Transnational Plans, Inc. vs. Commissioner of Internal Revenue

DECISION

power to decide disputed assessments, refunds of internal revenue taxes, fees, other charges, and penalties imposed in relation thereto, or other matters arising under the Tax Code. She holds office at the BIR National Office Building, Agham Road, Diliman, Quezon City. Petitioner received Letter of Authority (LOA) No.

000122833 dated September 25, 2007 from the Large Taxpayers Audit and Investigation Division I (LTAID I) of the BIR, authorizing the examination of petitioner's books of accounts and other financial records for all intemal revenue taxes for taxable year 2006. On August 12, 2009 petitioner received from the BIR a Preliminary Assessment Notice4 (PAN) dated August 3, 2009 indicating that the alleged deficiency taxes of petitioner is P20,539.755.71. In response, petitioner filed its protest letter5 on August 27, 2009 with the BIR. Thereafter, on October 9, 2009, petitioner received from respondent a Final Assessment Notice (FAN) dated September 24, 2009 bearing a decrease in the purported deficiency taxes in the total amount of P17,465,022.74.6 Petitioner then filed an administrative protest? on November 9, 2009. On April 15, 2011, petitioner received a Final Decision on Disputed Assessment (FDDA) dated April 11, 2011 from respondent.8 Based on the FDDA, respondent further decreased petitioner's alleged deficiency taxes to the total amount of P13,250,652.58. Said amount was broken down in the FDDA as follows:

Income Tax VAT Withholding Tax - Compensation Expanded Withholding Tax DST 3 Exhibit "C".

4 Exhibit "JJ".

5 Exhibit "KK~~.

Basic Penalties 1,493,384.57 1,244,468.45 4,030,948.36 3,518,219.84 1,087,446.00 967,380.70 162,923.88 157,189.83 293,435.63 270,291.32 6 Par. 2, Facts Stipulated by the Parties, JSFI, docket, p. 136. 7 Exhibits "E" and "E-1 ". 8 Par. 3, Facts Stipulated by the Parties, JSFI, docket, p. 136: Exhibit "F". Total 2,737,817.02 7,549,168.20 2,054,826.70 320,113.71 563,726.95

Compromise I I Penalty 25,000.00 TOTAL P13,250,652.58 On May 16, 2011, petitioner filed with this Court the instant Petition for Review9, questioning the assessments made by respondent in the FDDA. On June 27, 2011, respondent filed her Answer1o raising the following special and affirmative defenses: "xxx XXX XXX

7. Petitioner Transnational Plans, Inc. is liable to pay its deficiency income tax, value-added tax, withholding tax on compensation, expanded withholding tax and documentary stamp tax in the total amount of Thirteen Million, Two hundred Fifty Thousand, Six hundred Fifty Two and 58/100 Pesos (1'13,250,652.58).

8. Contrary to petitioner's claim that it was not informed in writing of the facts on which the assessment was based, the formal letter of demand and assessment notices indicated not merely the tax, compromise, and interest due thereon but likewise sufficiently stated the facts, the law, rules and regulations on which assessment is based.

Thus, petitioner cannot impugn the validity of assessment on the supposed omission.

9. Petitioner claims that the Final Assessment Notice was formally protested within the reglementary period of 30 days.

However, it did not aver the fact of submission of necessary documents in support of its protest. Upon investigation, it was revealed that indeed, petitioner failed to submit necessary documents within 60 days from the filing of protest. This omission is fatal to the administrative claim. 9.1 Section 228 of the NIRC of 1997 is hereunder quoted for ready reference: Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt ofthe assessment in such form and manner as may be prescribed by implementing rules and regulations. Within sixty (60) / days from filing of the protest, all relevant r

supporting documents shall have been submitted; otherwise, the assessment shall become final. 9.2 Relative therewith, Revenue Regulations No. 12- 99 implementing the provisions of the NIRC governing assessment of National internal Revenue Taxes likewise provides:

Section 3. Due Process Requirement in the Issuance of a Deficiency Tax Assessment. 3.1. 5 Disputed Assessment XXX XXX XXX The taxpayer shall submit the required documents in support of his protest within sixty (60} days from date of filing of his letter of protest, otherwise, the assessment shall become final, executory and demandable.

9.3 The foregoing was promulgated pursuant to the power of the Commissioner of Internal Revenue to interpret tax laws as enunciated in Section 4 of the NIRC, to wit:

SEC. 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases - The power to interpret the provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner, subject to review by the Secretary of Finance.

9.4 The mandatory character of Section 228 and Revenue Regulations No. 12-99 cannot be gainsaid. The word 'shall' connotes an imperative and mandatory character of a statute. The general rule of requiring adherence to the letter in construing statues applies with particular strictness to tax laws and provisions of a taxing act are not to be extended by implication. (CIR v. Court of Appeals, 338 Phil. 332, 330 (1997). To rule otherwise would not just prevent the Commissioner from reconsidering the protested assessment but will practically render nugatory the intention of Congress. 9.5 Consequently, the assessment has become final and executory and deprives this Honorable Court of jurisdiction to try the case. 10.

Furthermore, comprehensive study of petitioner's books of accounts and pertinent accounting records disclosed that it is liable to pay the total deficiency income tax assessment. V

Comparison made between Bond Placements per Documentary Stamp Tax (DST) Returns (tax base) of 1"62,276,610.00 versus the increase in bond placement per FS of 1"57,356,241.00 showed a difference of 1"4,920,369.00. Applying the Gross Profit rate of 12.7% yielded and (sic) a gross profit of 1"624,866.86. Hence, deficiency income tax is hereby assessed pursuant to Section 32 of the NIRC which provides:

XXX XXX XXX Disallowance of Cost & Expenses amounting to 3,641,823.35 were the result of the reconciliations made between the FS and ITR, and said cost and expenses were not supported by any proof despite repeated requests for the presentation of any document to prove that such costs and expenses were incurred and deductible during the year under re-audit. Hence, were disallowed pursuant to Section 34 (k) of the NIRC, as amended which is hereunder quoted: XXX XXX XXX

12. It is also liable to pay its value added tax liability. Reconciliation made between Gross Receipts subject to Value Added Tax (VAT) per returns amounting to 1"37,169,711.01 versus Gross Receipts subject to VAT per re- investigation of 1"70,691,857.64 showed a difference of 33,522,146.63.

Applying the VAT rate of 12% yielded an Output Tax of 4,022,657.60; hence, the same was assessed pursuant to Sections 106, 108 and 109 of the National Internal Revenue Code, as amended which provides: XXX XXX XXX Claimed input taxes for both domestic goods and services aggregating 1"8,290.76 were disallowed pursuant to Sections 110 and 113 (A) and (B) of the NIRC, as amended pertaining to Invoicing and Accounting Requirements for VAT Registered Persons, which is hereunder quoted: XXX XXX XXX

13. Likewise, it is liable to pay withholding tax on compensation. Claimed salaries and wages aggregating 1"9,816,995.75 is 1"3,398,268.75 higher than the Alpha List submitted amounting to 1"6,418,727.00. Said discrepancy is therefore subjected to deficiency withholding tax to conform to Sections 78, 79 and 80 of the NIRC, as amended which provides: V XXX XXX XXX 14. Verification disclosed that liability for expanded withholding tax should likewise be imposed. Reconciliation made between claimed expenses subject to 1%, 2%, 5% and 10% EWT including domestic purchases of goods and services totaling 1'9,482,367.91 versus the amount subjected to the same rates per Alpha List of 1'2,699,670.60 showed a difference of 1'6,782,697.31; hence, subjected to deficiency EWT to comply with Section 57(B) of the NIRC, as amended, which provides:' XXX XXX XXX

15. With respect to deficiency documentary stamp tax, Comparison made between the Documentary Stamp Tax paid per return amounting to 1'121,326.42 and the Documentary Stamp Tax due per our re-audit of 1'414,762.05 showed a difference of1'293,435.63. Deficiency Documentary Stamp Tax was imposed pursuant to Sections 180 and 186 of the NIRC, as amended, which is hereunder quoted:

XXX XXX XXX 16.

Compromise penalty was imposed pursuant to RMO 1-90 amounting to 1'25,000.00 due to the following violations: (1.) Failure to file list of regular suppliers (2.) Failure to file alpha list of income payments not subjected to withholding tax. (3.) Failure to file Monthly Alphabetical List of Payees (MAP) (4.) Failure to maintain subsidiary books as required under Sec. 113 and Sec. 233 of the NIRC.

17. It must be stressed that assessments are presumed correct and made in good faith. The taxpayer has the duty of proving otherwise. In the absence of proof of any irregularities in the performance of official duties, an assessment will not be disturbed. Even an assessment based on estimates is prima facie valid and lawful where it does not appear to have been arrived at arbitrarily or capriciously. (Marcos II vs. Court of Appeals, G.R. No. 120880, June 5, 1997)

18. The burden of proof is on the taxpayer contesting the validity or correctness of an assessment to prove not only that the Commissioner of Internal Revenue is wrong but the taxpayer is right. Otherwise the presumption of correctness of tax assessment stands. (Commissioner of Internal Revenue vs. Hantex Trading Co. Inc., G.R. No. 136975, March 31, 2005) 19.

Petitioner has not pointed out any prov1s1on or item in the assessment notice which bears a trace of falsity. The averments were based on conjectures, surmises and speculations. These cannot supply the basis for the charge of impropriety of the assessments made." /r-- A Notice of Pre-Trial Conference11 was issued by this Court on June 28, 2011, setting the case for pre-trial conference on August 4, 2011. Petitioner filed its Petitioner's Pre-Trial Brief12 on July 29, 2011; while respondent submitted her Respondent's Pre-Trial Briefl3 on August 1, 2011. Thereafter, the parties submitted their Joint Stipulation of Facts and Issues14 on September 5, 2011. After finding everything in order, this Court issued a Resolutionts dated September 8, 2011, declaring the pre-trial terminated and ordering petitioner to proceed with the initial presentation of its evidence.

On September 8, 2011, petitioner filed a Motion to Refer the Case for Mediation 16 praying that the instant petition be referred to the Philippine Mediation Center of the Court of Tax Appeals (CTA) for quick and speedy disposition. However, during the September 12, 2011 hearing, petitioner's counsel moved for the withdrawal of its motion after this Court informed petitioner that at that point the Court has no existing facilities for mediation. Petitioner filed a Motion to Suspend Proceedingst7 on October 24, 2011, claiming that since it made an offer of compromise with respondent, petitioner prays that the instant proceeding be suspended to give the parties an opportunity to settle the case amicably. Meanwhile, on March 23, 2012, petitioner filed a Motion to Refer Evidence to an Independent Certified Public Accountant18 , manifesting its intention to avail the services of Mr. Julito 0. Tabalba of J.O. Tabalba & Co. to act as an Independent Certified Public Accountant (ICPA) pursuant to Rule 13 of the Revised Rules of the Court of Tax Appeals. Finding merit therein, this Court granted petitioner's motion during the March 28, 2012 hearing by commissioning Mr. Julito 0. Tabalba as the ICPA of the instant case. This Court f

further ordered Mr. Julito 0. Tabalba to submit his ICPA report within forty-five (45) days. In compliance, the ICPA submitted his report on July 10, 2012.19 On March 21, 2013, petitioner flled its Formal Offer of Evidence20, offering Exhibits "A" to "VW", inclusive of sub- markings. On April 5, 2013, respondent flled her Comment (On Petitioner's Formal Offer of Evidence)21 interposing no objection to the admission of petitioner's exhibits, but only as to the manner they were identified in open court and subject to the condition that the same had faithfully complied with the necessity of comparison with the original documents under Section 4 of Rule 12 of the Revised Rules of the Court of Tax Appeals. Accordingly, in the Resolution22 dated May 10, 2013, this Court admitted most exhibits offered by petitioner save for some exhibits which were denied for petitioner's failure to have said exhibits identified during trial. Petitioner then filed a Motion for Reconsideration with Motion to Recall Witness (Re: Resolution dated May 10, 2013)23, begging the indulgence of this Court to allow it to recall its witness, Ms. Marivic M. Anciado, for the sole purpose of identifying the exhibits denied by this Court. In response, respondent flled her Comment (On Petitioner's Motion for Reconsideration with Motion to Recall Witness)24 on June 17, 2013, opposing petitioner's motion on the ground that nowhere in Ms. Marivic M. Anciado's judicial affidavit did she mention and identify the assailed exhibits; thus, how can she then identify the same when recalled. Petitioner then flled a Reply (To Respondent's Comment dated 14 June 2013)25 on June 24, 2013 claiming that even though its witness did not mention the exhibits in her judicial affidavit, said exhibits nevertheless form part of her testimony and are embedded with the other documentary exhibits that she identified. {

During the July 17, 2013 hearing,26 petitioner's witness, Ms. Marivic M. Anciado, was re-called to the witness stand and identified the assailed exhibits. Accordingly, the exhibits initially denied admission by this Court was then reconsidered and admitted as part of petitioner's formal offer of evidence. On October 4, 2013, respondent filed her Respondent's Formal Offer of Documentary Evidence27, offering Exhibits "R- 1" to "R-16-A", inclusive of sub-markings. In response thereto, petitioner filed its Comment (To Respondent's Formal Offer of Documentary Evidence) on October 21, 2013 opposing the admission of majority of respondent's exhibits for allegedly not having been properly identified. In the November 19, 2013 Resolution2s, this Court admitted all exhibits formally offered by respondent, and ordered both parties to submit their memoranda within thirty (30) days thereafter. On January 27, 2014, petitioner submitted its Memorandum29, while respondent submitted her Memorandum30 on February 14, 2014. With the filing of both parties' respective memoranda, this Court in the February 20, 2014 Resolution considered the instant case submitted for decision.

Shortly thereafter, on March 10, 20 14, petitioner filed a Motion for Leave to File and To Admit Attached Reply to Respondent's Memorandum claiming that it need to address a few arguments raised by respondent which it feels as inaccurate.31 Thus, petitioner prays that this Court admit and consider the reply attached to its motion. In the Resolution dated March 14, 2014, this Court granted the motion which consequently admitted petitioner's reply.32

STATEMENT OF ISSUES

The parties submitted the following issues33 for this Court's resolution: t

1. Whether or not petitioner is liable for deficiency income tax for taxable year 2006;

2. Whether or not petitioner is liable to pay deficiency value- added tax for taxable year 2006;

3. Whether or not petitioner is liable to pay deficiency withholding tax-compensation for taxable year 2006;

4. Whether or not petitioner is liable to pay deficiency expanded withholding taxes for taxable year 2006; and

5. Whether or not petitioner is liable to pay deficiency documentary stamp tax for taxable year 2006.

DISCUSSION /RULING

The issues presented before this Court essentially boils down to whether petitioner is liable for deficiency income tax, VAT, withholding tax-compensation, EWT, and DST for taxable year 2006.

Petitioner mainly argues that respondent's assessments are erroneous. As to the alleged deficiency income, it claims that respondent failed to consider petitioner's net loss, including its Net Operating Loss Carry Over (NOLCO) which was never fully utilized to offset petitioner's loss during taxable year 2006 and also the Minimum Corporate Income Tax (MCIT) it paid.

Respondent likewise failed to consider the input VAT of P375,966.79 in arriving at petitioner's alleged deficiency VAT. She also failed to consider the ten percent (10%) VAT rate imposed on transactions prior to the implementation of the twelve percent (12%) VAT rate on February 1, 2006, and being a pre-need company, its trust fund contributions were equally subjected to VAT in violation of Section 4.108-3UJ of Revenue Regulations (RR) No. 16-2005. As to its alleged deficiency withholding taxes, petitioner insists that respondent erroneously considered other employee benefits as part of their salaries and wages, which include retirement fund contribution, de minimis benefits, and seminar and training expenses. Lastly, petitioner claims that {

Page II of64 there is no unreported revenue amounting to P4,920,369.00 for which to base its DST. On the other hand, respondent avers that the instant Petition for Review is nothing but a mere scrap of paper since Ms. Ma. Veronica S. Lao Guico's authority to sign the Verification and Certification in behalf of petitioner was without authority. The Secretary's Certificate34 attached to the Petition for Review shows that it was executed and notarized before the meeting of the Board of Directors was actually held. However, should this Court entertain said petition despite its flaw, the petition must still fail since petitioner failed to submit all relevant documents within sixty (60) days from the filing of protest in accordance with Section 228 of the NIRC of 1997, in relation to RR No. 12-99. Conversely, petitioner replies that respondent's statement is inaccurate and misleading. Petitioner claims that the date of the meeting was just inadvertently typed. Nonetheless, there is a distinction between non-compliance and substantial compliance with the requirements of verification and non- forum shopping. Further, respondent is already estopped from raising as an issue the typographical error in the Secretary's Certificate since she only raised the alleged defect in her Memorandum.

Before proceeding to the crux of the controversy, this Court shall first address the other Issues raised by respondent.

With regard to the issue of petitioner's non-compliance with the requirements of verification and certification, this Court finds the same as substantially complied with and is therefore entitled admission. Section 835 of Republic Act (R.A.) No. 1125,36 as amended, provides that the proceedings before this Honorable Court "shall not be governed strictly by technical rules of evidence". However, liberal application of{- 34 Exhibit "B".

