Surplus Marketing Corporation V, et al.

DECISION

UY, J.:

Before this Court is a Petition for Review filed by Surplus Marketing Corporation, petitioner, on March 11 , 2016, against the Commissioner of Internal Revenue, respondent, praying for the cancellation and setting aside of respondent's Final Decision, finding petitioner liable for alleged deficiency taxes, penalties and interests for taxable year 2010, listed as follows:

(a) Income Tax in the amount of P145,271 ,573. 72;

(b) Improperly Accumulated Earnings Tax in the amount of P19,51 0, 137.37;

(c) Value Added Tax in the amount of P229,470,890.49;

(d) Expanded Withholding Tax (EWT) in the amount of P739,029.64;

(e) Withholding Tax on Compensation (WTC) in the amount of P5,921 ,671. 78;

(f) Documentary Stamp Tax in the amount of P223,699.24. (J

THE FACTS

Petitioner Surplus Marketing Corporation, is a corporation duly organized and existing under the laws of the Philippines. It is primarily engaged in the business of trading such as, but not limited to garments on a wholesale and retail basis. 1 Petitioner may be served with notices, pleadings and other processes at Suite 1102, 11th Floor, 139 Corporate Center 139 Valero Street, Salcedo Village, 1227 Makati City. 2 On the other hand, respondent Commissioner of internal Revenue (CIR) is being sued in his official capacity as the head of the Bureau of Internal Revenue (BIR), having been duly appointed to exercise the powers and perform the duties of his office including, inter alia, the power to decide disputed assessments, refunds or internal revenue taxes, fees and other charges, penalties imposed in relation thereto, or other matters arising under the Tax Code. 3 Respondent holds office and may be served with summons, notices and other processes at the 5th Floor, BIR National Office Bldg., BIR Road, Diliman, Quezon City.4 On April 29, 2011, petitioner filed its Annual Income Tax Return (ITR) for taxable year (TY) 2010.5 On September 23, 2011, the BIR Large Taxpayers Regular Audit Division 1 issued Letter of Authority (LOA) No. LOA-116-2011- 00000137 authorizing Revenue Officers Olivia Aviles, Aurora Pelayo, Olivia Sison, Rogelio Gonzales, Riza Sudano and Group Supervisor Marivic Bautista to examine petitioner's books of accounts and other accounting records for all internal revenue taxes for the period from January 1, 2010 to December 31, 2010 pursuant to Audit Criteria forTY 2009 and 2010. 6 Thereafter, petitioner, through Cecilia R. Patricio, executed five (5) Waivers of the Defense of Prescription under the Statute of Limitations of the National Internal Revenue Code to wit:

Waivers Date of Execution Prescriptive period of BIR’s right to assess 1° Waiver 2m Waiver 3" Waiver March 31, 2015 On August 13, 2014, respondent issued a Preliminary Assessment Notice (PAN)'? assessing petitioner for deficiency taxes for the taxable year 2010, broken down as follows:

Type Amount Penal a eee es es HIT 1 121,436,023.32 | - | 80,147,775.39| 50,000.00 | 201,633,798.71 | 3,491,732.33 | 9,637,181.22 [VAT | 156,245,041.45| =~ 107, 809,078.60 PEWT | 938,241.02) - ~—s|—655,830.47| 25,000.00 | 1,619,071.49 | wic [| 7,313,100.88| = - ~—s|_-5,046,039.61 | 25,000.00 | 12,384,140.49 | DST Reg. 12,500.00 Bt 8,625.0 3,000.00 24,125.00 Fee On February 5, 2015, petitioner received a copy of the Formal Letter of Demand (FLD) with Details of Discrepancies and Audit Result/Assessment Notices’? from Nestor S. Valeroso, OIC- Assistant Commissioner, Large Taxpayer Service assessing petitioner for alleged deficiency taxes, penalties and interest for the taxable year 2010, as follows:

m ee oe | Type Amount Penalt [IT | 81,936,096.59| —- ~—S| 66,204,366.05| — 50,000.00 | 148,190,462.64 | VAT | 132,254,361.69 | - ~—S | 107, 985,686.32 | 50,000.00 | 240,290,048.01 | SHEE ee ee eo 0.00 | 68 Or ae | WTC | 3,037,955.58| —- ~—s|_-2,505,401.97 ” Exhibit “R-3”, BIR Records, Folder 1, p. 543. 8 Exhibit “R-4”, BIR Records, Folder 1, p. 544. ° Exhibit “R-5”, BIR Records, Folder 1, p. 546. '© Exhibit “R-7”, BIR Records, Folder 1, p. 669. '' Exhibit “R-9”, BIR Records, Folder 1, p. 670. 2 Exhibit “R-8”, BIR Records, Folder 1, pp. 619 to 626. '? Exhibit “R-11”, BIR Records, Folder 1, pp. 684 to 698. “ Par. 6, Admitted Facts, JSFI, Docket — Vol. 4, p. 2124.

