the amount of foreign exchange gain, which is actually related to petitioner's PEZA/BOI-registered activity, would be difficult, if not impossible.

It may also be recalled that pursuant to the Certificate of ITH Entitlement, 72 petitioner "is entitled to ITH incentive provided under Article 39(a) of Executive Order No. 226 as amended by R.A. 7918" for a period of six (6) years from April 22, 2003 to April 21, 2009, and that its registered product is "IT Export Service Firm in the field of Customer Contact Center".

Moreover, Article II of the Registration Agreement (by and between PEZA and petitioner) executed on August 12, 2003, 73 which was referred to as the "Original Contract" in the Supplemental Agreements subsequently executed by petitioner with PEZA, 74 states the scope of petitioner's registered activity, to wit:

"ARTICLE II

SCOPE OF REGISTRANT'S REGISTERED ACTIVITY

2. The scope of the REGISTRANT'S registered activity shall be limited to the establishment of a contact center which will provide outsourced customer care services and the importation of machinery, equipment, tools, goods, wares, articles, or merchandise directly used in its registered operations at Asiatown IT Park. In the event the REGISTRANT decides to engage in a new or additional product line, directly or indirectly related to its,

Aegis Peoplesupport, Inc. v. CIR registered activity, it shall apply anew with PEZA for the latter's approval." (Emphasis supplied) In a Resolution rendered by the CTA First Division in an earlier case entitled Aegis PeopleSupport, Inc. [Formerly PeopleSupport (Philippines), Inc.] vs.

Commissioner of

Internal Revenue, CTA Case No. 8085, March 4, 2013, involving the parties herein, the Court made the following ruling on the issue similar to the present issue: "Thus, it becomes apparent that the activity of petitioner of entering into an agreement with a bank wherein petitioner agreed to sell specified amounts of dollars to the bank on pre-determined dates and at pre-determined exchange rates is not within the afore-quoted scope of petitioner's registered activity with the BOI and PEZA. Such being the case, the foreign exchange gain resulting from the said activity of the petitioner would not be exempt from income tax, or is not covered by income tax holiday granted to it by the BOI and PEZA, pursuant to the aforequoted first paragraph of Section 1 of Revenue Regulations No. 20-2002; Section 5, Part VII (Incentives to Ecozone Enterprises), Rule XIII

(Application

and

Entitlement)

of the

Rules

and Regulations to Implement Republic Act No. 7916; and Article II of the Registration Agreement executed on August 12, 2003 by and between the PEZA and petitioner.

Since the said activity is not within the scope of petitioner's registered activity with the BOI and PEZA, it is of no moment that the corresponding foreign exchange gain was used for petitioner's operation.

XXX

XXX

XXX

It is clear from the foregoing that if the foreign exchange gain of the concerned Ecozone Enterprise is attributed to an activity without income tax incentive, such foreign exchange gain shall likewise be without tax incentive or subject to the 'Normal Corporate Income Tax'. In this case, the foreign exchange 4

Aegis Peoplesupport, Inc. v. CIR gain of petitioner is attributed to its hedging activity-an activity without income tax incentive or an unregistered activity. Such being the case, the income tax holiday on its registered activity may not be extended to said foreign exchange gain.

To stress, there is a whale of a difference between: (i) the activity of entering into an agreement with a bank wherein petitioner agreed to sell specified amounts of dollars to the bank on pre-determined dates and at pre-determined exchange rates, and (ii) the activity of establishing a contact center which will provide outsourced customer care services and the importation of machinery, equipment, tools, goods, wares, articles, or merchandise directly used in its registered operations. Thus, even by virtue of the above-quoted PEZA memorandum circular, petitioner cannot apply its income tax incentive to the said unregistered activity.

Moreover, the Court cannot use as bases the BIR

Rulings

being invoked by petitioner, since the respective transactions contemplated therein are not the same as that of petitioner. In other words, said BIR Rulings did not specifically address the supposed tax treatment on petitioner's unregistered activity of entering into the said agreement with the pertinent bank.

But even granting that certain indications in the said BIR Rulings would seem applicable to petitioner for being a PEZA-registered enterprise, such as the requirement of a 'nexus between the transaction giving rise to the foreign exchange gain or loss and the PEZA entity's registered activity' to avail of the applicable income tax incentive, the same can be ignored for being erroneous and improper, as they go against the said provisions of Revenue Regulations No. 20-2002, Rules and Regulations to Implement Republic Act No. 7916, and Registration Agreement executed on August 12, 2003 by and between the PEZA and petitioner." (Emphasis supplied)( Aegis Peoplesupport, Inc. v. CIR Clearly from the foregoing, since petitioner's conduct of entering into a hedging contract is not within the ambit of its registered activities with the BOI and PEZA, the forex gains arising from such hedging contract cannot be exempted from income tax.