35 SECTION 8. Court of record; seal; proceedings. - The Court of Tax Appeals shall be a court of record and shall have a seal which shall be judicially noticed. It shall prescribe the form of its writs and other processes. It shall have the power to promulgate rules and regulations for the conduct of the business of the Court, and as may be needful for the uniformity of decisions within its jurisdiction as conferred by law, but such proceedings shall not be governed strictly by technical rules of evidence. 36 An Act Creating the Court of Tax Appeals.

procedural rules is allowed only when two requisites are present: (1) there is a plausible explanation for the non- compliance, and (2) the outright dismissal would defeat the administration of justice.37 In the instant case, petitioner sufficiently complied with the above-mentioned requisites. Its counsels explained the reason for the inadvertence in the Secretary's Certificate. To further deny due course of the instant case, especially when it is already submitted for decision, will certainly defeat the administration of justice. As correctly pointed out by petitioner in the case of Swedish Match Philippines, Inc. vs. The Treasurer of the City of Manila3B, the Supreme Court held that: "A distinction between noncompliance and substantial compliance with the requirements of a certificate of non-forum shopping and verification as provided in the Rules of Court must be made. In this case, it is undisputed that the Petition filed with the RTC was accompanied by a Verification and Certification of Non- Forum Shopping signed by Ms. Beleno, although without proof of authority from the board. However, this Court finds that the belated submission of the Secretary's Certificate constitutes substantial compliance with Sections 4 and 5, Rule 7 of the 1997 Revised Rules on Civil Procedure. A perusal of the Secretary's Certificate signed by petitioner's Corporate Secretary Rafael Khan and submitted to the RTC shows that not only did the corporation authorize Ms. Beleno to execute the required Verifications and/or Certifications of Non-Forum Shopping, but it likewise ratified her act of filing the Petition with the RTC. xxx XXX XXX XXX Clearly, this is not an ordinary case of belated submission of proof of authority from the board of directors. Petitioner-corporation ratified the authority of Ms. Beleno to represent it in the Petition filed before the RTC, particularly in Civil Case No. 03-108163, and consequently to sign the verification and certification of non-forum shopping on behalf of the corporation. This fact confirms and affirms her authority and gives this Court all the more reason to uphold that authority." (Emphasis supplied) Anent the issue that petitioner failed to submit all relevant documents within sixty (60) days from the filing of protest in accordance with Section 228 of the National Internal/-

Revenue Code (NIRC) of 1997, in relation toRR No. 12-99, this Court has consistently held that the term "complete documents" should be understood to refer to those documents that are necessary to support the application for refund or tax credit certificate, as determined by the taxpayer. The BIR examiner can require the taxpayer to submit additional documents but the 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. 39 The Supreme Court in the case of Commissioner of Internal Revenue vs. First Express Pawnshop Company, Inc.4o, answered the issue of what are relevant documents needed to be submitted to the Bureau of Internal Revenue, in the following manner:

"The term 'relevant supporting documents' should be understood as those documents necessary to support the legal basis in disputing a tax assessment as determined by the taxpayer. The BIR can only inform the taxpayer to submit additional documents. The BIR cannot demand what type of supporting documents should be submitted. Otherwise, a taxpayer will be at the mercy of the BIR, which may require the production of documents that a taxpayer cannot submit." (Emphasis supplied) This Court will now address the merit of the claim. Section 203 of the NIRC of 1997, as amended, mandates that respondent should make an assessment for deficiency taxes within three (3) years from the last day prescribed by law to file the tax retum or the actual date of filing of such retum, whichever comes later. Any assessment notice issued beyond this three-year prescriptive period shall not be valid save in certain cases, to wit: "SEC. 203. Period of Limitation Upon Assessment and Collection. - Except as provided in Section 222, internal revenue taxes shall be assessed within three (3) years after{- 39 Diageo Philippines, Inc. vs. Commissioner of Internal Revenue, CTA Case Nos. 7846 and 7865, January 16,2012, citing BPI-Family Savings Bank, Inc. vs. Court of Appeals, eta/., G.R. No. 122480, April 12, , 2000 and Commissioner of Internal Revenue vs. Ironcon Builders and Development Corporation, G.R. No. 180042, February 8, 20 I 0.

the last day prescribed by law for the filing of the return, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period: Provided, That in a case where a return is filed beyond the period prescribed by law, the three (3)-year period shall be counted from the day the return was filed. For purposes of this Section, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day." However, since the matter of prescription was never raised as an issue in the instant case, this Court shall now go into the merits of the case. DEFICIENCY INCOME TAX- P2,737,817.02 In respondent's FDDA41 , she computed the alleged deficiency income tax for taxable year 2006, as follows: Taxable income per return I"( 16,308,626.00) Add: Adjustment Unreported income (unaccounted P4,920,369.00 source of funds) Taxable income- gross profit (.127) 624,886.86 Disallowed cost & expenses Discounts f'3,611,850.00 Non-deductible interest expense 29,973.35 3,641,823.35 Taxable income per re-audit f' 4,266,710.21 Income tax due (35%) f' 1,493,348.57 Add: Interest (20% per annum) !'1,219,468.45 Compromise penalty 25,000.00 1,244,468.45 Total Deficiency Income Tax p 2,737,817.02 The determination of whether or not the assessment is correct shall depend on the propriety of the income imputed as well as the cost/ expense deductions disallowed by respondent, namely:

a. Unreported income 1"4,920,369.00

b. Discounts 3,611,850.00

c. Interest expense 29,973.35

Each shall be discussed accordingly for the proper disposition of the income tax assessment.

a. Unreported Income- P4,920,369.00 Respondent charged petitioner of an alleged undeclared income in the amount of P4,920,369.00 based on the following finding: 42

1. Comparison made between Bond Placements per Documentary Stamp Tax (DST) Returns (tax base) of P62,276,610.00 versus the increase in bond placement per FS of P57,356,241.00 showed a difference of P4,920,369.00. Applying the Gross Profit Rate of 12.7% yielded and [sic] a gross profit of 1'624,886.86. Hence, deficiency income tax is hereby assessed pursuant to Section 32 of the National Internal Revenue Code (NIRC). Examination of petitioner's Notes to Financial Statements43 for the years ended December 31, 2006 and 2005, particularly, Note 12, disclosed that petitioner has trust funds which are being administered by three (3) local banks under trust agreements for the fulfillment of petitioner's obligations under the pre-need pension and education plan agreements. In compliance with the rules and regulations of the Securities and Exchange Commission (SEC) and in accordance with the terms of the trust agreements, no withdrawal shall be made from the trust funds except to: (a) pay all costs, expenses and charges incurred in connection with the administration, preservation, maintenance and protection of the trust fund or any part thereof needed for the payment of benefits; (b) settle, compromise or abandon all claims and demands in favor of or against the trust fund, with the prior written consent of petitioner; and engage in investing activities.

The amount of P57,356,241.0044 increase in Financial Assets at Fair Value through Profit or Loss (FVPL) represents additional investments in government securities, shares of stocks and unrealized market gain on valuation acquired by/

the trustee banks for the trust funds. 45 These Financial Assets at FVPL formed part of the trust funds' Assets on Investments managed independently by the trustee banks for the benefits of the plan holders. The transactions relating to the trust funds' investments are being recorded in a separate book, the trust being an entity with separate and distinct legal personality. As such, taxes relating to the trust funds' assets are being paid by the trustee bank out of the trust funds. 46 On the other hand, the amount of P62,276,610.00 tax base reflected in petitioner's DST returns47 pertains to bonds and loan agreements entered into by petitioner for which it paid DST.

Considering that the trustee banks were the ones responsible for the P57,356,241.00 increase in Financial Assets at FVPL of the trust funds' investments, it was erroneous for respondent to compare the said amount with the P62,276,610.00 value of the bonds and loan agreements entered into by petitioner itself and, thereafter, conclude the difference between the two amounts as petitioner's unaccounted source of income. Moreover, the composition of the two amounts differs; the amount of P57,356,241.00 pertains to government securities, shares of stocks and unrealized market gain on valuation whereas the amount of P62,276,610.00 refers to bonds and loan agreements. While axiomatic is the fact that all presumptions are in favor of the correctness of tax assessments, the assessment itself should not only be based on mere presumptions, no matter how logical the presumption might be. It has consistently been held that in order to stand the test of judicial scrutiny, the assessment must be based on actual facts. 48 For lack of factual basis, the deficiency income tax assessment corresponding to the alleged P4,920,369.00 unaccounted source of income should be cancelled. V

b. Disallowed Cost and Expenses- P3,641,823.35 Disallowance of cost and expenses in the total amount of P3,641,823.35, consisting of discounts and interests in the respective amounts of P3,611,850.00 and P29,973.35, was the result of the reconciliations made by respondent's examiner between petitioner's Financial Statements (FS) and Income Tax Return (ITR). Respondent claims that said cost and expenses were not supported by any documentary proof, despite repeated requests, to prove that such costs and expenses were incurred and deductible during the year under re-audit. Consequently, these were disallowed pursuant to Section 34(K) of the NIRC of 1997, as amended. 49 Corollary, on the disallowed discounts of P3,611,850.00, petitioner explained that discounts are recorded and presented in the books as direct costs. While premium collections are recorded and presented in the books as gross of discounts for internal monitoring.

Petitioner also claims that these discounts constitute income and actual receipts, which should be allowed as deduction for income tax purposes since under Section 27 of the NIRC of 1997, as amended, the term "gross income" means gross receipts less sales returns, allowances and discounts.so Perusal of petitioner's Statements of Income and Notes to Financial Statements, specifically Note 15s1, for the years ended December 31, 2006 and 2005 discloses that the account "Discounts" in the amount of P3,611,850.00 is one of the items reported under "Other Direct Costs and Expenses". The Court-commissioned ICPA, Mr. Julito Tabalba, on his examination of the VAT official receipts (ORs), found that discounts granted by petitioner amounted to P2,108,043.86.52 However, verification thereof in the summary schedules shows a lower amount by P3,380.40, as computed below:~

Month Exhibit January "ZZ-1" to "ZZ-9", LLL-7 Februarv "ZZ-10" to "ZZ-18" March "ZZ-19" to "ZZ-26" April "ZZ-27" to "ZZ-34" May "ZZ-35" to "ZZ-46", LLL-11 to LLL-12 June "ZZ-4 7" to "ZZ-51", LLL-16 to LLL-19 Juiv "ZZ-52" to "ZZ-58" August "ZZ-59" to "ZZ-67" Seotember "ZZ-68" to "ZZ-75" October "ZZ-76" to "ZZ-83" November "ZZ-84" to "ZZ-90", LLL-23 to LLL-24, LLL-26 December "ZZ-91" to "ZZ-99" Total Discount Per Summary Per ICPA Difference Schedule p 50,630.00 p 50,858.75 p 1228.75) 138,868.48 138,868.48 - 187,554.89 187,554.89 - 102,035.90 102,035.90 - 215,025.81 215,025.81 - 220,529.21 220,529.21 - 171,438.70 171,438.70 - 210,418.85 210,418.85 - 323,370.81 326,413.86 13,043.051 205,541.02 205,541.02 - 101,617.35 101,617.35 - 177,632.44 177,741.04 (108.60) p 2,104,663.46 p 2,108,043.86 p 13,380.401 In addition, scrutiny of the ORs submitted by petitioner reveals that out of the P2,104,663.46 sales discounts per schedules, the amount of P1,722,711.52 shall be disallowed due to the following reasons: Exhibit Date Customer O.R. No.J Discount No.

1. No discount was indicated in the O.R. ss 39 4-Jao-06 MMI Pension 45339 p 4,519.56 SS46 16-Jan-06 Banico, E.

45346 394.80 ss 47 16-Jan-06 Castro, R.

45347 117.00 ss 182 12-Jan-06 Francisco, Geronimo 45482 114.69 ss 525 17-Jan-06 Yap, M.

45825 289.80 ss 557 5-Jao-06 Alamat Crew 45857 781.40 ss 568 11-Jan-06 CASSC 45868 896.60 ss 570 11-Jan-06 MET!

45870 123.30 ss 574 11-Jan-06 D. ASSET 45874 192.45 ss 576 11-Jan-06 Cadenza Emplovee 45876 43.80 ss 577 11-Jan-06 DAKILA 45877 298.10 ss 578 11-Jan-06 Exito Employee 45878 108.60 ss 579 11-Jan-06 BONITA 45879 78.00 ss 580 11-Jan-06

TRANS M

45880 78.00 ss 661 26-Jan-06 Tambolero, M.

45961 234.00 ss 701 18-Jan-06

LA WIN

46001 64.10 ss 704 18-Jao-06 MAUNLAD 46004 144.90 ss 705 18-Jan-06 NEOMARINE 46005 449.60 ss 709 18-Jan-06 AMEX 46009 370.80 ss 734 24-Jan-06 SMI 46034 6,391.95 ss 737 24-Jan-06 SMI 46037 457.50 ss 738 24-Jan-06 !PSI 46038 228.75 ss 739 24-Jan-06 TCL 46039 783.00

CIA CASE NO. 8291 ss 744 24-Jan-06 ss 803 25-Jan-06 ss 808 27-Jan-06 ss 855 31-Jan-06 ss 1636 27-Jan-06 ss 816 1-Feb-06 SS824 4-Feb-06 ss 1011 16-Feb-06 ss 1032 20-Feb-06 ss 669 1-Feb-06 ss 670 2-Feb-06 ss 678 2-Feb-06 ss 679 2-Feb-06 SS690 20-Feb-06 SS692 20-Feb-06 SS817 1-Feb-06 SS823 4-Feb-06 SS838 13-Feb-06 SS839 13-Feb-06 SS843 13-Feb-06 SS845 13-Feb-06 SS846 13-Feb-06 SS871 3-Feb-06 SS898 16-Feb-06 SS1012 16-Feb-06 SS1013 16-Feb-06 SS1014 16-Feb-06 SS1015 16-Feb-06 SS1017 17-Feb-06 SS1018 20-Feb-06 SS1019 20-Feb-06 SS1021 20-Feb-06 SS1024 20-Feb-06 SS1026 20-Feb-06 SS1027 20-Feb-06 SS1031 20-Feb-06 SS1033 20-Feb-06 SS1035 20-Feb-06 SS1036 20-Feb-06 SS1038 20-Feb-06 SS1039 20-Feb-06 SS1040 20-Feb-06 SS1041 20-Feb-06 SS1042 20-Feb-06 SS1043 20-Feb-06 SS1152 20-Feb-06 SS1157 21-Feb-06 SS1159 22-Feb-06 SS1162 22-Feb-06 SS1167 28-Feb-06 SS1458 16-Mar-06

VISION AIR

46044 1,189.50 TAC 46103 810.00

ASIAN A

46108 274.40 Jennifer Humandv 46155 381.50 Villacorta, R.

46936 83.00 ASIANA PHILS.

46116 274.40 TMDC 46124 530.60 TAC 46311 810.00

NEO MARINE

46322 449.60 Pramis, A.

45969 117.00 Duhina, J.

45970 140.00 TMDC 45978 228.75 NET!

45979 305.00 Yao,M.

45990 289.80 Looez, C.

45992 128.00

ASIAN A

46117 2,595.98 JRDC 46123 228.75 TESI 46138 1,297.20 TESI 46139 686.25 D. WONDER 46143 1,110.00 HOKOKU 46145 6,538.50 DONGJIN 46146 1,751.40

YAS BROKERAGE

46171 76.25 Carimoong, C.

46198 825.00

NFJSC- CEBU

46312 131.60 NFJSC 46313 1,658.75 NFJSC CEBU 46314 131.60 NFJSC 46315 1,619.75 EPERFORMAX 46317 391.40 MATATAG 46318 144.90 VROON 46319 3,014.80 ALAMAT 46321 1,550.00 EX! TO 46324 731.20

LA WIN

46326 1,170.00 HNGKNGFLEET 46327 312.00 CADENZA 46331 3,061.70 BONITA 46333 78.00 PRSPRDD 46335 538.30 D. ASSET 46336 192.45 EX! TO 46338 108.60 MET!

46339 413.10 TLSC 46340 1,952.65

DOLPHIN MGT

46341 662.00 TDGI 46342 1,051.00 KAPALARAN 46343 107.90 KMTC 46452 118.95 CASSC 46457 576.80 Go, A.

46459 309.40 !PSI 46462 1,247.85 ADTOURS 46476 5,788.40 NFJSC 46758 838.75

SS2702 4-Jul-06 SS872 3-Feb-06 ss 872 3-Feb-06 SS1007 13-Feb-06 SS1032 20-Feb-06 SS1155 21-Feb-06 SS1155 21-Feb-06 SS1155 21-Feb-06 SS1155 21-Feb-06 SS1155 21-Feb-06 SS1155 21-Feb-06 TT743 7-Mar-06 SS697 3-Mar-06 SS1034 20-Feb-06 SS1040 20-Feb-06 SS1043 20-Feb-06 SS1129 1-Mar-06 SS1138 3-Mar-06 SS1161 1-Mar-06 SS1181 1-Mar-06 SS1186 2-Mar-06 SS1197 3-Mar-06 SS1199 3-Mar-06 SS1200 3-Mar-06 SS1235 24-Mar-06 SS1252 7-Mar-06 SS1256 7-Mar-06 ss 1259 7-Mar-06 SS1260 9-Mar-06 SS1266 9-Mar-06 SS1269 13-Mar-06 SS1272 9-Mar-06 SS1272 9-Mar-06 SS1274 9-Mar-06 SS1276 9-Mar-06 SS1277 9-Mar-06 SS1278 9-Mar-06 SS1280 10-Mar-06 SS1282 10-Mar-06 ss 1283 10-Mar-06 SS1284 10-Mar-06 SS1287 10-Mar-06 SS1292 10-Mar-06 SS1293 14-Mar-06 SS1295 14-Mar-06 SS1297 15-Mar-06 SS1298 15-Mar-06 SS1299 15-Mar-06 SS1303 9-Mar-06 SS1304 24-Mar-06 SS1305 24-Mar-06 KMTC 48002 158.60 YUSEN 46172-4 305.00

YAS BROKERAGE

46172-5 305.00

TRANS M

46307-2 3,551.80 DAKILA 46332-2 128.20 NYKSIN 46455-3 38,998.70 JCL 46455-4 969.00 ICMA 46455-5 1,210.70 HACHIUMA 46455-6 14,394.55 HOKOKU 46455-7 772.60 NYKLINE 46455-8 1,659.80 TLSC 893 6,859.45 TLI 45997 1 213.05

LA WIN

46334 399.69 TLI 46340 1,833.85 KAPALARAN 46343 107.90 Esteban, M.

46429 78.00 PIZZATEK 46438 131.40 SMI 46461 7,561.65 D. MAGIC 46481 2,008.50 CASSC 46486 836.60 TMDC 46497 551.60 TOG!

46499 535.60 TOG!

46500 2,369.00 Raneses, Pacita 46535 7,800.00 NET!

46552 1 247.85 TMDC 46556 943.20 MMI 46559 6,362.90

VISION AIR

46560 87.60

ASIAN A

46566 274.40 NLPH 46569 5,188.85 EXITO 46572 108.60 EXITO 46572 108.60

LA WIN

46574 64.10 NEOMARlNE 46576 513.70 CADENZA 46577 43.80 CADENZA 46578 165.60 KAPALARAN 46580 107.90 MANDARA 46582 800.00

DYNAMIC ASSET

46583 192.45 DOLSHIP 46584 396.50 DALEX 46587 972.40 MAUNLAD 46592 87.60 TAC 46593 686.25 DONGJIN 46595 2,217.00 FETRAN 46597 1,465.70

TRANS M

46598 4,731.80 HOKOKU 46599 4,713.80 MMS 46603 198.40 MMI 46604 305.00 MMI 46605 846.00

SS1367 16-Mar-06 SS1373 17-Mar-06 SS1381 23-Mar-06 SS1403 20-Mar-06 SS1409 20-Mar-06 SS1453 16-Mar-06 SS1457 16-Mar-06 SS1461 16-Mar-06 SS1479 22-Mar-06 SS1481 23-Mar-06 SS1482 23-Mar-06 SS1483 23-Mar-06 SS1485 23-Mar-06 SS1487 23-Mar-06 SS1489 23-Mar-06 SS1491 23-Mar-06 ss 1493 23-Mar-06 SS1494 29-Mar-06 SS1495 29-Mar-06 SS1497 23-Mar-06 SS1498 29-Mar-06 SS1499 30-Mar-06 SS696 3-Mar-06 SS696 3-Mar-06 SS696 3-Mar-06 ss 1124 6-Mar-06 SS1124 6-Mar-06 SS1457 16-Mar-06 SS1463 17-Mar-06 SS1463 17-Mar-06 SS1463 17-Mar-06 SS1463 17-Mar-06 SS1463 17-Mar-06 SS1463 17-Mar-06 SS1463 17-Mar-06 SS1463 17-Mar-06 SS1315 26-Apr-06 SS1565 3-Apr-06 SS1566 3-Apr-06 SS1572 3-Apr-06 SS1574 3-Apr-06 SS1575 3-Apr-06 SS1584 4-Apr-06 SS1585 3-Apr-06 SS1586 5-Apr-06 SS1592 6-Apr-06 ss 1594 6-Apr-06 SS1595 5-Apr-06 SS1597 5-Apr-06 SS1599 6-Apr-06 SS1600 5-Apr-06 Yap,M.