Fa

DST 109,136.10 TOTAL 226,676,982.94 27,284.03 2,269,016.36 90,004.54 12,000.00 238,424.67 184,487,689.25 178,000.00 413,611 ,688.55 On March 9, 2015, petitioner filed with respondent its protest letter15 to the FLO questioning the validity of the said assessments for lack of factual and legal bases. 16 On October 16, 2015, petitioner received a copy of the Final Decision on Disputed Assessment (FDDA)17 denying petitioner's protest in part and finding petitioner liable for alleged deficiency taxes, penalties and interests for TY 2010 in the total amount of P401, 137,002.25, broken down as follows: 18 Tax Basic Surcharge Interest Compromise Total TY!l_e Amount Penalty IT 75,518,239.06 - 69,703,334.66 50,000.00 145,271,573.72 IAET 8, 966,929.30 2,241 '732.33 8,276,475.74 25,000.00 19,510,137.37 VAT 118,319,180.24 - 111,101,710.25 50,000.00 229,470,890.49 EWT 372,503.68 - 350,525.96 16,000.00 739,029.65 WTC 3,037,955.58 - 2,858,716.20 25,000.00 5,921,671.79 DST 109,067.10 - 102,632.14 12,000.00 223,699.24 TOTAL 206,323,874.97 2,241,732.33 192,393,394.95 178,000.00 401 '137 ,002.25 Petitioner filed a letter re~uesting for reconsideration before the CIR on November 16, 2015. 1 Thereafter, on February 12, 2016, petitioner received a denial lette~ 0 from the CIR of petitioner's request for reconsideration reiterating the assessment contained in the FDDA.21 Subsequently, petitioner filed the instant Petition for Review on March 11, 2016 assailing the said assessment. Respondent filed his Answer on June 20, 2016, 22 interposing the following special and affirmative defenses: ( 1) That there was no error or illegality that can be ascribed to respondent's assessment of

petitioner's deficiency tax liability, as respondent properly appraised petitioner of its tax deficiencies; and (2) That the law heavily presumes upon the favor of the propriety and exactness of the tax assessments.

Pre-trial conference was initially set on October 13, 2016?3 However, upon motion of petitioner filed on September 27, 2016, 24 and without objection from respondent, 25 Pre-Trial Conference was reset to February 9, 2017.26 Petitioner filed its Pre-Trial Brief on February 3, 2017,27 while respondent filed her Pre-Trial Brief on February 6, 2017.28 After the Pre-Trial Conference held on February 9, 201729, petitioner filed a Motion to Allow the Engagement of an Independent Certified Public Accountant was filed on February 17, 2017. 30 On February 27, 2017, the parties filed their Joint Stipulation of Facts and Issues, 31 which was approved in the Resolution dated March 9, 2017. 32 Thus, Pre-Trial was deemed terminated and the Court subsequently issued the Pre-Trial Order dated March 27, 2017. 33 During trial, petitioner presented Elrey T. Ramos, 34 the Court commissioned Independent Certified Public Accountant (ICPA) and Florita V. Sabangan, 35 petitioner's Accounting Manager. On September 22, 2017,36 petitioner filed its Formal Offer of Evidence without respondent's comment despite due notice.37 23 Docket- Vol. 3, p. 1445 to 1446. 24Petitioner's "Motion for Cancellation of the October 13, 2016 Pre-Trial Conference", Docket- Vol. 3, p. 1454 to 1456. 25 Respondent's "Comment" filed on October 4, 2016, Docket- Vol. 3, p. 1459 to 1461. 26 Order dated September 30,2016, Docket- Vol. 3, p. 1457. 27 Docket- Vol. 3, pp. 1473 to 1480. 28 Docket- Vol. 3, pp. 2021 to 2024. 29 Docket- Vol. 4, pp. 2032 to 2034. 30 Petitioner's "Motion to Allow the Engagement of an Independent Certified Public Accountant" was granted by the Court in the Order dated April4, 2017, Docket- Vol. 4, pp. 2041 to 2043 and Docket- Vol. 4, pp. 2173 to 2175, respectively.