Basic is the rule that tax refunds are in the nature of tax exemptions and are to be construed strictissimi juris against the entity claiming the same. 75 Moreover, statutes in derogation of sovereignty such as those containing exemption from taxation should be strictly construed in favor of the state. 76 In this regard, taxation is the rule and exemption is the exception. The burden of proof rests upon the party claiming exemption to prove that it is, in fact, covered by the exemption so claimed. 77 Tax exemption should be granted only by clear and unequivocal provision of law on the basis of language too plain to be mistaken. They cannot be extended by mere implication or inference. 78 Petitioner failed to sustain the burden placed upon it by presenting proof that it is entitled to the refund or issuance of a tax credit certificate in the amount of P38,087,854.48 allegedly representing excess payment of regular corporate income tax for the CY 2008.

WHEREFORE, premises considered, the instant Petition for Review is hereby DENIED for lack of merit.

Associate Justice

75 Philippine Geothermal, Inc. vs. The Commissioner of Internal Revenue, G.R. No. 154028, July 29, 2005.

76 PLOT vs. City of Oavao, 399 SCRA 442. 77 National Power Corporation vs. Province of Isabela, G.R. No. 165827, June 16, 2006 citing Cyanamid Philippines, Inc. v. Court of Tax Appeals, 379 Phil. 689, 703 (2000) .

Aegis Peoplesupport, Inc. v. CIR

WE CONCUR:

with Concurnng Opinion)

ROMAN G. DEL ROSARIO

Presiding Justice

Page 29 of 29

(on leave) ERLINDA P. UY

Associate Justice

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

Presiding Justice

Chairperson, 1st Division

REPUBLIC OF THE PHILIPPINES

Court of Tax Appeals

QUEZON CITY

FIRST DIVISION

AEGIS PEOPLESUPPORT, INC.

[FORMERLY PEOPLESUPPORT

(PHILIPPINES), INC.], Petitioner, -versus-

COMMISSIONER OF INTERNAL

REVENUE, Respondent.

X- - - - - - - - - - - CTA CASE NO. 8267

Members:

DEL ROSARIO, Chairperson, UY, and MINDARO-GRULLA, JJ.

Promulgated:

CONCURRING OPINION

DEL ROSARIO, P.J.:

I concur in the denial of the Petition for Review on the sole ground that petitioner failed to prove during trial that the foreign exchange gain of P-1 08,822,441.00 is entirely attributable to its registered activity with the Board of Investments (BOI) and Philippine Economic Zone Authority (PEZA) which is the establishment of a contact center. As correctly pointed out by the ponente, the Honorable Associate Justice Cielito N. Mindaro-Grulla, although the Court-commissioned Independent Certified Public Accountant (ICP A) matched the revenues with inward remittances, showed the movement of petitioner's Citibank N.A. dollar account for the revenues and provided schedules of some of the significant expenses, the same are not sufficient to clearly show that the foreign exchange gain of P-1 08,822,411.00 is entirely attributable to petitioner's registered activity with the BOI and PEZA. Indeed, the presence of other credits in petitioner's Citibank N.A. account casts doubt on petitioner's claim that the foreign exchange gains that resulted from its hedging activity are totally attributable to its registered activity.£>t'l

CONCURRING OPINION

There is no denying that tax refunds partake of the nature of tax exemptions, which are construed strictissimi juris against the taxpayer, thus, evidence in support of a claim must likewise be strictissimi scrutinized and duly proven. 1 The taxpayer has the burden to present convincing evidence to substantiate a claim for refund/ and a taxpayer's "[ e]ntitlement to a tax refund is for the taxpayer to prove and not for the government to disprove. "3 I VOTE to DENY the Petition for Review filed by AEGIS PEOPLESUPPORT, INC.

Presiding Justice

1 Commissioner of Internal Revenue vs. Far East Bank & Trust Company (Now Bank of the Philippines Islands), G.R. No. 173854, March 15, 2010, citing Philippine Long Distance Telephone Company v. Commissioner of Internal Revenue, G.R. No. 157264, January 31, 2008, 543 SCRA 329, 33. 2 Philam Asset Management, Inc. vs. Commissioner of Internal Revenue, G.R. Nos. 1566371162004, December 14,2005.

3 Supra, note 19.