Pramis, A.

Albacete, J.

Sanglav, R.

Batulan, R.

CASSC NFJSC NESC CADENZA EX! TO Vroon-ideal

LA WIN

HKG FLT

PRSPRDD D. WONDER ALAMAT Vroon-ideal NYKSMI IPS!

D. Magic NET!

ADTOURS Fit TWFI TLI

YUSEN STAFF

YUSENMGMT NFJSC-CEBU COSMIC

NYK SIN

JCL ICMA HACHIUMA HOKOKU NYKLINE TMM MMS

YAS BROKERAGE

Yusen NCT NCT NCT

VISION AIR

YAS BROKERAGE

TCL TLSC TLI FIT TWFI TESI Martinez, Renvi 46667 217.35 46673 117.00 46681 394.80 46703 171.00 46709 164.00 46753 1,070.60 46757 848.75 46761 231.30 46779 1,529.40 46781 287.60 46782 2,096.20 46783 399.00 46785 312.00 46787 710.60 46789 1,347.00 46791 1,398.00 46793 2,096.20 46794 7,085.15 46795 261.30 46797 1,951.50 46798 1,641.65 46799 5,891.60 45996-1 43.80 45996-2 51.70 45996-3 1,213.05 46424-1 1,359.30 46424-2 683.30 46757-1 131.60 46763-1 166.00 46763-3 34,806.30 46763-4 1,295.00 46763-5 7,080.40 46763-6 14,867.65 46763-7 772.60 46763-8 2,284.00 46763-9 6,267.20 46615 198.40 46865 228.75 46866 1,220.00 46872 637.90 46874 637.90 46875 533.75 46884 538.30 46885 991.50 46886 783.00 46892 634.40 46894 1,213.05 46895 43.80 46897 51.70 46899 946.20 46900 3,903.90

SS1633 19-Apr-06 SS1682 25-Apr-06 SS1684 25-Aor-06 SS1701 6-Apr-06 SS1702 6-Apr-06 SS1710 6-Apr-06 SS1712 6-Apr-06 SS1715 6-Apr-06 SS1716 6-Apr-06 SS1717 6-Apr-06 SS1718 6-Apr-06 SS1719 6-Apr-06 SS1720 6-Apr-06 SS1721 6-Apr-06 SS1722 6-Apr-06 SS1724 6-Apr-06 SS1725 6-Apr-06 SS1729 6-Apr-06 SS1730 7-Apr-06 SS1734 10-Apr-06 SS1735 10-Apr-06 SS1740 12-Apr-06 SS1741 12-Apr-06 SS1742 12-Apr-06 SS1743 12-Apr-06 SS1748 18-Apr-06 SS1749 18-Aor-06 SS1751 18-Apr-06 ss 1752 18-Apr-06 SS1754 18-Apr-06 SS1755 19-Apr-06 SS1757 20-Apr-06 SS1758 20-Apr-06 SS1759 20-Apr-06 SS1776 27-Apr-06 SS1779 27-Apr-06 SS1780 27-Apr-06 SS1784 28-Apr-06 SS1785 28-Apr-06 SS1789 28-Apr-06 SS1793 28-Apr-06 SS1795 28-Apr-06 SS1799 28-Apr-06 SS1858 27-Apr-06 SS1760 24-Apr-06 SS1760 24-Apr-06 SS1760 24-Apr-06 SS1760 24-Apr-06 SS1760 24-Apr-06 SS1760 24-Apr-06 SS1760 24-Apr-06 Yap, M.

46933 217.35 TMDC 46982 551.60 TMDC 46984 305.00 TESI 47001 3,736.25 MMI 47002 4,428.20

LA WIN CREW

47010 803.90 ALAMAT 47012 1,085.40

NEO MARINE

47015 904.00 MATATAG 47016 144.90

EXITO CREW

47017 209.60 CADENZA 47018 1,529.40 D. Asset 47019 192.45 Meti 47020 413.10 Cadenza Emp 47021 121.80 Exito Emp 47022 108.60 KAPALARAN 47024 107.90

LA WIN

47025 64.10 NEOMARINE 47029 513.70 PIZZATEK 47030 109.50 SMI 47034 838.75 NCT 47035 533.75 DOLPHIN 47040 237.90

DOLPHIN MGMT

47041 662.00 Dongiin 47042 2,537.70 Hokoku 47043 4,713.40 TOG!

47048 700.00 !LSI 47049 20.60 FETRAN 47051 539.50

TRANS M

47052 821.90

ASIAN A

47054 274.40 KMTC 47055 118.95 NLPH 47057 4,364.50 NLPH 47058 4,364.50 TESI 47059 946.20 TOG!

47076 391.40 D. Magic 47079 2,087.70

YAS BROKERAGE

47080 991.50 A1vior, B.

47084 4,935.00 Mendoza, R.

47085 788.40

TRANS M

47089 78.00 SMI 47093 4,662.60 !PSI 47095 392.90 NET!

47099 994.50 MMI Crew 47158 4,503.90 COSMIC 47060-1 466.00 CSPLDT 47060-2 625.40 JCL 47060-4 815.00 ICMA 47060-5 6,712.00 HACHIUMA 47060-6 4 086.90 HOKOKU 47060-7 772.60 NYKLINE 47060-8 1,703.20

SS1760 24-Apr-06 SS1763 SS1763 SS1764 24-Apr-06 ss 1764 24-Apr-06 SS1325 10-May-06 SS1859 2-May-06 SS1870 4-May-06 SS1871 4-May-06 SS1874 5-May-06 ss 1875 5-May-06 SS1878 8-May-06 SS1879 8-May-06 SS1882 8-May-06 SS1883 8-May-06 SS1886 8-May-06 SS1889 9-May-06 SS1894 9-May-06 SS1896 9-May-06 SS1899 9-Mav-06 SS1900 9-Mav-06 SS1920 16-May-06 SS2052 9-May-06 SS2054 9-May-06 SS2056 9-May-06 SS2057 9-Mav-06 SS2058 9-May-06 SS2059 9-May-06 SS2060 9-May-06 SS2062 9-May-06 SS2063 9-Mav-06 SS2067 11-May-06 SS2068 11-May-06 ss 2072 15-May-06 SS2074 15-May-06 SS2075 15-May-06 SS2082 16-May-06 SS2100 18-May-06 SS2103 24-Mav-06 SS2104 24-Mav-06 SS2107 24-May-06 SS2152 18-May-06 SS2153 SS2165 22-Mav-06 SS2167 22-May-06 SS2172 22-May-06 ss 2174 22-May-06 SS2175 22-Mav-06 SS2176 22-May-06 SS2182 22-May-06 SS2186 22-May-06 TMMCREW 47060-9 2,581.30 47063-1 1 358.30 47063-2 683.30

YUSEN STAFF

47064-1 1,359.30 YUSENMGMT 47064-2 686.30 MMI employees 46625 4,519.56 EPERFORMAX 47159 391.40 Matawaran, R.

47170 175.20 Flores, E.

47171 175.20 TESI 47174 2,247.50 TESI 47175 762.50 CASSC 47178 1,070.60 CASSC 47179 226.20 ADTOURS 47182 4,342.20 ADTOURS 47183 5,417.80 TDGI 47186 2,142.40 TMDC 47189 551.60 DALEX 47194 184.00

DOLPHIN MGMT

47196 662.00 Transnational Resources, Inc 47199 87.60 Neomarine Emp 47200 513.70 Yap,M.

47220 217.35

LA WIN

47352 64.10 KAPALARAN 47354 107.90 EXITO 47356 108.60 CADENZA 47357 121.80 D. ASSET 47358 192.45 Aguirre, Roberto 47359 530.40 MET!

47360 268.20 Aguirre, Roberto 47362 1,383.00 Virtusio, Domingo 47363 109.50 Dong Jin Crew 47367 3,132.10 HOKOKU 47368 2,397.50 D. WONDER 47372 678.80 Fetran 47374 5,171.50

TRANS M

47375 781.90 TDC 47382 686.25 !PSI 47400 144.30

MMI EMP

47403 846.00 MMI 47404 243.00 MMI 47407 6,350.70 NET!

47452 706.50 NYKFIL 47453 4,782.45

YAS BROKERAGE

47465 765.90 YUSEN 47467 915.00 NFJSC 47472 3,355.00 NESC 47474 667.50 NFJSC 47475 1,658.75 NFJSC 47476 131.60 NFJSC-MANILA 47482-2 131.60 TLI 47486 79.30

SS2187 22-May-06 SS2189 22-May-06 SS2194 22-May-06 SS2196 22-Mav-06 SS2197 23-May-06 SS2198 23-May-06 SS2202 24-May-06 SS2207 24-May-06 SS2211 25-Mav-06 SS2219 25-May-06 SS2221 25-May-06 SS2224 26-May-06 SS2226 26-Mav-06 SS2227 26-Mav-06 SS2228 26-May-06 SS2229 26-May-06 SS2230 26-May-06 SS2233 26-May-06 SS2234 26-Mav-06 SS2237 26-May-06 SS2239 26-May-06 SS2242 29-Mav-06 SS2247 30-Mav-06 SS2260 30-May-06 SS2262 31-May-06 SS2095 18-Mav-06 SS2095 18-Mav-06 SS2155 22-May-06 SS2155 22-May-06 SS2155 22-May-06 SS2155 22-Mav-06 SS2155 22-Mav-06 SS2155 22-May-06 SS2155 22-May-06 SS2169 22-May-06 SS2169 22-Mav-06 SS2182 22-May-06 SS2182 22-May-06 SS2284 7-Jun-06 SS2343 15-Jun-06 SS2345 16-Jun-06 SS2451 13-Jun-06 SS2452 13-Jun-06 SS2455 13-Jun-06 SS2457 13-Jun-06 SS2459 14-Jun-06 SS2460 14-Jun-06 SS2461 14-Jun-06 SS2463 14-Jun-06 SS2464 14-Jun-06 SS2467 14-Jun-06 TLI TLI TLI

VISION AIR

ASIAN A

ASIAN A

NCT NLPH

VISION AIR

Doiphin-Dodongo, B.

VROON DALEX KAGITINGAN Maunlad Crew EXITO

ASIAN A

CADENZA NEOMARINE PROSPERIDAD IDEAL ALAMAT TCL TMDC

LA WIN

SMI TDGI NYKFIL

AMBULO YUSEN

COSMIC NYKSIN JCL ICMA NYKLINE TMM

YUSEN STAFF

YUSEN MGMT

NFJSC NFJSC-CEBU Lao Guico Ma. Veronica Siin, Marlon Yap, Margie VROON PROSPERIDAD

LA WIN

IDEAL EXITO ALAMAT CADENZA CADENZA EXITO

LA WIN

47487 1,213.05 47489 118.95 47494 1,213.05 47496 280.00 47497 185.40 47498 1,998.20 47502 637.90 47507 4,696.50 47511 304.90 47519 2,377.60 47521 731.60 47524 382.00 47526 1,974.00 47527 156.00 47528 209.60 47529 274.40 47530 1,973.40 47533 2,257.00 47534 355.90 47537 829.80 47539 304.00 47542 783.00 47547 228.75 47560 1,830.40 47562 1,601.25 47395-1 262.00 47396-1 594.10 47455-7 772.60 47455-1 166.00 47455-3 28,668.60 47455-4 903.00 47455-5 7,220.20 47455-8 2,469.20 47455-9 4,202.00 47469-1 1,446.90 47469-2 683.30 47482-1 1,658.75 47482-2 131.60 47584 1,052.80 47643 103.40 47645 217.35 47751 731.60 47752 355.90 47755 803.90 47757 829.80 47759 822.80 47760 304.00 47761 2,832.60 47763 121.80 47764 108.60 47767 64.10

SS2471 14-Jun-06 SS2472 14-Jun-06 SS2473 14-Jun-06 SS2474 14-Jun-06 ss 2475 14-Jun-06 SS2476 15-Jun-06 SS2477 15-Jun-06 SS2478 15-Jun-06 SS2479 16-Jun-06 SS2483 16-Jun-06 SS2486 16-Jun-06 SS2487 16-Jun-06 ss 2488 16-Jun-06 SS2489 16-Jun-06 SS2490 16-Jun-06 SS2500 20-Jun-06 SS2514 29-Jun-06 SS2515 29-Jun-06 SS2518 30-Jun-06 SS2551 20-Jun-06 SS2557 21-Jun-06 SS2558 21-Jun-06 SS2559 21-Jun-06 SS2566 23-Jun-06 SS2573 29-Jun-06 SS2576 28-Jun-06 SS2576 28-Jun-06 SS2580 28-Jun-06 SS2581 28-Jun-06 SS2585 29-Jun-06 SS2586 30-Jun-06 SS2587 30-Jun-06 SS2588 30-Jun-06 SS2657 30-Jun-06 SS2326 5-Jun-06 SS2344 30-Jun-06 SS2482 16-Jun-06 SS2482 16-Jun-06 SS2127 26-Jul-06 SS2130 31-Jul-06 SS2134 26-Jul-06 SS2135 27-Jul-06 SS2137 26-Jul-06 SS2548 31-Jul-06 SS2591 14-Jul-06 SS2593 16-Jul-06 SS2594 17-Jul-06 SS2599 16-Jul-06 SS2659 16-Jul-06 SS2661 16-Jul-06 SS2702 16-Jul-06 D. ASSET

DOLPHIN MGMT

D. Magic D. WONDER

VISION AIR

NET!

!PSI

NYK SMI

NESC NEOMARINE DONGJIN HOKOKU

RET PLAN

TRANS M

FETRAN

ASIAN A

Operana, E.

Operana, E.

YUSEN

ASIAN A

PIZZATEK D. WONDER D. Magic TCL DALEX CASSC CASSC SMI !PSI

MMI PENSION

MMI PIZZATEK NLPH Elmer Paredes ADTOURS YUSENMGMT NFJSC NFJSC-CEBU MMS TMDC TMDC MMI MMI MAUNLAD NET!

CASSC NLPH TDGI Volfango, Edna Volfango, Edna Figueras, Kerwin 47771 192.45 47772 530.40 47773 1,577.50 47774 678.80 47775 304.90 47776 968.70 47777 144.30 47778 4,437.30 47779 667.50 47783 449.60 47786 641.40 47787 8,562.60 47788 84,329.50 47789 1,143.90 47790 1,636.70 47800 274.40 47814 460.00 47815 525.00 47818 2,058.75 47851 123.60 47857 109.50 47858 1,344.90 47859 796.50 47866 783.00 47873 382.00 47876 1 503.80 47876 1 070.60 47880 11,971.25 47881 1,448.75 47885 4,519.56 47886 228.75 47887 109.50 47888 4,123.50 47957 1.05 47626-1 5,643.30 47644-3 815.30 47782-1 848.75 47782-2 131.60 47427 198.40 47430 551.60 47434 4,346.25 47435 3,923.90 47437 1,316.00 47848 87.60 47891 1,982.50 47893 1,172.15 47894 2,058.75 47899 638.60 47959 166.00 47961 157.50 48002 158.60

SS2705 16-Ju1-06 SS2774 31-Ju1-06 SS2775 31-Ju1-06 SS2776 31-Ju1-06 SS2780 31-Ju1-06 SS2796 31-Ju1-06 SS2797 31-Ju1-06 SS2853 26-Ju1-06 SS2854 26-Ju1-06 SS2856 26-Ju1-06 SS2857 26-Ju1-06 SS2858 26-Ju1-06 SS2859 26-Ju1-06 SS2860 26-Ju1-06 SS2861 31-Ju1-06 SS2862 25-Ju1-06 SS2864 31-Ju1-06 SS2865 29-Ju1-06 SS2866 31-Jul-06 SS2867 31-Ju1-06 SS2868 31-Ju1-06 SS2875 31-Ju1-06 SS2876 31-Ju1-06 SS2877 31-Ju1-06 SS2878 31-Ju1-06 SS2879 31-Ju1-06 SS2880 31-Ju1-06 SS2883 26-Ju1-06 SS2885 31-Ju1-06 SS2886 31-Ju1-06 SS2887 31-Ju1-06 SS2888 26-Ju1-06 SS2889 31-Ju1-06 SS2893 26-Ju1-06 SS2894 26-Ju1-06 SS2900 26-Ju1-06 SS2952 26-Ju1-06 SS2955 26-Ju1-06 SS2958 31-Ju1-06 SS2960 29-Ju1-06 SS2962 29-Ju1-06 SS2967 31-Ju1-06 SS2973 31-Ju1-06 SS2977 31-Ju1-06 SS2701 16-Ju1-06 SS2701 16-Ju1-06 SS2863 31-Ju1-06 SS2866 31-Ju1-06 SS2897 26-Ju1-06 SS2897 26-Ju1-06 SS2897 26-Ju1-06 Jimenez, Theresa Yusen Yusen

YAS BROKERAGE

Carpio, Judv ADTOURS ADTOURS KMTC KMTC TAC TAC JRDC KAMRAZ TDC

DOLPHIN MGT

KYOKKO FETRAN

TRANS M

NET!

KAPALARAN

LA WIN EMP

NEOMARINE PROSPERIDAD DOLPHIN-TRI CADENZA DAC

EXITO EMP

NLPH NYK-SMI !PSI TCL TOG!

KPD !PC fr. JRD MMI

MMI EMP

EXITO PROSPERIDAD MATATAG TESI CADENZA ALAMAT KMTC Operana, Edgar IDEAL TWFI FIT D. WONDER NETIADD'L COSMIC CSPLDT JCL 48005 771.00 48074 27,297.50 48075 76.25 48076 10,675.00 48080 87.60 48096 251.85 48097 1,009.40 48153 39.65 48154 1427.4 48156 228.70 48157 1,448.70 48158 228.75 48159 228.75 48160 838.75 48161 530.40 48162 1,467.10 48164 1,459.10 48165 2,787.00 48166 1,282.10 48167 107.90 48168 64.10 48175 449.60 48176 43.80 48177 43.80 48178 121.80 48179 192.45 48180 108.60 48183 4,429.30 48185 4,487.60 48186 144.30 48187 1,258.00 48188 700.00 48189 18,328.90 48193 846.00 48194 243.00 48200 822.80 48252 7,131.90 48255 250.00 48258 2,116.10 48260 1,710.20 48262 304.00 48267 118.95 48273 460.00 48277 829.80 48001-2 51.70 48001-3 43.80 48163-1 616.80 48166-1 87.60 48197-1 166.00 48197-2 1,620.70 48197-4 1,479.00

SS2897 26-Jul-06 SS2897 26-Jul-06 SS2897 26-Jul-06 SS2897 26-Jul-06 SS2918 16-Aug-06 SS2981 14-Aug-06 SS2982 14-Aug-06 SS2987 14-Aug-06 SS2990 14-Aug-06 SS2991 14-Aug-06 SS2992 14-Aug-06 SS2993 14-Aug-06 SS2994 14-Aug-06 SS2996 14-Aug-06 SS2997 14-Aug-06 SS3000 14-Aug-06 SS3067 16-Aug-06 SS3096 31-Aug-06 SS3101 14-Aug-06 SS3110 24-Aug-06 SS3111 25-Aug-06 SS3119 31-Aug-06 SS3123 16-Aug-06 SS3124 31-Aug-06 SS3125 16-Aug-06 SS3141 25-Aug-06 SS3144 25-Aug-06 SS3146 25-Aug-06 SS3148 25-Aug-06 SS3149 25-Aug~06 SS3160 31-Aug-06 SS3163 31-Aug-06 SS3165 31-Aug-06 SS3351 25-Aug-06 SS3353 28-Aug-06 SS3354 28-Aug-06 SS3355 28-Aug-06 SS3358 28-Aug-06 SS3359 28-Aug-06 SS3360 28-Aug-06 SS3361 28-Aug-06 SS3362 28-Aug-06 SS3363 28-Aug-06 SS3364 28-Aug-06 SS3365 28-Aug-06 SS3366 28-Aug-06 SS3371 31-Aug-06 SS3372 31-Aug-06 SS3373 31-Aug-06 SS3375 31-Aug-06 SS3376 31-Aug-06 HACHIUMA HOKOKU NYKLINE TMM Edmon Vitacion

ASIAN A

ASIAN A

NFJSC NESC NCT NCT NESC NYK-FJSC TOG!

TOG ASIA

TLI

YAS BROKERAGE

PIZZATEK TLI VROON D. Magic TCL CASSC TRANSM TRANSM DALEX CADENZA D. WONDER D. Magic PROSPERIDAD San Jose, Bienvenido MMI TMDC MATATAG

LA WIN

EX! TO IDEAL VROON KYOKKO HOKOKU TRANSM FETRAN TOG!

TESI TCL TCL

DOLPHIN KAPALARAN

PROSPERIDAD

NEO MARINE

DOLPHIN EXITO

DOLPHIN CADENZA

48197-6 12,375.30 48197-7 250.00 48197-8 1,406.10 48197-9 5,942.50 48218 816.00 48281 1,812.80 48282 123.60 48287 381.25 48290 15,173.75 48291 19,977.50 48292 1,421.30 48293 667.50 48294 848.75 48296 61.80 48297 610.00 48300 118.95 48367 657.30 48396 87.60 48401 793.00 48410 2,515.20 48411 1,207.50 48419 658.00 48423 649.85 48424 78.00 48425 78.00 48441 382.00 48444 2,082.20 48446 699.80 48448 1,023.60 48449 355.90 48460 1,316.00 48463 3,796.90 48465 551.60 48651 250.00 48653 803.90 48654 822.80 48655 829.80 48658 3,881.80 48659 1,467.10 48660 7,674.90 48661 1,111.00 48662 4,540.10 48663 700.00 48664 2,247.50 48665 3,431.25 48666 915.00 48671 107.90 48672 43.80 48673 449.60 48675 108.60 48676 121.80

SS3377 31-Aug-06 SS3378 31-Aug-06 SS3379 31-Aug-06 SS3380 31-Aug-06 SS3381 31-Aug-06 SS3382 31-Aug-06 SS3388 31-Aug-06 SS3390 31-Aug-06 SS3391 31-Aug-06 SS3392 31-Aug-06 SS3396 31-Aug-06 SS3397 31-Aug-06 SS3409 31-Aug-06 SS3410 31-Aug-06 SS2994 31-Aug-06 SS3069 31-Aug-06 SS3069 31-Aug-06 SS3070 31-Aug-06 SS3102 31-Aug-06 SS3111 31-Aug-06 SS3367 31-Aug-06 SS3367 31-Aug-06 SS3367 31-Aug-06 SS3367 31-Aug-06 SS3367 31-Aug-06 SS3367 31-Aug-06 SS3367 31-Aug-06 SS3367 31-Aug-06 SS3367 31-Aug-06 SS3385 31-Aug-06 SS3395 31-Aug-06 SS2741 28-Sep-06 SS3168 28-Sep-06 SS3169 28-Sep-06 SS3170 30-Sep-06 SS3447 15-Sep-06 SS3451 13-Sep-06 SS3452 29-Sep-06 SS3453 29-Sep-06 SS3455 18-Sep-06 SS3456 18-Sep-06 SS3457 28-Sep-06 SS3461 28-Sep-06 SS3462 30-Sep-06 SS3463 30-Sep-06 SS3464 28-Sep-06 SS3465 28-Sep-06 SS3466 28-Sep-06 SS3469 28-Sep-06 SS3472 SS3473 28-Sep-06

LA WIN

DOLPHIN MGT

DOLPHIN MGT

TLSC TLI TLI Operana, Edgar TLSC NCT NYKFJSC NESC NESC YUSEN

YAS BROKERAGE

NYK-FJSCCEBU

YUSEN STAFF

YUSENMGMT YUSENMGMT TOG!

D. Magic COSMIC CSPLDT NYK-SIN JCL ICMA HACHIUMA HOKOKU

NYK LINE

TMM TLSC-TWFI

NYKFSJC CEBU

AHRI Safranca, Sonny MMI TMDCMML Talamor, Ronnie

VISION AIR

ASIAN A

ASIAN A

ARHI ARHI Homer Del Ayre TLSC TLSC FIT MLGTPP Sobremonte, Rogelio So bremon te, Rogelio TOG PROSPERlDAD

DOLPHIN MML

48677 64.10 48678 4,402.60 48679 1,205.40 48680 4,956.25 48681 674.05 48682 594.75 48688 525.00 48690 1,336.50 48691 1,214.70 48692 991.25 48696 2,897.50 48697 635.50 48709 305.00 48710 915.00 48294-1 131.60 48369-1 1,626.90 48369-3 815.30 48370-1 891.30 48402-1 262.00 48411-2 289.80 48667-1 166.00 48667-2 1,620.70 48667-3 27,409.70 48667-4 657.00 48667-5 6,348.70 48667-6 9,809.00 48667-7 2 590.00 48667-8 1,929.90 48667-9 6,685.50 48685-2 51.70 48695-2 131.60 48041 305.00 48468 305.00 48469 2,363.70 48470 686.25 48747 394.80 48751 87.60 48752 32.80 48753 32.80 48755 305.00 48756 76.25 48757 394.80 48761 991.25 48762 1,336.50 48763 43.80 48764 1,052.80 48765 658.00 48766 131.60 48769 84 329.50 48772 1,066.00 48773 555.10

SS3474 30-Seo-06 SS3476 30-Seo-06 SS3477 30-Sep-06 SS3479 30-Sep-06 SS3483 30-Sep-06 SS3485 SS3486 28-Seo-06 SS3487 30-Sep-06 SS3491 30-Sep-06 SS3493 27-Sep-06 SS3494 30-Sep-06 SS3499 SS3505 28-Seo-06 SS3510 29-Sep-06 SS3511 13-Sep-06 SS3516 29-Sep-06 SS3517 29-Seo-06 SS3518 29-Sep-06 SS3519 29-Sep-06 SS3530 29-Sep-06 SS3539 8-Sep-06 SS3542 8-Seo-06 SS3543 13-Sep-06 SS3544 29-Sep-06 SS3547 29-Sep-06 SS3548 29-Seo-06 SS3563 30-Seo-06 ss 3582 30-Sep-06 SS3619 SS3654 27-Sep-06 SS3655 27-Seo-06 SS3656 30-Sep-06 SS3660 30-Sep-06 SS3664 ss 3665 SS3666 SS3667 28-Sep-06 SS3668 SS3936 30-Sep-06 SS2155 SS3463 30-Sep-06 SS3468 28-Sep-06 SS3468 28-Seo-06 SS3468 28-Sep-06 SS3468 28-Sep-06 SS3468 28-Sep-06 SS3468 28-Seo-06 SS3468 28-Sep-06 SS3175 24-0ct-06 SS3176 24-0ct-06 TESI TDGI TDGI

CADENZA CRED

CASSC EMP

CASSC EMP

DOLPHIN DYNAMIC

DOLSHIP MET!

EXITO CREW

MAUNLAD CREW

MATATAG

EXITO EMP

TDG MMS

VISION AIR

KYOKKO HOKOKU

TRANS M

FETRAN

NYKSIN CREW

FETRAN

LA WIN CREW

VISION AIR

NEO MARINE

NLPH NLPH YUSENMGMT Bustamante, Lorna TMDC MET!

NEO MARINE

DOLSHIPTRI IDEAL NLPH !PSI NET!

SMI MML

NYK FIL

FIT MANILA

CSPLDT TWFI

NYKSIN CREW

JCLCREW

ICMA CREW

HACHIUMA HOKOKU

NYK LINE

YUSEN STAFF

MMI MMI 48774 1 783.10 48776 721.00 48777 123.60 48779 7,412.20 48783 649.85 48785 741.60 48786 192.45 48787 242.70 48791 822.80 48793 131.40 48794 250.00 48799 108.60 48805 84,329.50 48810 198.40 48811 87.60 48816 2,431.10 48817 10,764.10 48818 1,392.00 48819 1,459.10 48830 1,525.00 48839 2.55 48842 10.24 48843 280.00 48844 88.00 48847 4,526.90 48848 3,637.20 48863 1,005.20 48882 43.80 48919 943.20 48954 242.70 48955 318.00 48956 43.80 48960 330.00 48964 915.00 48965 1,872.65 48966 228.75 48967 457.50 48968 76.25 49236 43.80 47455-2 493.80 48763-1 51.70 48768- 3A 31,095.00 48768-4 657.00 48768-5 5,116.50 48768-6 11,260.32 48768-7 640.00 48768-8 3,589.00 48863-1 1,406.90 48475 4,519.56 48476 1,290.00

SS3179 9-0ct-06 SS3183 12-0ct-06 SS3184 12-0ct-06 SS3187 30-0ct-06 SS3189 24-0ct-06 SS3190 24-0ct-06 SS3676 24-0ct-06 SS3680 25-0ct-06 SS3682 5-0ct-06 SS3688 16-0ct-06 SS3693 26-0ct-06 SS3694 25-0ct-06 SS3697 24-0ct-06 SS3698 24-0ct-06 SS3699 16-0ct-06 SS3799 31-0ct-06 SS3808 24-0ct-06 SS3809 18-0ct-06 SS3814 20-0ct-06 SS3818 20-0ct-06 SS3901 19-0ct-06 SS3902 19-0ct-06 SS3904 20-0ct-06 SS3905 25-0ct-06 SS3911 23-0ct-06 SS3912 23-0ct-06 SS3913 25-0ct-06 SS3914 25-0ct-06 SS3925 23-0ct-06 SS3927 25-0ct-06 SS3928 25-0ct-06 SS3931 27-0ct-06 SS3936 23-0ct-06 SS3937 23-0ct-06 SS3938 25-0ct-06 SS3940 23-0ct-06 ss 3944 26-0ct-06 SS3945 26-0ct-06 SS3946 26-0ct-06 SS3949 30-0ct-06 SS3950 30-0ct-06 SS3952 30-0ct-06 SS3956 30-0ct-06 SS3957 30-0ct-06 SS3959 30-0ct-06 SS3962 26-0ct-06 SS3965 27-0ct-06 SS3970 30-0ct-06 SS3975 30-0ct-06 SS3690 24-0ct-06 SS3967 30-0ct-06 TMDC MMI MMI MMI

MMI CREW

MMI CREW

TAC LIMOU

ALAMAT SHIPPING

NESC TOG!

YAS BROKERAGE

YUSEN STAFF

YUSENMGMT

ASIAN A

Adkison, Arlene TACMML Transnational Corp.

Pizzatek and Food Corp. Pizzatek and Food Corp.

ASIAN A

ASIAN A

TESI TESI Dolphin-Dalex AETI

AETI MML

TCL KYOKKO

TRANSM CREW

FETRAN Sobremonte, Rogelio TLSC-FIT TLSC-TWFI TLSC HOKOKU-DOLPHIN NCT NCTEMP TOG!

VROON

NEO MARINE CREW

MAUNLAD-IKARIA

LA WIN CREW

HARMONY CREW

EXITO CREW

DOLPHIN SHIP MGT

LACANDALO, PILARDO TCL

CADENZA CREW

NYK FJSC CEBU

CS PLOT

48479 395.60 48484 1,290.00 48485 4,519.56 48487 1,316.00 48489 4,744.80 48490 3,312.30 48976 99.00 48980 20.60 48982 192.45 48988 635.50 48993 84,329.50 48994 657.30 48997 1,323.90 48998 1,005.20 48999 142.80 49099 6,480.00 49108 228.75 49109 305.00 49114 87.60 49118 87.60 49201 123.60 49202 309.00 49204 228.75 49205 1,739.30 49211 382.00 49212 741.60 49213 206.00 49214 1,375.00 49225 1,383.10 49227 3,562.50 49228 738.60 49231 131.60 49236 43.80 49237 51.70 49238 1,336.50 49240 14,523.60 49244 1 214.70 49245 1 284.70 49246 516.00 49249 1,415.80 49250 88.00 49252 131.40 49256 1,395.10 49257 2,895.00 49259 822.80 49262 1,209.00 49265 198.25 49270 762.50 49275 908.00 48990-2 3 275.10 49267-1 1,240.30

SS3967 30-0ct-06 SS3967 30-0ct-06 SS3967 30-0ct-06 SS3199 28-Nov-06 SS3200 28-Nov-06 SS3747 25-Nov-06 SS3993 28-Nov-06 SS3999 28-Nov-06 SS4063 28-Nov-06 SS4064 28-Nov-06 SS4065 25-Nov-06 SS4107 30-Nov-06 SS4114 30-Nov-06 SS4255 28-Nov-06 SS4256 28-Nov-06 ss 4258 28-Nov-06 SS4260 28-Nov-06 SS4261 28-Nov-06 SS4262 28-Nov-06 SS4263 29-Nov-06 SS4264 28-Nov-06 SS4265 28-Nov-06 SS4266 28-Nov-06 SS4268 28-Nov-06 SS4270 28-Nov-06 SS4275 29-Nov-06 SS4277 29-Nov-06 SS4278 29-Nov-06 SS4279 29-Nov-06 SS4281 29-Nov-06 SS4284 29-Nov-06 SS4287 28-Nov-06 SS4288 28-Nov-06 SS4289 30-Nov-06 SS4292 30-Nov-06 SS4299 29-Nov-06 SS4300 29-Nov-06 SS4302" 29-Nov-06 SS4303 29-Nov-06 SS4304 29-Nov-06 SS4306 29-Nov-06 SS4308 29-Nov-06 SS4308 29-Nov-06 SS4309 29-Nov-06 SS4310 29-Nov-06 SS4311 29-Nov-06 SS4316 29-Nov-06 SS4317 29-Nov-06 SS4321 30-Nov-06 SS4324 30-Nov-06 SS4325 30-Nov-06 JCL ICMA HOKOKU

MMI EMP

MMIMML Araquil, Roselyn KMTC

NYK FIL SMI

YAS MML

YAS BROKERAGE

Tiu, Nestorio San Jose, Bienvenido

MMI EMP

DOLPHIN MGT

TAC

TOG ASIA MML

TOG! MML TOG!

TRI

NEO MARINE EMP

DOLSHIP MET!

NYK-FIL IPS!

!PSI MML

NYK-FIL SMI

NYK-FIL NET!

TOG!

FETRAN

TRANS MCREW

KYOKKO

HOKOKU DOLSHIP

ASIAN A

VISION AIR

VISION AIR

TCL NTMA

DISNEY MAGIC

D. WONDER

DOLPHIN MGT

ASIAN A

VISION AIR

TRI PROSPERIDAD PROSPERIDAD PROSPERIDAD

NEO MARINE CREW

NEO MARINE CREW

DAC KAPALARAN Justo, Norito NLPH

LA WIN EMP

49267-4 481.00 49267-5 4,262.30 49267-7 250.00 48499 1,290.00 48500 610.00 49047 1,680.00 49293 277.55 49299 3,712.60 49363 457.50 49364 657.30 49365 266.50 49407 1,316.00 49414 243.00 49555 321.60 49556 810.00 49558 76.25 49560 1,936.40 49561 368.00 49562 43.80 49563 318.00 49564 188.70 49565 275.70 49566 305.00 49568 3,243.00 49570 1,282.10 49575 700.00 49577 5,262.20 49578 2,278.70 49579 1,062.40 49581 3,503.50 49584 142.80 49587 87.60 49588 87.60 49589 775.00 49592 144.90 49599 1,977.60 49600 2,727.20 49602 321.60 49603 123.60 49604 277.55 49606 43.80 49608 43.80 49608 87.60 49609 1,209.00 49610 88.00 49611 318.00 49616 192.45 49617 107.90 49621 987.00 49624 4,003.80 49625 6,410.00

CIA CASE NO. 8291

SS4326 30-Nov-06 SS4326 30-Nov-06 SS4330 30-Nov-06 SS4331 30-Nov-06 SS4332 30-Nov-06 SS4333 30-Nov-06 SS4062 29-Nov-06 SS4296 29-Nov-06 SS4296 29-Nov-06 SS4296 29-Nov-06 SS4296 29-Nov-06 SS4296 29-Nov-06 SS2751 29-Dec-06 SS4070 29-Dec-06 SS4113 29-Dec-06 SS4126 29-Dec-06 SS4127 29-Dec-06 SS4345 30-Dec-06 SS4346 30-Dec-06 SS4348 30-Dec-06 SS4350 30-Dec-06 SS4370 30-Dec-06 SS4374 30-Dec-06 SS4391 30-Dec-06 SS4401 30-Dec-06 SS4408 30-Dec-06 SS4411 30-Dec-06 ss 4412 30-Dec-06 SS4413 30-Dec-06 SS4414 30-Dec-06 ss 4415 30-Dec-06 SS4417 29-Dec-06 SS4419 29-Dec-06 SS4422 30-Dec-06 SS4423 30-Dec-06 SS4424 30-Dec-06 SS4425 30-Dec-06 SS4427 30-Dec-06 SS4432 30-Dec-06 SS4433 30-Dec-06 SS4504 30-Dec-06 SS4505 30-Dec-06 SS4506 30-Dec-06 SS4508 30-Dec-06 SS4509 30-Dec-06 SS4512 30-Dec-06 SS4516 30-Dec-06 SS4517 30-Dec-06 SS4519 30-Dec-06 SS4520 30-Dec-06 SS4521 30-Dec-06

DYNAMIC ASSET

EXITO EMP

HARMONY EXlTO CREW

CADENZA CREW

ALAMATCREW

YUSEN STAFF

COSMIC

MARINE ENG'R/ CS VEGA

JCL

ICMA CREW

HOKOKUNYK ADTOURS Leyva, Lee berti

MMI RET

MMI RET

MMI EMP

PIZZATEK

DOMINOS PIZZATEK

NLPH TCL YUSENMML Enotori, F1orencio

YAS BROKERAGE

TCLMML

NYK-FJSC CEBU

NESC MML

NESC !PSI MML NET! MML SMIMML TMDC TMDCMML CASSCEMP TESI TESI

LA WIN CREW

VROON CREW

CASSC

CASSC MML

TLI MML

TLSC MML

DOLPHIN MML

EXITO CREW

HARMONY CREW

MATATAG CREW

ALAMAT

LAWIN CREW

DOLSHIP

DOLSHIP HOKOKU

KYOKKO 49626 108.60 49626 108.60 49630 2,895.00 49631 613.20 49632 6,570.40 49633 2,195.00 49362-1 1,323.90 49596-1 468.90 49596-2 2,239.75 49596-4 1,179.00 49596-5 4,119.50 49596-7 1,983.60 48095 2,722.40 49370 262.80 49413 4,519.56 49426 4,519.56 49427 2,199.00 49645 87.60 49646 87.60 49648 4,164.60 49650 775.00 49670 1,143.75 49674 150.00 49691 563.70 49701 762.50 49708 131.60 49711 1,830.00 49712 635.50 49713 762.50 49714 305.00 49715 1,753.75 49717 785.60 49719 228.75 49722 649.85 49723 1,783.10 49724 1,783.10 49725 2,421.60 49727 255.40 49732 591.35 49733 576.80 49804 118.95 49805 396.50 49806 39.65 49808 613.20 49809 391.60 49812 250.00 49816 550.00 49817 1,395.10 49819 118.95 49820 2,408.00 49821 2,026.40

SS4522 30-Dec-06 SS4523 30-Dec-06 SS4524 30-Dec-06 SS4525 30-Dec-06 SS4526 30-Dec-06 SS4529 30-Dec-06 SS4530 30-Dec-06 SS4533 30-Dec-06 SS4537 30-Dec-06 SS4538 30-Dec-06 SS4540 29-Dec-06 SS4542 29-Dec-06 SS4543 29-Dec-06 ss 4545 29-Dec-06 SS4546 29-Dec-06 SS4547 29-Dec-06 SS4548 29-Dec-06 SS4551 29-Dec-06 SS4555 30-Dec-06 SS4558 30-Dec-06 SS4562 30-Dec-06 SS4563 30-Dec-06 SS4564 30-Dec-06 SS4565 29-Dec-06 SS4567 30-Dec-06 SS4568 30-Dec-06 SS4569 30-Dec-06 SS4580 30-Dec-06 SS4583 30-Dec-06 SS4585 30-Dec-06 SS4586 30-Dec-06 SS4590 30-Dec-06 SS4591 30-Dec-06 SS4593 29-Dec-06 SS4594 29-Dec-06 SS4599 29-Dec-06 SS4600 29-Dec-06 SS4431 30-Dec-06 SS4431 30-Dec-06 SS4431 30-Dec-06 SS4431 30-Dec-06 SS4431 30-Dec-06 SS4431 30-Dec-06 SS4431 30-Dec-06 SS4431 30-Dec-06 SS4431 30-Dec-06 SS4561 29-Dec-06 SS4561 29-Dec-06 SS4561 29-Dec-06 SS4561 29-Dec-06 SS4561 29-Dec-06 TUM!

TRANSM FETRAN VROONCREW D. WONDER NET!

!PSI NTMA

DISNEY MAGIC

TRI NEO MARlNE EMP

LA WIN EMP

KAPALARAN EMP

EXITO EMP

CADENZAEMP MET!

DAC NEO MARlNE CREW

LAWIN CREW

EXITO CREW

VROONCREW

KYOKKO CREW

HOKOKU DOLSHIP

HOKOKU DOLSHIP

TRANSM CREW

FETRAN CREW

JRDC

VISION AIR

TMDC NESC NYKFJSC

NYKFJSC MML

NYKFJSC VlSION AlR TOG!

AlTI MML TOG!

TAC

MARINE ENG'R/ CS VEGA

NYK SIN CREW

JCL ICMA HACHIUMA HOKOKU

NYK LINE

TMMCREW COSMIC MARlNE ENG'R JCL ICMACREW HACHIUMA 49822 816.00 49823 1,301.50 49824 7,626.00 49825 255.40 49826 1,181.20 49829 991.25 49830 457.50 49833 579.60 49837 2,801.27 49838 43.80 49840 318.00 49842 64.10 49843 107.90 49845 108.60 49846 121.80 49847 97.80 49848 192.45 49851 88.00 49855 1,395.10 49858 613.20 49862 483.40 49863 2,511.20 49864 1,548.00 49865 73.80 49867 5,176.40 49868 1,676.80 49869 228.75 49880 280.00 49883 280.00 49885 588.60 49886 228.75 49890 228.75 49891 915.15 49893 280.00 49894 700.00 49899 288.40 49900 123.60 49731-1 99.00 49731-2 1,240.30 49731-3 28,289.40 49731-4 1,179.00 49731-5 4,394.00 49731-6 11,551.50 49731-7 667.60 49731-8 3,156.30 49731-9 6,531.50 49861-1 468.90 49861-2 2,039.80 49861-4 1 263.00 49861-5 5,499.30 49861-6 4,607.20

SS4561 29-Dec-06 SS4561 29-Dec-06 SS4561 29-Dec-06 SS4638 30-Dec-06 SS4641 30-Dec-06

2. Missing O.R. - 20-Jan-06 - 27-Feb-06 - 20-Feb-06 - 1-Mar-06 - 21-Mar-06 - 14-Jun-06 - 28-Jun-06 - 23-Jun-06 - 23-Jun-06 - 23-Jun-06 - 23-Jun-06 - 23-Jun-06 - 23-Jun-06 - 23-Jun-06 - 31-Jul-06 - 31-Aug-06 - 30-Sep-06 - 29-Dec-06 - 29-Dec-06 - 29-Dec-06 - 23-Feb-06 HOKOKUNYK

NYK LINE

TMMCREW

NYKFJSC CEBU

NYKFJSC CEBU

YAS Brokerage Trans M Mapalad, L.

Lacandalo, P.

TRANS M

KAPALARAN Figueras, Kerwin Adam COSMIC CSPLDT

NYK SIN

ICMA HOKOKU NYKLINE TMM Bertolano, E.

Navarro, Geraldine TCL

PROSPERIDAD EMP

TOG! MML NCT

TRANS M

3. Not dated within the subject taxable year ss 923 23-Feb-05 Ramo, F.

4. Cancelled O.R. SS2771 31-Jul-06 YAS Brokerage Total 49861-7 3,717.60 49861-8 1,814.20 49861-9 7,219.40 49888-1 131.60 49891-1 131.60 45835 765.90 46467 78.00 46199 262.80 46420 1,665.00 46765 78.00 47766 107.90 47870 263.20 47868-1 949.20 47868-2 1,151.80 47868-3 27,520.30 47868-5 6,511.60 47868-7 772.60 47868-8 1,752.60 47868-9 3,903.70 47996 653.00 48559 586.50 48798 775.00 49839 43.80 49901 988.80 49902 934.70 78.00 46223 552.20 48072 765.90 p 1,722,711.52 Thus, out of the claimed discounts of P3,611,850.00, petitioner was only able to substantiate the amount of P381 ,951.94 (P2, 104,663.46 less P1,722,711.52). That having been settled, this Court shall now determine whether the discounts granted by petitioner in the amount of P381,951.94 for taxable year 2006 are deductible against its taxable gross income. As such, Section 27(A) of the NIRC of 1997, as amended, provides that: "SEC.

27.

Rates of Income Tax on Domestic C01porations. - (A) In General. - xxx. ~

For purposes of this Section, the term 'gross income' derived from business shall be equivalent to gross sales less sales returns, discounts and allowances and cost of goods sold. 'Cost of goods sold' shall include all business expenses directly incurred to produce the merchandise to bring them to their present location and use. For a trading or merchandising concern, 'cost of goods sold' shall include the invoice cost of the goods sold, plus import duties, freight in transporting the goods to the place where the goods are actually sold, including insurance while the goods are in transit. For a manufacturing concern, 'cost of goods manufactured and sold' shall include all costs of production of finished goods, such as raw materials used, direct labor and manufacturing overhead, freight cost, insurance premiums and other costs incurred to bring the raw materials to the factory or warehouse. In the case of taxpayers engaged in the sale of service, 'gross income' means gross receipts less sales returns, allowances and discounts." (Emphasis supplied) Clearly, for income tax purposes, discounts are treated as reductions of gross receipts of taxpayers engaged in the sale of services.

Petitioner avers that it presented the discounts as part of its "Other Direct Costs and Expenses" because its premium collections were presented as gross of the said discounts. However, this Court is of the opinion that such treatment has the same effect as presenting the sales net of discounts under Section 27 and would not affect the income tax due of the taxpayer for as long as the discounts claimed as deductible cost/ expense was also presented as part of the taxpayer's gross sales/revenues. In the instant case, it was shown that petitioner claimed the amount of P3,611,850.00 representing discounts as deduction from its gross income, however, petitioner failed to establish that such amount formed part of its declared premium collections for the year 2006 in the amount of P104,642,335.0053. Hence, the entire claimed discounts of P3,611,850.00 (including the amount of P381,951.94 substantiated by ORs) shall be disallowed./--

On non-deductible interest expense in the amount of P29,973.35, perusal of the records reveals that respondent based her assessment on petitioner's Schedule of Interest and Bank Charges54 which reflected the following: Date Ref. No.

Particulars Amount 19-Jan-06 539068 Elmer Agbanglo - int earned f' 2,000.00 23-Jan-06 539118 Marv1ene De Castro 666.67 24-Jan-06 539128 Melvin Uy 500.00 3-Apr-06 539473 Abelardo Untalasco 2,000.00 18-Apr-06 539536 Apolinar Gagan 333.33 12-Jul-06 666483 Eric Rodrigo 1,000.00 18-Jul-06 666519 Belen Bano 3,000.00 18-Jul-06 666527 Belen Palaganas 700.00 27-Jul-06 666580 Vito Baguion 438.76 31-Jul-06 48189 Karla P. Delgado 1,499.07 18-Aug-06 666686 Ronel Dela Cruz 725.00 1-Sep-06 666722 Deogracias Mina 416.67 7-Sep-06 666784 CDDR-PCF 208.33 4-0ct-06 666920 Rogelio Sancho 875.00 5-0ct-06 666932 Marites P. Manuel 25.09 17-0ct-06 666975 Mariano Reyes 166.67 31-0ct-06 667031 Alma Sacasas 729.17 20-Nov-06 667132 Victorio Catabay 1,166.67 28-Nov-06 667217 Ferdinand Mate!

1,750.00 14-Dec-06 728969 Analyn Bemando 875.00 29-Dec-06 jv#12-38/ 1 rec interest & bank charges 280.00 30-Dec-06 jv#12-07 /3 rec service charge Jan 06 200.00 30-Dec-06 iv#12-08f3 rec service charge Feb 06 200.00 30-Dec-06 jv#12-09/3 rec service charge Mar 06 200.00 30-Dec-06 jv#12-10/3 rec service charge Apr 06 400.00 30-Dec-06 jv#12-11/3 rec service charge May 06 400.00 30-Dec-06 jv#12-12/3 rec service charge Jun 06 400.00 30-Dec-06 jv#12-13/3 rec service charge Jul 06 400.00 30-Dec-06 jv#12-14/3 rec service charge Aug 06 400.00 30-Dec-06 jv#12-15/3 rec service charge Sep 06 400.00 30-Dec-06 jv#12-16/3 rec service charge Oct 06 200.00 30-Dec-06 jv#12-17 /6 rec service charge M C 100.00 30-Dec-06 jv#12-17 /7 rev bank charge 2005 (1,510.00) 30-Dec-06 jv#12-17 /8 rev bank charge 1-10 (2,000.00) 30-Dec-06 jv#12-35/4 Rec OR#49270 5.00 31-Dec-06 jv#12-19/4 Bank charges 66.47 31-Dec-06 jv#12-20/ 1 Bank charges DM#06-003 33.00 31-Dec-06 jv#12-21/3 Bank charges checkbook 3,300.00 31-Dec-06 jv#12-23/10 OR#46637 0.16 31-Dec-06 jv#12-24 Under / over deposits 12.32 31-Dec-06 jv#12-25/8 MC Application 50.00

31-Dec-06 iv# 12-27/7 31-Dec-06 iv#12-28/8 31-Dec-06 iv#12-29f7 31-Dec-06 iv#12-29/8 31-Dec-06 iv#12-30/01 31-Dec-06 iv#12-30l08 31-Dec-06 iv# 12-32 I 20 31-Dec-06 iv#12-39/ 14 31-Dec-06 iv# 12-40 I 04 31-Dec-06 iv# 12-40 I 06 31-Dec-06 iv#12-47 /15 31-Dec-06 iv#12-47!16 31-Dec-06 iv# 12-47/17 31-Dec-06 iv#12-54 OR#198 (50.00) OR#49229/270 4.05 Bank chare:es BC sec/TDC 100.00 Bank charges 0.40

OR#48667 NYK SMI

(102.481 Bank charges BC Sep 06 4,950.00 ch#666768 32.53 Bank chare:es HSBC$ 784.00 Bank charges Nov 06 70.00 Bank charges Jan/Feb 06 550.00 Interest & Bank charges 500.00 Rcls interest & bank charges 583.33 Rcls interest & bank charges 800.00 2006 AJE Accruals (860.86) Total P29,973.35 Moreover, it must be noted that the total disallowed interest expense can be traced in petitioner's 2006 Trial Balance - Profit and Loss under Interest and Bank Charges account.55 Considering that petitioner failed to substantiate the P29,973.35 interest and bank charges, respondent's disallowance of the same shall be upheld pursuant to Section 34(A)( 1 )(b) of the NIRC of 1997, as amended, which states: "(b) Substantiation Requirements. - No deduction from gross income shall be allowed under Subsection (A) hereof unless the taxpayer shall substantiate with sufficient evidence, such as official receipts or other adequate records:

(i) the amount of the expense being deducted, and (ii) the direct connection or relation of the expense being deducted to the development, management, operation and/or conduct of the trade, business or profession of the taxpayer."

c. Respondent's FDDA did not consider the net loss amounting to P16,308,626.00 In arriving at the deficiency income tax for taxable year 2006, respondent did not consider petitioner's net loss amounting to P16,308,626.0056. While the FDDA reflected the 2006 net loss of P16,308,626.00, a simple review of the mathematical computation of the alleged deficiency income tax stated in the FDDA would reveal that the P16,308,626.00 net loss was not considered. Obviously, the 2006 net loss of/-

petitioner amounting to 1'16,308,626.00 will easily offset the disallowed items, and petitioner will still suffer a net loss of 1'12,666,802.65, as computed below. Thus, the deficiency income tax assessment for taxable year 2006 shall be cancelled.

Taxable income per return 1"(16,308,626.00) Add: Disallowances Discounts 1"3,611 ,850.00 Non-deductible interest expense 29,973.35 3,641,823.35 Taxable Income per Court's Verification P( 12,666,802.65) DEFICIENCY VALUE-ADDED TAX- P7,549,168.20 Respondent's reconciliation of petitioner's gross receipts subject to VAT and per the examiner's investigation showed a difference of 1'33,522,146.63. She computed the deficiency VAT in the amount ofP7,549,168.20 as follows;57 Collection of premiums per VAT 1"67 ,446,873.36 O.R.s Less: VAT component (12%) 7 ,226,450. 72 Taxable sales per re-audit 60,220,422.64 Add: Other income 1"5,551 ,066.00 Unreported revenue 4,920,369.00 10,471,435.00 Total receipt subject to VAT per re- audit 70,691,857.64 Gross receipt subject to VAT per return 37,169,711.01 Difference 33,522,146.63 Output tax (12%) 4,022,657.60 Disallowed input tax 8,290.76 Deficiency VAT 4,030,948.36 Add: Interest (20% per annum) 3,493,219.84 Compromise penalty 25,000.00 3,518,219.84 Total Deficiency Value Added Tax p 7,549,168.20 Petitioner maintained that, in arnvmg at the alleged deficiency VAT assessment, respondent subjected the trust fund contributions to VAT, notwithstanding that under existing regulations applicable in taxable year 2006, the gross receipts of pre-need companies is net of the actual trust fund contribution. As such, VAT is imposed only on the premiums collected. ~

RR No. 16-05, which took effect on November 1, 2005, defines a pre-need company and provides the basis for the computation of its VA Table gross receipts as follows: "SECTION 4.108-3. Definitions and Specific Rules on Selected Services. - XXX XXX XXX U) Pre-need Companies are corporations registered with the Securities and Exchange Commission and authorized/licensed to sell or offer for sale pre-need plans, whether a single plan or multi-plan. They are engaged in business as seller of services providing services to plan holders by managing the funds provided by them and making payments at the time of need or maturity of the contract.

As service providers, the compensation for their services is the premiums or payments received from the plan holders.

XXX XXX XXX SECTION 4.108-4. Definition of Gross Receipts. - 'Gross receipts' refers to the total amount of money or its equivalent representing the contract price, compensation, service fee, rental or royalty, including the amount charged for materials supplied with the services and deposits applied as payments for services rendered and advance payments actually or constructively received during the taxable period for the services performed or to be performed for another person, excluding VAT." Based above, the taxable base for pre-need companies for VAT purposes should be the entire receipts (including amounts collected for the trust fund contributions of planholders) without any deduction except VAT. Even though the foregoing provisions were amended under RR No. 04-07, which became effective on April 7, 2007, the trust fund contributions remained VATable, to wit: "SECTION 11. Gross Receipts.- Sec. 4.108-4 of RR No. 16-2005 is hereby amended to read as follows: 'SEC. 4.108-4. Definition of Gross Receipts. - 'Gross receipts' refers to the total amount of money or its equivalent representing the contract price, compensation, service fee, / rental or royalty, including the amount charged for materials supplied with the services and deposits applied as payments for services rendered and advance payments actually or constructively received during the taxable period for the services performed or to be performed for another person, excluding the VAT, except those amounts earmarked for payment to unrelated third (3rd) party or received as reimbursement for advance payment on behalf of another which do not redound to the benefit of the payor. A payment is a payment to a third (3rd) party if the same is made to settle an obligation of another person, e.g., customer or client, to the said third party, which obligation is evidenced by the sales invoice/ official receipt issued by said third party to the obligor/ debtor (e.g., customer or client of the payor of the obligation). An advance payment is an advance payment on behalf of another if the same is paid to a third (3rd) party for a present or future obligation of said another party which obligation is evidenced by a sales invoice/ official receipt issued by the obligee/ creditor to the obligor/ debtor (i.e., the aforementioned 'another party') for the sale of goods or services by the former to the latter. For this purpose 'unrelated party' shall not include taxpayer's employees, partners, affiliates (parent, subsidiary and other related companies}, relatives by consanguinity or affinity within the fourth (4th) civil degree, and trust fund where the taxpayer is the trustor, trustee or beneficiary, even if covered by an agreement to the contrary." (Emphasis supplied) On November 12, 2007, the BIR issued Revenue Memorandum Circular (RMC) No. 74-07 emphasizing that: "It is hereby clarified that the taxable base of Pre- need Companies for VAT purposes shall be the gross receipts without any deduction. Such contribution is similar or equated to the recorded 'Reserve' in the case of insurance companies, whether life or non-life. Reserve is not deductible, for purposes of determining the taxable gross direct premium/writing for non-life insurance companies as well as life insurance companies. The said tax treatments have already been clarified and reiterated under Revenue Regulations (RR) No. 16-2005, as amended." However, in BIR Ruling No. DA-027-0658 dated January 31, 2006, then Commissioner of Internal Revenue, Jose Mario~

Bunag, clarified to the Philippine Federation of Pre-Need Companies, Inc., to which petitioner is a member, that the gross receipts of a pre-need company should be net of actual trust fund contributions for VAT purposes. Since petitioner relied in good faith on BIR Ruling No. DA-027 -06, the amounts it collected from planholders which were set aside for trust fund contributions shall be excluded from petitioner's VATable gross receipts, following the rationalization of the Supreme Court En Bane in the consolidated case of Commissioner of Internal Revenue vs. San Roque Power Corporation, Taganito Mining Corporation vs. Commissioner of Internal Revenue, and Philex Mining Corporation vs. Commissioner of Internal Revenue59, where it was held that under Section 246 of the Tax Code, taxpayers may rely upon a rule or ruling issued by the Commissioner from the time the rule or ruling is issued up to its reversal by the Commissioner or the Supreme Court. Be that as it may, petitioner has to comply with the invoicing requirements as provided under Section 113 of the NIRC of 1997, as amended, thus: "SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons. - XXX XXX XXX (B) Information Contained in the VAT Invoice or VAT Official Receipt. - The following information shall be indicated in the VAT invoice or VAT official receipt: XXX XXX XXX

(d) If the sale involves goods, properties or services some of which are subject to and some of which are VAT zero-rated or VAT-exempt, the invoice or receipt shall clearly indicate the breakdown of the sale price between its taxable, exempt and zero-rated components, and the calculation of the value-added tax on each portion of the sale shall be shown on the invoice or receipt: Provided, That the seller may issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale." (Emphasis supplied) V

In the instant case, the trust fund contributions which were separately indicated in petitioner's VAT official receipts as "NONVAT (Trust Fund)" only amounted to 1"635,213.90, detailed as follows:

Exhibit Date O.R. No.

Client Trust Fund ss 2302 31-May-06 47602 Habulan, J-Feb06 p 855.40 ss 2319 31-May-06 47619 Mercado, Marina 2,566.20 ss 2320 31-May-06 47620 Pareia,Josephine 854.10 ss 2264 1-Jun-06 47564 Escalante, Anselmo 1,138.80 ss 2265 1-Jun-06 47565 Escalante, Anselmo 5,070.00 ss 2323 2-Jun-06 47623 Escalante, Anselmo 1,014.00 ss 2324 2-Jun-06 47624 Escalante, Anselmo 284.70 ss 2351 5-Jun-06 47651 Bautista, Allan 8,554.00 ss 2352 5-Jun-06 47652 Paie, Juanito 1,710.80 ss 2276 6-Jun-06 47576 Corpuz, Nora 14,976.00 ss 2327 6-Jun-06 47627 De Jesus, Christopher 569.40 ss 2330 6-Jun-06 47630 Bermudez, Ruben 23,951.20 ss 2353 6-Jun-06 47653 Dizon, Richard 3,421.60 ss 2354 6-Jun-06 47654 Dahilig, Jasus 3,658.20 ss 2356 6-Jun-06 47656 47656 Alejandro, P- NovOS-May 06 1,992.90 ss 2332 7-Jun-06 47632 Esteban, Marcelo 1,014.00 ss 2333 7-Jun-06 47633 Ofalsa, Rhodora 812.50 ss 2334 7-Jun-06 47634 Ofalsa, Rhodora 812.50 ss 2363 8-Jun-06 47663 47663 Galvan,T- Feb06-Jun07 5,304.00 ss 2335 9-Jun-06 47635 Galleta, Rex 5,154.50 ss 2364 9-Jun-06 47664 47664 Monoso, L- May-Jul06 1,751.10 ss 2365 9-Jun-06 47665 47665 Olaya, 0- May 06 1,015.95 ss 2366 9-Jun-06 47666 47666 Luberiano, E- May-Jun06 2,031.90 ss 2368 9-Jun-06 47668 47668 Pendon, J -Mar-Nov06 2,546.70 ss 2369 9-Jun-06 47669 4 7669 Navarro, J -Jun-Aug06 2,566.20 ss 2371 13-Jun-06 47671 47671 Ponce, E -May-Jun06 1,014.00 ss 2336 14-Jun-06 47636 Diesmos, Tessa 855.40 ss 2338 14-Jun-06 47638 Villeno, Elena 854.10 ss 2339 15-Jun-06 47639 Divina Pelobello 284.70 ss 2340 15-Jun-06 47640 Acuna, Grace 569.40 ss 2346 16-Jun-06 47646 Grace Beriso 284.70 ss 2347 16-Jun-06 47647 Lopez, Charisse 416.65 ss 2348 16-Jun-06 47648 Ellen Flores 421.85 ss 2349 16-Jun-06 47649 Mata, Mirasol 1,184.95 ss 2380 16-Jun-06 47680 Villafranca, I - !PC 5,923.45 ss 2381 19-Jun-06 47681 Albuera, M -Mar -Apr 06 1,710.80 ss 2496 19-Jun-06 47796 Delos Reyes, C - May06 389.35 ss 2350 20-Jun-06 47650 Abuso, A1 Tiu 5,001.75 ss 2554 20-Jun-06 47854 Evangelista, L - Aug 06 1,144.00 ss 2503 21-Jun-06 47803 Fermin, M- Oct-Dec05 1,716.00 ss 2504 21-Jun-06 47804 Fermin, M- Oct-Dec05 1,930.50 ss 2391 22-Jun-06 47691 Anora, R - Jun-Jul06 2,031.90 ss 2393 23-Jun-06 47693 Del Avre, H +Feb 06 2,566.20 ss 2506 23-Jun-06 ss 2508 26-Jun-06 ss 2394 27-Jun-06 ss 2396 27-Jun-06 ss 2397 27-Jun-06 ss 2510 27-Jun-06 ss 2511 27-Jun-06 ss 2512 27-Jun-06 ss 2400 28-Jun-06 ss 2653 28-Jun-06 ss 2654 28-Jun-06 ss 2516 29-Jun-06 ss 2583 29-Jun-06 ss 2517 30-Jun-06 ss 2525 30-Jun-06 ss 2526 30-Jun-06 ss 2527 30-Jun-06 ss 2655 30-Jun-06 ss 2658 30-Jun-06 ss 2532 3-Jul-06 ss 2533 3-Jul-06 ss 2534 3-Jul-06 ss 2596 3-Jul-06 ss 2659 3-Jul-06 ss 2661 3-Jul-06 ss 2662 3-Jul-06 ss 2663 4-Jul-06 ss 2664 4-Jul-06 ss 2666 4-Jul-06 ss 2704 4-Jul-06 ss 2536 5-Jul-06 ss 2537 5-Jul-06 ss 2667 5-Jul-06 ss 2668 5-Jul-06 ss 2669 5-Jul-06 ss 2673 6-Jul-06 ss 2674 7-Jul-06 ss 2675 7-Jul-06 ss 2676 7-Jul-06 ss 2538 10-Jul-06 ss 2679 10-Jul-06 ss 2680 10-Jul-06 ss 2682 10-Jul-06 ss 2539 11-Jul-06 ss 2540 12-Jul-06 ss 2684 12-Jul-06 ss 2541 14-Jul-06 ss 2546 17-Jul-06 47806 47808 47694 47696 47697 47810 47811 47812 47700 47953 47954 47816 47883 47817 47825 47826 47827 47955 47958 47832 47833 47834 47896 47959 47961 47962 47963 47964 47966 48004 47836 47837 47967 47968 47969 47973 47974 47975 47976 47838 47979 47980 47982 47839 47840 47984 47841 47846 Sangdaan,J-TEP 4,784.00 Balgos, R- Jun06-May07 18,154.50 Romero, J - Aug-Dec08 854.10 Romulo Verastigan 1,200.00 Loyola, R - Apr-Jul06 2,028.00 Bisares, M - Jun06 426.40 Bernard, B - May06 1,423.50 Carpio, J - Jun06 569.40 De Leon, J - Dec 05-Jan06 1,710.80 Gubaton, M - Jun06 4,063.15 Gubaton,M - Jun06 4,485.00 Estrada, J - Jun06 284.30 Suniga, Domarie 1,556.10 Bernardita Cayabyab 5-6,06 683.80 Josephine Pareia Mar06 854.10 Ronalda Serrano Jun06 806.00 Myleen Salvador 778.05 Emilio Johnson Jan06 812.50 Mason Alacre Jan06 643.50 2nd Quarter Pl68,043.55 Macaspac, Concepcion p 284.70 Escalante, Anselmo 1,014.00 Escalante, Anselmo 284.70 Sison,Wilfredo 507.00 Edna Volfango 1,079.00 Volfango, Edna 1,023.75 Basco, Marianita 3,421.60 Javellonar, Armando 7,215.00 Anthony Picazo 507.00 Percival Artuz 8,580.00 Figueras, Kerwin Adam 3,421.60 Mendoza, Reginald 3,416.40 Grace Mapalad 854.10 Real, Regimar 20,529.60 David, Margie 1,820.00 Villaluz, Rowell 1,946.10 Randy Solitario 539.50 Madridano, Joel 4,204.80 Romualdo H. Vallejo 1,015.95 Ronnie Morales 643.50 Ang, Michelleynne 848.90 Romil Camarines 5,132.40 Ligtas, Frederick 2,566.20 Geomar Magdadaro 1,820.00 Divina Pelobello 284.70 Jotojot, Alvin 1,708.20 Casupanan, Jose 3,421.60 Antonio !lao 1,883.70 Grace Mapalad 854.10 ss 2547 17-Ju1-06 ss 2548 17-Ju1-06 ss 2752 17-Ju1-06 ss 2756 18-Jul-06 ss 2757 18-Jul-06 ss 2758 20-Jul-06 ss 2760 21-Jul-06 ss 2761 21-Jul-06 ss 2762 21-Jul-06 ss 2763 21-Jul-06 ss 2764 21-Jul-06 ss 2765 25-Jul-06 ss 2766 25-Jul-06 ss 2767 25-Ju1-06 ss 2898 25-Jul-06 ss 2768 26-Ju1-06 ss 2778 27-Jul-06 ss 2779 28-Jul-06 ss 2780 28-Jul-06 ss 2781 31-Jul-06 ss 2784 31-Jul-06 ss 2786 31-Jul-06 ss 2788 31-Jul-06 ss 2792 31-Jul-06 ss 2051 4-Aug-06 ss 2052 4-Aug-06 ss 2053 4-Aug-06 ss 2054 7-Aug-06 ss 2055 7-Aug-06 ss 2056 8-Aug-06 ss 3103 8-Aug-06 ss 3107 8-Aug-06 ss 2057 9-Aug-06 ss 3115 9-Aug-06 ss 2060 10-Aug-06 ss 2071 11-Aug-06 ss 3117 11-Aug-06 ss 3120 14-Aug-06 ss 3126 14-Aug-06 ss 3127 14-Aug-06 ss 2072 15-Aug-06 ss 2073 15-Aug-06 ss 2074 15-Aug-06 ss 2075 15-Aug-06 ss 2076 15-Aug-06 ss 2081 16-Aug-06 ss 2083 16-Aug-06 ss 2084 16-Aug-06 ss 2085 16-Aug-06 ss 2088 17-Aug-06 47847 47848 48052 48056 48057 48058 48060 48061 48062 48063 48064 48065 48066 48067 48198 48068 48078 48079 48080 48081 48084 48086 48088 48092 48351 48352 48353 48354 48355 48356 48403 48407 48357 48415 48360 48371 48417 48420 48426 48427 48372 48373 48374 48375 48376 48381 48383 48384 48385 48388 Diesmos, Tessa 855.40 Chov, Louella 569.40 Grace Beriso 284.70 Matawara, Rea 569.40 Ofalsa, Rhodora 609.70 Manalang, Noel 10,627.50 Prado, Shervl 806.00 Carlos Noriega 1,423.50 Bisares, Marieta 426.40 Bernabe, Bernard 1,423.50 Shernan Balilo 4,732.00 Fermin,Miriam 643.50 Fermin,Miriam 572.00 Anonuevo, Ma. Cecilia 1,138.80 Ilaga, Adoracion 4,988.10 Estrada, Jusmon 284.70 Rabanal, Jesusa 1,625.00 Ellen Flores 416.65 Carpio, Judy Ann 569.40 Carmela Dadural 569.40 Serrano, Ronaldo 806.00 Acuna, Grace 569.40 Alegarbez, Roberto 25,057.50 Carlo G. Cantanero 3,341.00 Leyva,Leeberti 1,138.80 Escalante, Anselmo 284.70 Escalante, Anselmo 1,014.00 Emmanuel Bertolano 2,562.30 Emmanuel Bertolano 4,244.50 De Jesus, Christopher 569.40 Lao Guico, Ma. Veronica 6,843.20 Rowena De Leon 569.40 Florencio Enotorio 6,592.95 Sison, Wilfredo 507.00 Cainta, Romulo 3,395.60 Pareja, Josephine Sussana 854.10 Casugbu, Linaflor 10,270.00 Rectin, Janet 447.20 Suniga, Domarie 855.40 Suniga, Domarie 3,591.00 Grace Mapalad 854.10 Diesmos, Tessa 855.40 Choy, Louella 569.40 Divina Pelobello 284.70 Grace Acuna 569.40 Ellen Flores 416.65 Lopez, Charisse 833.30 Grace Beriso 284.70 Garcia, Ma. Regina 1,138.80 Fermin, Miriam 572.00 ss 2089 17-Aug-06 ss 2090 17-Aug-06 ss 2092 18-Aug-06 ss 2093 18-Aug-06 ss 2095 18-Aug-06 ss 2097 23-Aug-06 ss 3401 25-Aug-06 ss 3402 28-Aug-06 ss 3403 29-Aug-06 ss 3404 29-Aug-06 ss 3406 30-Aug-06 ss 3219 31-Aug-06 ss 3223 31-Aug-06 ss 3388 31-Aug-06 ss 3407 31-Aug-06 ss 3408 31-Aug-06 ss 3415 31-Aug-06 ss 3417 31-Aug-06 ss 3418 31-Aug-06 ss 3419 31-Aug-06 ss 3421 31-Aug-06 ss 3423 31-Aug-06 ss 3424 31-Aug-06 ss 3899 5-Sep-06 ss 3428 5-Sep-06 ss 3429 5-Sep-06 ss 3430 5-Sep-06 ss 3433 6-Sep-06 ss 3501 6-Sep-06 ss 3434 8-Sep-06 ss 3239 12-Sep-06 ss 3440 15-Sep-06 ss 3450 18-Sep-06 ss 3556 19-Sep-06 ss 3557 19-Sep-06 ss 3558 19-Sep-06 ss 3559 20-Sep-06 ss 3560 22-Sep-06 ss 3561 22-Sep-06 ss 3568 22-Sep-06 ss 3569 26-Sep-06 ss 3570 27-Sep-06 ss 3571 27-Sep-06 ss 3572 27-Sep-06 ss 3573 29-Sep-06 ss 3575 30-Sep-06 ss 3576 30-Sep-06 ss 3577 30-Sep-06 ss 3578 30-Sep-06 ss 3581 30-Sep-06 48389 48390 48392 48393 48395 48397 48701 48702 48703 48704 48706 48519 48523 48688 48707 48708 48715 48717 48718 48719 48721 48723 48724 48699 48728 48729 48730 48733 48801 48734 48539 48740 48750 48856 48857 48858 48859 48860 48861 48868 48869 48870 48871 48872 48873 48875 48876 48877 48878 48881 Fermin, Miriam 643.50 Abellon, Maria Noelane 4,015.05 Bernabe, Bernard 1,423.50 Bisares, Marieta 426.40 Macaspac, Concepcion 142.35 Noly Canonoy 3,558.75 Noel Manalang 13,435.50 Escaran, Wilfredo 484.90 Villeno, Elena 569.40 Carpio, Judy Ann 569.40 Estrada, Jusmon 284.70 Salloman, Jerryben 1,365.00 Tamayo, Manuelito 855.40 Operana, Edgar 3,412.50 Escalante, Anselmo 284.70 Escalante, Anselmo 1,014.00 Matawara, Rea 569.40 Carimpong, Cynthia 3,217.50 Serrano, Ronaldo 806.00 Ofalsa, Rbodora 609.70 Pareia, Josephine Sussana 854.10 Rabanal, Jesusa 2,437.50 Brucelo, Mylene 1,992.90 Sison,Wilfredo 507.00 Esteban, Marcelo 1,014.00 Cayabyab, Bemardita 683.80 Myleen Salvador 778.05 Dinglasan, Lea Carmen 2,886.00 Bondoc, Nino Anthony 1,828.45 Florencio Enotorio 1,883.70 Javellonar, Armando 7,215.00 Divina Pelobello 284.70 Grace Beriso 284.70 Mata, Mirasol 1,184.95 Ellen Flores 416.65 Bisares, Marieta 426.40 Ligutom, Ma. Carr 3,471.00 Fermin, Miriam 572.00 Fermin, Miriam 643.50 Leyva,Leeberti 1,708.20 Mendoza, Reginald 1,708.20 Carpio, Judy Ann 569.40 Genova, Renato 855.40 Diesmos, Tessa 855.40 Frederick Navales 29,802.50 Serrano, Ronaldo 806.00 Pareja, Josephine Sussana 854.10 Anselmo Escalante 1,014.00 Anselmo Escalante 284.70 Acuna, Grace 569.40 ss 3582 30-Sep-06 ss 3583 3-0ct-06 ss 3584 3-0ct-06 ss 3585 3-0ct-06 ss 3586 3-0ct-06 ss 3587 4-0ct-06 ss 3588 5-0ct-06 ss 3589 5-0ct-06 ss 3592 6-0ct-06 ss 3593 6-0ct-06 ss 3594 10-0ct-06 ss 3595 11-0ct-06 ss 3596 13-0ct-06 ss 3597 13-0ct-06 ss 3598 16-0ct-06 ss 3599 16-0ct-06 ss 3600 16-0ct-06 ss 3801 16-0ct-06 ss 3802 16-0ct-06 ss 3804 16-0ct-06 ss 3805 16-0ct-06 ss 3806 16-0ct-06 ss 3811 20-0ct-06 ss 3812 20-0ct-06 ss 3813 20-0ct-06 ss 3815 20-0ct-06 ss 3816 21-0ct-06 ss 3819 25-0ct-06 ss 3820 25-0ct-06 ss 3821 30-0ct-06 ss 3822 30-0ct-06 ss 3823 30-0ct-06 ss 3824 30-0ct-06 ss 3827 31-0ct-06 ss 3828 31-0ct-06 ss 3831 31-0ct-06 ss 3835 2-Nov-06 ss 3843 3-Nov-06 ss 3844 3-Nov-06 ss 3845 3-Nov-06 ss 3846 3-Nov-06 ss 3847 7-Nov-06 ss 3848 7-Nov-06 ss 3849 7-Nov-06 ss 4054 8-Nov-06 ss 4059 10-Nov-06 ss 4066 14-Nov-06 ss 4071 15-Nov-06 48882 48883 48884 48885 48886 48887 48888 48889 48892 48893 48894 48895 48896 48897 48898 48899 48900 49101 49102 49104 49105 49106 49111 49112 49113 49115 49116 49119 49120 49121 49122 49123 49124 49127 49128 49131 49135 49143 49144 49145 49146 49147 49148 49149 49354 49359 49366 49371 Bustamante, Lorena 284.70 3rd Quarter P300,219.10 De Leon, Janice I' 855.40 Habulan, Jesus 4,277.00 Remigio Talaga 2,334.80 Rotairo, Rujen 569.40 Cafe, Anthony 2,545.40 Ang, Michelleynne 848.90 Gasacao, Reynaldo 7,410.00 De Jesus, Christopher 569.40 Rectin, Janet 894.40 Jotoiot, Alvin 1,281.15 Codera, Delio 1,883.70 Lopez, Charisse 833.30 Ofalsa,Rhodora 1,219.40 Diesmos, Tessa 855.40 Grace Mapalad 854.10 Clarizza Mendoza 1,638.00 Divina Pelobello 284.70 Ellen Flores 416.65 Choy,Louella 569.40 Bondoc, Nino Anthony 1,828.45 Del Avre, Homer 2,566.20 Grace Beriso 284.70 Genova, Renato 855.40 Bisares, Marieta 426.40 Carmela Dadural 569.40 Manliclic, Melvinne 1,716.00 Estrada, Jusmon 569.40 Rotairo, Ruien 569.40 Operana, Edgar 2,990.00 Operana, Edgar 3,412.50 Remigio Talaga 1,117.40 Grace Mapalad 854.10 Noel Manalang 10,744.50 Manalang, Noel 8,482.50 Acuna, Grace 569.40 Isles, Erwin Dell 4,329.00 Fermin, Miriam 572.00 Fermin, Miriam 643.50 Escalante, Anselmo 569.40 Escalante, Anselmo 2,028.00 Joel Madridano 1,708.20 Mendoza, Reginald 1,708.20 Rotairo, Ruien 569.40 Dinglasan, Lea Carmen 2,886.00 De Leon, Janice 855.40 Florencio Enotorio 1,883.70 Divina Pelobello 284.70 ss 4073 16-Nov-06 ss 4074 16-Nov-06 ss 4075 16-Nov-06 ss 4076 17-Nov-06 ss 4077 17-Nov-06 ss 4078 17-Nov-06 ss 4079 17-Nov-06 ss 4083 21-Nov-06 ss 4085 21-Nov-06 ss 4089 23-Nov-06 ss 4092 28-Nov-06 ss 4094 29-Nov-06 ss 4095 29-Nov-06 ss 4096 29-Nov-06 ss 4099 30-Nov-06 ss 4351 30-Nov-06 ss 4354 4-Dec-06 ss 4356 4-Dec-06 ss 4357 4-Dec-06 ss 4360 5-Dec-06 ss 4365 8-Dec-06 ss 4366 8-Dec-06 ss 4367 8-Dec-06 ss 4368 8-Dec-06 ss 4374 13-Dec-06 ss 4379 15-Dec-06 ss 4380 15-Dec-06 ss 4381 15-Dec-06 ss 4383 15-Dec-06 ss 4385 18-Dec-06 ss 4386 18-Dec-06 ss 4387 18-Dec-06 ss 4388 18-Dec-06 ss 4389 18-Dec-06 ss 4393 20-Dec-06 ss 4394 22-Dec-06 ss 4396 29-Dec-06 ss 4397 29-Dec-06 ss 4398 29-Dec-06 49373 Grace Beriso 284.70 49374 Mata, Mirasol 1,184.95 49375 Ellen Florez 833.30 49376 Lilibeth Mendoza 24,017.50 49377 Choy,Louella 569.40 49378 Diesmos, Tessa 855.40 49379 Sobremonte, Rogelio 855.40 49383 Bisares, Marieta 426.40 49385 Bemabe, Bernard 4,270.50 49389 Cayabyab, Bemardita 683.80 49392 Carpio, Judy Ann 1,138.80 49394 Remigio Talaga 1,167.40 49395 Estrada, Jusmon 284.70 49396 Operana, Edgar 3,412.50 49399 Elmer 5,960.50 49651 Acuna, Grace 569.40 49654 Fermin, Miriam 572.00 49656 Fermin, Miriam 643.50 49657 Lopez, Charisse 833.30 49660 Ligutom, Ma. Carr 3,471.00 49665 Escalante, Anselmo 2,028.00 49666 Escalante, Anselmo 569.40 49667 Ofalsa, Rhodora 609.70 49668 Matawara, Rea 284.70 49674 Florencio Enotorio 1,883.70 49679 Divina Pelobello 284.70 49680 Bustamante, Lorena 284.70 49681 Bustamante, Lorena 389.35 49683 Acuna, Grace 569.40 49685 Sobremonte, Rogelio 855.40 49686 Del Ayre, Homer 2,566.20 49687 Diesmos, Tessa 855.40 49688 Choy, Louella 569.40 49689 Mata, Grace 9,750.00 49693 Bisares, Marieta 426.40 49694 Grace Beriso 284.70 49696 Operana, Edgar 2,990.00 49697 Operana, Edgar 3,412.50 49698 Carmela Dadural 569.40 4th Quarter P166,951.25 Total - Year 2006 P635,213.90 As reflected in its trial balance6o and audited FS61 for taxable year 2006, petitioner's total premium collections for/

the year 2006 amounted to Pl04,642,335.00, broken down as follows: 62 Taxable Premium Collections Period Peso Dollar Total Jan-06 I' 7,630,733.44 I' 1' 125,964.04 I' 8,756,697.48 p 7,630,733.44 p 1,125,964.04 p 8, 756,697.48 Feb-06 I' 6,812,701.57 I' 1,237,564.93 I' 8,050,266.50 Mar-06 8,162,398.68 1,171,237.30 9,333,635.98 p 14,975,100.25 p 2,408,802.23 p 17,383,902.48 1st Quarter p 22,605,833.69 p 3,534, 766.27 p 6,140,599.96 Apr-06 I' 9,446,025.65 I' 1,156,455.66 I' 10,602,481.31 May-06 8,962,285.08 1 055,770.89 10,018,055.97 Jun-06 8,136,697.15 1,300,562.20 9,437,259.35 2nd Quarter p 26,545,007.88 p 3,512, 788.75 p 30,057.796.63 Jul-06 I' 6,935,632.85 I' 1' 110,035.88 I' 8,045,668.73 Aug-06 7' 181 '752.03 1,042,952.76 8,224,704.79 Sept-06 6,699,835.93 1,160,788.68 7,860,624.61 3rd Quarter p 20,817,220.81 p 3,313,777.32 p 24,130,998.13 Oct-06 I' 6, 788,351.75 I' 975,611.98 I' 7,763,963.73 Nov-06 6,705,482.74 992,622.11 7,698,104.85 Dec-06 7,876,569.05 974,302.52 8,850,871.57 4th Quarter p 21,370,403.54 p 2,942,536.61 p 24,312,940.15 Total p 91,338,465.92 p 13,303,868.95 p 104,642,334.87 However, the above-computed premium collections of Pl04,642,334.87 shall be further reduced by the amount of P635,213.90 representing trust fund contributions. Therefore, only the remaining amount of P104,007,120.97 shall be subjected to VAT.

Petitioner likewise asserts that its mam clients are seamen or seafarers who receive compensation for services rendered abroad as members of the complement of vessels engaged exclusively in international trade. These seamen are considered overseas contract workers for all intents and purposes and classified as non-residents of the Philippines following the provision of Section 23(C) of the NIRC of 1997, as amended. Since petitioner's services rendered to the seamen ~

are services rendered to non-residents and paid for in acceptable foreign currency, the premium payments and the trust fund contributions coming from the seamen should not attract 12% VAT since the services are zero-rated services under the provisions of Section 108(B)(2) of the NIRC of 1997, as amended.

Unfortunately, however, petitioner failed to adduce evidence in support of its assertion. Respondent also disallowed the input tax of P8,290.7663. Records disclose that the assessed amount of P5,551,066.0064 Other Income is composed of the surcharges on lapsed plans, processing fees, other income and commission income reflected in petitioner's trial balance and audited FS65 for taxable year 2006, detailed as follows: Taxable Surcharge Month on Lapsed Processing Other Commission Plans Fee Income Income Total January I' 272,345.87 I' 19,113.47 I' 113,226.70 I' 55,363.77 I' 460,049.81 Subtotal I' 272,345.87 I' 19,113.47 I' 113,226.70 I' 55,363.77 I' 460,049.81 February I' 248,904.04 I' 35,057.61 I' 01,023.66 I' 2,392.62 I' 387,377.93 March 297,184.39 56,804.82 97,378.81 29,414.84 480,782.86 I' 546,088.43 I' 91,862.43 p 198,402.47 p 31,807.46 p 868,160.79 1st Qtr I' 818,434.30 p 110,975.90 p 311,629.17 p 87,171.23 p 1,328,210.60 April p 310,200.61 I' 33,210.94 I' 119,262.88 I' 35,053.71 I' 497,728.14 May 326,222.46 28,850.00 83,147.69 22,268.79 460,488.94 June 286,584.51 27,865.13 103,817.65 41,154.62 459,421.91 2nd Qtr I' 923,007.58 I' 89,926.07 p 306,228.22 p 98,477.12 p 1,417,638.99 July p 341,298.44 I' 24,903.49 I' 208,979.70 I' 23,573.13 I' 598,754.76 August 312,139.28 28,201.54 121,562.00 28,726.01 490,628.83 September 274,596.84 26,650.00 133,784.69 69,414.81 504,446.34 3rd Qtr p 928,034.56 p 79,755.03 I' 464,326.39 p 121,713.95 p 1 593,829.93 October p 277,833.62 I' 32,751.86 I' 132,739.34 I' 1,056.20 I' 444,381.02 November 236,512.24 44,670.00 127,521.71 41,816.36 450,520.31 December 240,198.14 30,901.15 32,746.48 12,639.39 316,485.16 4th Qtr p 754,544.00 p 108,323.01 I' 293,007.53 p 55,511.95 p 1,211,386.49 Total lr 3,424,020.44 I' 388,980.01 p 1,375,191.31 p 362,874.25 1'5,551,066.01

CTA CASE NO. 829I

Again, for petitioner's failure to refute respondent's findings, the disallowed input tax of f'8,290. 76 shall be upheld and the aforesaid income shall form part of petitioner's taxable gross receipts for the year 2006 pursuant to Section 105 m relation to Section 1 08(A) of the NIRC of 1997, as amended. In fine, petitioner is liable to pay basic deficiency VAT in the amount off'8,577,964.13, computed as follows: Jan Feb- Mar 1• Quarter 2" Quarter 3n1 Quarter 4th Quarter (In Philippine Pesos) Total Collection of 8,756,697.48 17,383,902.48 26,140,599.96 30,057.796.63 24,130,998.13 24,312,940.15 104,642,334.87 ___Q!em.iums Less:

Trust Fund Contributions properly - - - 168,043.55 300,219.10 166,951.25 635,213.90 supported by VATORs Net Premium 8,756,697.48 17,383,902.48 26,140,599.96 29,889,753.08 23,830,779.03 24,145,988.90 104,007,120.97 Collections Add:

Surcharges on Lapsed 272,345.87 546,088.43 818,434.30 923,007.58 928,034.56 754,544.00 3,424,020.44 Plans Processing 19,113.47 91,862.43 110,975.90 89,926.07 79,755.03 108,323.01 388,980.01 Fees Other 113,226.70 198,402.47 311,629.17 306,228.22 464,326.39 293,007.53 1,375,191.31 income Commission 55,363.77 31,807.46 87,171.23 98,477.12 121,713.95 55,511.95 362,874.25 income Total receipts 9,216,747.29 18,252,063.27 27,468,810.56 31,307,392.07 25,424,608.96 25,357,375.39 109,558,186.98 subiect to VAT Tax Rate 10% 12"/o" 12'% 12% 12% Output tax 921,674.73 2,190,247.59 3,111,922.32 3,756,887.05 3,050,953.08 3,042,885.05 12,962,647.49 Add:

Disallowed 1,323.00 3,167.61 1,867.89 1,932.26 8,290.76 input tax Less: Input tax 124,244.61 72,492.16 66,176.73 113,053.30 375,966.80 VAT due 2,989,000.71 3,687,562.50 2,986,644.24 2,931,764.01 12,594,971.46 Less: VAT paid 961,544.36 1,215,193.24 988,474.86 851,794.86 4,017,007.32 Basic deficiency 2,027,456.35 2,472,369.26 1,998,169.38 2,079,969.15 8,577,964.14 VAT tr 66 Effective February I, 2006, the VAT rate was increased from I 0% to I2% pursuant to Revenue Memorandum Circular No. 07-06.

DEFICIENCY WITHHOLDING TAX

ON COMPENSATION - P2,054,826. 70 Respondent computed the alleged deficiency withholding tax on compensation as follows:67 Salaries and wages 1'6,418, 727.24 Provision for quarterly allowance 3,338,758.51 Per diems 59,510.00 1'9,816,995.75 Compensation_l)_er alpha list 6,418,727.00 Difference 3,398,268.75 Deficiency withholding tax on compensation 1,087,446.00 (32%) Add: Interest (20% per annum) 942,380.70 Compromise penalty 25,000.00 Deficiency withholding tax on compensation 1'2,054,826. 70 In arriving at the above computation, respondent simply compared the amount stated in the alphalist amounting to P6,418,727.00 and the alleged claimed salaries and wages aggregating to P9,816,995.75. As stated by respondent in the FDDA, the salaries and wages reflected under Note 16 of the 2006 Audited Financial Statements amounting to P6,418,728.0068 is equal to the amount reflected in the alphalist69, thus: No. of Non·Taxable Taxable SSS& Total employees 13th Month Others Compensation 15 1'420,000.00 1'135,475.80 1'5,549,599.62 1'6, 105,075.42 2 10,000.00 4,712.70 90,537.30 105,250.00 2 38,107.83 8,700.00 161,594.00 208,401.83 Total 1'468, 107.83 1'148,888.50 1'5,801,730.92 6,418, 727.25 PerFS 6,418,728.00 Rounding-off difference p (0.75) In effect, these assessments are prov1s10n for quarterly allowance in the amount of P3,338,758.5F0 and per diems in the amount of P59,510.00. V

As to the prov1s10n for quarterly allowance, petitioner alleged that these are actual disbursements paid to employees. Petitioner insists that for internal purposes, the account title "provision" is used but, at year-end, these provisions are reversed, thereby only actual or cash disbursements remain.71 Included in this account are de minimis and other benefits of relatively small value, reimbursements of related company costs and other expenses not subject to income tax on compensation. 72 With regard to the per diems in the aggregate amount of P233,510.0073, petitioner avers that this represents payments to members of the board of directors/non-employees in the amount of Pl74,100.00, and to employees in the amount of P59,410.00.74 However, petitioner failed to present sufficient evidence to explain the actual nature of the aforesaid amounts. Thus, in the absence of proof that the provision for quarterly allowance of P3,338,758.51 and per diems of P59,510.00 paid to petitioner's employees are not subject to withholding tax on compensation, petitioner shall be held liable for the corresponding deficiency withholding tax on compensation for taxable year 2006.

Nonetheless, the tax rate to be used shall be the effective rate computed based on the total withholding tax on compensation paid divided by the total amount of net taxable compensation during the taxable year 2006, as shown below: Reference No. of Gross Tsxable Personal Net Tsxable Effective (BIR Compensation Compensation Tax Due Records) Employees Income (a)

15 p 5,549,599.62

2 90,537.30

2 292,713.12 p 5,932,850.04 71 Exhibit "KK", p. 13. 72 Exhibit "E", p. 14. 73 BIR Records, pp. 421-425. 74 Exhibit "KK", p. 13. Exemption Income Tax Rate (b)

(c) = (a) - (b) (d)

(e) = (dl + (c) p 531,000.00 P5,018,599.62 P1,207,915.64 72,000.00 18,537.30 2,649.97 65,000.00 227,713.12 34,724.53 p 668,000.00 PS,264,850.04 Pl,245,290.14 24%

In sum, petitioner is liable to pay basic deficiency withholding tax on compensation for the year 2006 in the amount of P803,789.33, computed as follows: Provision for quarterly allowance 1'3,338, 758.51 Per diems 59,510.00 Total compensation subject to withholding tax 1'3,398,268.51 Effective tax rate Basic deficiency withholding tax on compensation p

DEFICIENCY EXPANDED WITHHOLDING TAX-

P320,113.71 24% 803,789.33 The table below shows respondent's computation of the deficiency expanded withholding tax assessment: 75 Total professional fees 1'1,638,489.13 Professional fees per alpha list 1,314,207.00 Professional fees not subjected to EWT 324,282.13 Tax due (10%) p 32,428.21 Rentals per FS/ITR 718,805.05 Rentals per alpha list 545,838.00 Rentals not subjected to EWT 172,967.05 Tax due (5%) 8,648.35 Purchases of services per FS/ITR 6,738,907.76 Purchases per alpha list 839,625.00 Purchases of services not subjected to EWT 5,899,282.76 Tax due (2%) 117,985.66 Purchases of goods/merchandise per FS/ITR 386,165.97 Purchases of goods per alpha list - Purchases of goods not subjected to EWT 386,165.97 Tax due (1%) 3,861.66 Deficiency tax 162,923.88 Add: Interest (20% per annum) 141,189.83 Compromise penalty 16,000.00 157,189.83 Total deficiency withholding tax - expanded p 320,113.71 " Exhibit "F", p. 2.

1. Professional Fees - P324,282.13 Respondent found that petitioner had income payments for professional fees in the amount of P324,282.13 which were not subjected to EWT, as detailed below: PerBIR Professional and consultation fees P239,000.13 Administrative and management fees 545,455.00 Commissions 887,004.00 Less: SGV and Co. professional fees portion 32,970.00 P1,638,489.13 Per Alphalist Professional talent fee (WC010) P239,000.00 Fees of director (WI090) 174,100.00 Gross commission, etc. (WC140) 897,207.00 Others 3,900.00 1,314,207.00 Professional fees not subjected to EWT p 324,282.13 It appears from the foregoing table that the professional fees allegedly not subjected to EWT in the amount of P324,282.13 originated from the "Administrative and management fees". According to petitioner, the account listed as "Administrative and management expenses" is composed of reimbursements of expenses for corporate events, quality management, and other costs and expenses, which were charged by Transnational Diversified Corporation (TDC) and Transnational Diversified Group, Inc.

(TDGI) at cost.

Petitioner argued that since TDC and TDGI collects at cost and without gain or profit, these pure reimbursements of costs transactions do not partake the nature of an income payment, hence not subject to EWT. Again, this Court cannot sufficiently verify petitioner's claim since it failed to submit evidence in support of its claim. In addition, the portion of the "Administrative and management fees" was offset by the "Fees of director" in the amount of P174, 100.00 and "Others" in the amount of P3,900.00. These two items clearly do not fall within the classification of "Administrative and management fees" as defined above.

Hence, it is but proper to exclude the "Fees of director" and "Others" in the offsetting. Petitioner further insists that the revenue exammer erroneously categorized "Commissions/ Service fees", t-- payments of which were made to Dolphin Ship Management, Inc., Multinational Maritime, Inc.

and NYK Fil Ship Management, Inc., as "Professional fees", and that the corresponding taxes were properly withheld and remitted using the 10% withholding tax rate. Assuming arguendo, that the "Commission" was offset against the corresponding income payment per alphalist, such offsetting was more favorable to petitioner by P10,203.00. Also, in arriving at the total "Professional fees" subject to EWT, respondent deducted the SGV and Co.'s professional fees portion.

Conversely, petitioner insisted in its protest letter76 that the proper composition of "Professional fees" includes, among others, that of the SGV and Co., to wit: Actuarial Advisors, Inc. p 239,000.00 Transnational E-Business Solutions, Inc.; SGV and Co. 497,882.99 Security and janitorial expenses (Sniper Security Agency) 351,793.03 Total professional fees per ITR Pl ,088,676.03 Perusal of the records reveals that among the afore- mentioned three (3) items, only the professional fees of Actuarial Advisors, Inc. in the amount of P239,000.00 was included by respondent in her assessment. 77 Thus, she already disregarded the professional fees pertaining to Transnational E-Business Solutions, Inc. (TESI), SGV and Co., and Sniper Security Agency. Hence, it is improper for respondent to deduct the professional fees pertaining to SGV and Co. when, in the first place, it has never been part of subject professional fees. Accordingly, petitioner is found liable for basic deficiency EWT on professional fees in the amount of P54,545.50, computed as follows:

Administrative and management fees 1'545,455.00 Tax rate 10% Basic deficiency EWTon professional fees (10%) p 54,545.50

2. Rentals - P172,966.45 Petitioner accounted the discrepancy of P172,966.4578, as follows:

TESI Network Support I' 40,000.00 TESI Network Support - Accrual 30,000.00 Payments to U-Bix for rentals of photocopier 13,480.74 Other various accruals of miscellaneous expenses 89,485.71 Total 1'172,966.45 TESI was registered with the Board of Investments (BOI) under Certificate of Registration No. 2001-09279 dated June 28, 2001, and was entitled to income tax holiday (ITH) incentive from June 28, 2001 to June 27, 2007 or for a total period of 6 years.so In accordance with the provision of Section 39(a)(1) of Executive Order No. 226, income payments received by TESI, in connection with its registered activity, are exempt from the payment of said withholding tax. On payments to U-Bix Corporation for rentals of photocopying machines, petitioner asserts that these were already subjected to the 2% EWT rate in the amount of P269.61. However, this Court finds that although there were payments relating to U-Bix Corporation reflected in the alphalist81 , it cannot be traced therefrom the alleged EWT payment of P269.61. Petitioner pointed out that other various accruals of miscellaneous expenses do not pertain to any specific vendor, some of which are casual or non-regular suppliers of TPI.

Nonetheless, petitioner failed to show that these were casual or non-regular suppliers exempt from EWT. Accordingly, petitioner is liable for basic deficiency EWT on rentals in the amount ofP5,148.32, as computed below: Payments to U-Bix for rentals of photocopier Other various accruals of miscellaneous expenses Basic deficiency EWTon rental (5%) 78 BIR Records, p. 502. 19 BIR Records, p. 553; Exhibit "UU". 80 BIR Records, p. 554; Exhibit "VV". 81 BIR Records, p. 207, lines 46 and 47. 1'13,480.74 89,485.71 1'102,966.45 p 5,148.32

3. Purchases of services - P5,899,282. 76, and Purchases of goods- P386,165.97 In its protest letters82 to the Preliminary Assessment Notice dated August 27, 2009 and Formal Letter of Demand dated November 5, 2009, petitioner requested respondent for the details of the purchases of services per FS / ITR in the amount of P6,738,907.76 and purchases of goods/merchandise per FS/ITR in the amount ofP386,165.97. However, respondent has not provided the factual basis and details of these discrepancies on which petitioner is being assessed of deficiency withholding tax. As mentioned earlier, Section 228 of NIRC of 1997, as amended, provides that the taxpayer must be informed in writing of the law and the facts upon which a tax assessment is based; otherwise, the assessment is void. This is in consonance with the due process requirement of the 1997 Philippine Constitution, which provides that "No person shall be deprived of his property without due process of law." The taxpayer needs to know the nature of the examiner's findings in order to be able to properly contest the same and submit supporting documents. In the FDDAB3, Formal Letter of Demand and Final Assessment Noticess4, and Preliminary Assessment Notice85 sent by respondent to petitioner and particularly in the attached "Details of Discrepancies", there was no indication whatsoever as to how respondent's examiner arrived at the amounts of P6,738,907.76 and P386,165.97 allegedly representing petitioner's purchases of services and goods/merchandise per FS/ITR, respectively. Petitioner cannot be expected to be able to determine and thereafter refute the examiner's findings without the disclosure of the details of the basis of the assessment. Accordingly, the deficiency EWT assessments on these items are invalid and illegal for respondent's failure to inform petitioner in writing of the facts on which the said assessment was based. r

In sum, petitioner is liable to pay basic deficiency EWT in the total amount of P59,693.82, as computed below: Basic deficiency EWT on: Professional fees 1'54,545.50 Rental 5,148.32 Total 1'59,693.82 DEFICIENCY DOCUMENTARY STAMP TAX- P563,726.95 In the FDDA, respondent computed the alleged deficiency DST for the year 2006 as follows: DST on Premiums- Pre-Need Plans Premiums collected I' 103,378,870.77 DST due (0.20/200) 103,378.87 DST paid per return 59,109.63 DST on Bonds and Loan Agreements DSTbase DST due (1/200) DST paid per return Basic Deficiency DST Add: Interest (20% per annum) Compromise Penalty Total Deficiency

a. DST on Premiums - Pre-Need Plans - P44,269.37 62,276,610.00 311,383.05 62,216.79 I' 44,269.37 249,166.26 293,435.63 254,291.32 16,000.00 p 563,726.95 Petitioner contends that portion of the premium collections being assessed pertains to plans issued prior to March 20, 2004 and were already subjected to DST based on the plan amounts. According to Section 186 of the NIRC of 1997 (prior to R.A. No. 9243), the DST on pre-need plans issued prior to March 20, 2004 shall be fifty centavos (P0.50) on each five hundred pesos (P500.00) of the value or amount of the plan. Pursuant to the amendment introduced by R.A. No. 9243, as implemented by Section 8 of R.R. No. 13-2004, the DST on all premium collections for pre-need plans issued on or after March 20, 2004 shall be twenty centavos (P0.20) on each two hundred pesos (P200.00), or fractional part thereof, of the premium or contribution collected. Premium collections applicable to pre-need plans issued by petitioner prior to March 20, 2004, the DST of which having been collected earlier based on plan amounts, need no longer be subjected again to stamp tax rate of 0.20/200. Thus, premiums/- collected amounting only to P57,899,090.00 was subjected to DST in the amount ofP57,901.13, as shown below: Taxable Month (2006) Tax BaseB6 Tax PaidB7 January p 4,017,000.00 p 4,017.00 February 3,911,000.00 3,911.00 March 6,571,280.00 6,571.50 April 7 ,045, 700.00 7,046.00 May 7,011,340.00 7,011.50 June 3,814,900.00 3,815.00 July 3, 702,130.00 3,702.13 August 4, 767,580.00 4,768.00 September 4,049,780.00 4,050.00 October 4,098,950.00 4,099.00 November 4,727,110.00 4,727.50 December 4,182,320.00 4,182.50 Total p 57,899,090.00 p 57,901.13 On the other hand, respondent's verification disclosed total premium collections of Pl03,378,870.7788 for the period January to December 2006, as summarized below: Month Peso Pension Peso Education Dollar Pension Total Collection January I' 5,458,308. 96 I' 2,172,425.00 I' 1,125,918.19 I' 8,756,652.15 February 4,568,720.05 2,243,982.00 1,218,517.60 8,031,219.65 March 3,897,251.00 4,265,148.00 1,171,342.46 9,333,741.46 April 7,476,049.00 1,969,978.00 1,165,472.43 10,611,499.43 May 6,573,521.97 2,388,764.00 1,055,807.08 10,018,093.05 June 6,233,360.00 1,903,337.00 1,300,440.05 9,437,137.05 July 4,557,117.00 2,378,517.00 1,110,107.40 8,045,741.40 August 5,041,196.00 2,140,557.00 1,042,962.80 8,224, 715.80 September 4,645,437.00 2,107,019.00 1,160,803.26 7,913,259.26 October 4,641,670.00 2,146,681.00 975,582.13 7,763,933.13 November 4,620,221.00 2,085,262.00 992,631.40 7,698,114.40 December 4,712,149.00 1,762,170.00 1,070,444.99 7 ,544, 763.99 I' 103,378,870.77 However, as earlier stated, petitioner's premmm collections for the year 2006 as reflected in its trial balance and audited FS for the year 2006 amounted to P104,642,335.00. Hence, this amount shall be the reference in determining petitioner's DST liability. y

After thorough study of the records, petitioner failed to prove that, of the total premium collections of 1"104,642,335.00, the amount of 1"46,743,245.00 (1"104,642,335.00 less 1"57,899,090.00) was related to plans issued prior to March 20, 2004 and was already previously subjected to DST at the rate of 0.50/500. Mere allegation without adducing documentary evidence is not enough. This renders the assessment valid and correct. Consequently, petitioner is liable to pay basic deficiency DST on premiums in the amount ofP46,741.21, computed as follows: Total premium collections subject to DST p 104,642,335.00 Tax rate DST due on premiums (pre-need plans) Less: DST paid per return Basic deficiency DST on premiums - pre-need plans

b. Deficiency DST on Bonds and Loan Agreements- P249,166.26 P.20/P200 p 104,642.34 57,901.13 p 46,741.21 Petitioner alleged that the tax base of 1"62,276,610.00 reflected in its monthly DST returns should be corrected as 1"12,545,224.97 only. Petitioner's accountant then in-charge erroneously arrived at the tax base for DST on loans. Instead of using the tax rate of 1"1/1"200, the rate of P0.30/P200 was used in electronically filed returns. To support its claim, petitioner presented the following summary:B9 Month Erroneous Tax Should Be Tax DST Paid Exhibit Base Base per Return January I' 4,200,260.00 I' 840,056.18 I' 4,200.26 "Y" Febru9D' 4,085,250.00 974,417.95 4,085.25 "Z" March 6,518,120.00 1,303,770.82 6,518.12 "AA" April 4,596,050.00 919,213.68 4,596.05 "BB" May 4,209,670.00 841,933.06 4,209.67 "CC" June 6,225,710.00 1,252,066.00 6,225.71 "DD" July 6,261,720.00 1,252,342.67 6,261.72 "EE" August 4,774,120.00 935,034.30 4,774.12 "FF" BIR September 5,875,130.00 1' 175,023.56 5,900.00 Records, pp.

126-127 October 6,788,690.00 1,357,739.16 6,788.69 "GG"

November December 4,559,570.00 4,182,320.00 Total P62,276,610.00 898 870.78 4,559.57 "HH" 794,756.81 5,238.00 "II" P12,545,224.97 p 63,357.16 Unfortunately, the above summary and the related DST returns are insufficient to establish petitioner's assertion that the P63,357 .16 DST it had paid pertains to loan agreements worth P12,545,224.97. Petitioner should have presented such loan agreements in order for this Court to ascertain the veracity of its claim. As already held in various cases, assessments are prima facie presumed correct and made in good faith. The burden of proof to rebut the presumption of correctness in the assessment is on the taxpayer. Petitioner herein failed on that task. Thus, respondent's findings shall be upheld. Petitioner is liable to pay basic deficiency DST on bonds and loan agreements in the amount of P248,025.89, as computed below:

Bonds and loans subject to tax 1"62,276,610.00 Tax rate P1/P200 DSTdue 311,383.05 Less: DST paid per return 63,357.16 Basic deficiency DST on bonds and loan agreements p 248,025.89 In fine, petitioner is liable for basic deficiency DST for taxable year 2006 in the total amount of P294,767.10, as computed below:

Basic deficiency DST on: Premiums (pre-need plans) p 46,741.21 Bonds and loan agreements 248,025.89 Total p 294,767.10 COMPROMISE PENALTIES- P132,000.00 The compromise penalties of P132,000.00, as broken down below, are found to be without legal basis: Tax Type Income tax Compromise Penalty p 25,000.00 {-

Value added tax Withholding tax - compensation Expanded withholding tax Documentary stamp tax Penalty for failure to file list of regular supplier, alpha list of income payments not subjected to withholding tax, Monthly Alphabetical List of Payees (MAP) and failure to maintain subsidiary books as required under Sections 113 and 233 of the NIRC Total 25,000.00 25,000.00 16,000.00 16,000.00 25,000.00 P132,000.00 A compromise penalty cannot be imposed since no compromise agreement was reached between the parties. The imposition of the same without the conformity of the taxpayer is illegal and unauthorized. 90 Revenue Memorandum Order No. 1-90 expressly provides that "compromise penalties are only amounts suggested in settlement of criminal liability, and may not therefore be imposed or exacted on the taxpayer in the event that a taxpayer refuses to pay the suggested compromise penalty". Since petitioner did not pay the compromise penalties imposed by respondent, it did not agree to settle the same.

As a consequence, the compromise penalties ofP132,000.00 shall be cancelled.

WHEREFORE, premises considered, the instant Petition for Review is hereby PARTIALLY GRANTED. The assessments covering taxable year 2006 for deficiency income tax in the amount of P2,737,817.02 and compromise penalties in the amount of P132,000.00 shall be CANCELLED AND WITHDRAWN. However, the assessments for deficiency VAT, withholding tax on compensation, EWT and DST for the same taxable year shall be UPHELD WITH MODIFICATIONS. Accordingly, petitioner is ORDERED TO PAY respondent the amount of P12, 170,268.00, inclusive of the twenty-five percent (25%) surcharge imposed under Section 248(A)(3) of the NIRC of 1997, computed as follows: Tax Type Basic Tax 25% Total Surcharge Value added tax 1'8,577,964.14 1'2,144,491.04 1'10,722,455.18 Withholding tax on compensation 803,789.33 200,947.33 1,004,736.66 9° Commissioner of Internal Revenue vs. Lianga Bay Logging Co., Inc. and the Court of Tax Appeals, G.R. No. L-35266, January 21, 1991.

Expanded withholding tax Documentary stamp tax 59,693.82 14,923.46 74,617.28 294,767.10 73,691.78 368,458.88 Total P9,736,214.39 P2,434,053.61 P12,170,268.00

(a) Deficiency interest at the rate of twenty percent (20%) per annum on the basic deficiency VAT, withholding tax on compensation, EWT and DST computed from the dates indicated below until full payment thereof pursuant to Section 249(B) of the NIRC of 1997, as amended; Deficiency Interest Tax Type Basic Tax Computed from Value-added tax 1st Quarter 1'2,027,456.35 25-Apr-06 2nd Quarter 2,472,369.26 25-Jul-06 3rd Quarter 1,998,169.38 25-0ct-06 4th Quarter 2,079,969.15 25-Jan-07 8,577,964.14 Withholding tax on compensation 803,789.33 15-Jan-07 Expanded withholding tax 59,693.82 15-Jan-07 Documentary stamp tax 294,767.10 05-Jan-07

(b) Delinquency interest at the rate of 20% per annum on the total amount of P12,170,268.00 and on the 20% deficiency interest which have accrued as afore-stated in (a), computed from April 15, 2011 until full payment thereof pursuant to Section 249(C) of the NIRC of 1997, as amended.

WE CONCUR:

~~ r- 37'""__,_.#-- AMELIA R. COTANGCO-MANALASTAS Associate Justice Q~-;4, c. ~......e-4... 9.,. JlJANITO C. CASTANEDA: JR. CAESAR A. CASANOVA Associate Justice Associate Justice

ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. 9......~ . .:4 c. ~ ... ;>4 Q JtfANITo c. CASTANEDA, aR. Associate Justice Chairperson CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. Presiding Justice