In the Resolution dated December 6, 2017, the Court admitted some of petitioner's evidence, while those exhibits that were not found in the records of the case and those exhibits that were formally offered but failed to correspond with the documents actually marked, were denied admission. Hence, petitioner filed a Motion for Partial Reconsideration (of the Resolution promulgated on December 6, 2017) on December 22, 2017, 38 praying that the Court partially reconsider the assailed Resolution, to allow resubmission of the denied exhibits, to set a hearing for the identification of the USB containing said exhibits and to allow petitioner to re-offer same documents. For his part, respondent interposed his objection thereto in his Comment to Petitioner's Motion for Partial Reconsideration filed on January 19, 2018. 39 On March 14, 2018, the Court granted petitioner's motion to allow re-submission of re-marked exhibits and set a hearing for the identification of the USB containing said exhibits. Thus, resolution of petitioner's Motion for Partial Reconsideration of the Resolution promulgated on December 6, 2017 was held in abeyance.40 Petitioner filed its Manifestation and Compliance (Re: Resolution promulgated on March 14, 2018) on March 26, 2018.41 Subsequently, petitioner filed a Supplemental Formal Offer of Evidence for the Petitioner on April10, 2018. 42 On July 4, 2018, the Court partially granted petitioner's Motion for Partial Reconsideration of the Resolution promulgated on December 6, 2017 and admitted the exhibits in petitioner's Supplemental Formal Offer of Evidence. 43 On September 21, 2018, the instant case was transferred to this Court's Third Division pursuant to CT A Administrative Circular No. 02-2018, "Reorganizin~ the Three (3) Divisions of the Court" dated September 18, 2018.

Subsequently, respondent presented his sole witness, Revenue Officer (RO) Aurora Pelayo on January 17, 2019.45 On February 4, 2019, respondent filed his Formal Offer of Evidence, 46 with petitioner's Comment (on the Respondent's Formal Offer of Evidence) filed on February 13, 2019. 47 Thereafter, the Court admitted all of respondent's documentary evidence on March 15, 201948 On April 17, 2019, respondent filed his Manifestation stating that he is adopting the arguments raised in his Answer in lieu of filing a Memorandum. 49 On the other hand, petitioner filed a Motion for Extension of Time to Submit Petitioner's Memorandum on April 24, 2019, praying for an additional period of twenty (20) days from April 25, 2019, or until May 15, 2019, to file its memorandum.50 The Court granted the same on May 2, 2019.51 On May 15, 2019, petitioner filed its Memorandum. 52 Consequently, this case was submitted for decision on May 20, 2019.53 Hence, this Decision.

THE ISSUE

The parties stipulated a sole issue for this Court's resolution, to wit:

"Whether or not petitioner is liable for the alleged deficiency taxes for the taxable year 2010 in the aggregate amount of P401, 137,002.24, inclusive of penalties and interests; which alleged deficiencies were assessed per Final Decision on Disputed Assessment ("FDDA") and was sustained by the respondent in his (sic) Final Decision denying the Motion for Reconsideration on the FDDA." 54

Petitioner's arguments: In assailing respondent's assessments of deficiency taxes, petitioner raises the following arguments, to wit:

INCOME TAX

Petitioner disputes the adjustments in the taxable income per Income Tax Return, itemized as follows: A. Under-Declaration of Sales Petitioner alleges that it has no under-declaration of sales and assails respondent's assessment on the following grounds: (1) The assessment is based on unverified third-party information derived from SIR's system; (2) Respondent's use of extrapolation method in arriving at what it deemed undeclared sales is highly speculative; and (3) The purchase transaction is not a basis for assessing income tax.

B. Disallowed Sales Returns and Allowances The discount fees and sales discounts which comprise the disallowed "sales returns and allowances" are supported and, thus, are valid deductions for purposes of computing any alleged income tax liability of petitioner. C. Disallowed Expenses Respondent erred in disallowing deductible expenses in the amount ofP27,724,704.62. Allegedly, these expenses should not be disallowed because these are valid deductions from petitioner's gross income and are duly supported. Thus, this assessment should be cancelled for lack of factual or legal bases. D. Disallowed Expenses Due to Non-withholding of Tax The deficiency assessment for Expanded Withholding Tax (EWT) in the amount of P1 0,373, 770.13 should be cancelled for want of factual or legal bases. At the very least, the same should be reduced insofar as it was able to prove that portion of expenses which are exempt from withholding tax pursuant to Revenue Regulations No. 2-98 as amended.~

E. Unsupported Creditable Tax Withheld Tax credits claimed in its ITR were supported by BIR Form 2307 which were reviewed and verified by the ICPA and only the amount P13,506.23 were found to be unsupported.

IMPROPERLY ACCUMULATED EARNINGS TAX

Petitioner contends that the unappropriated Retained Earnings (RE) of P24,285,696.00 was the proper amount that should be considered in computing Improperly Accumulated Earnings Tax (IAET). Thus, respondent's deficiency assessment must be cancelled. Petitioner further asserts that it will be deprived of its right to due process because the alleged IAET liability of petitioner for CY 2010 was based on wrong facts and figures.

VALUE-ADDED TAX

A. Undeclared Income The deficiency VAT assessment is allegedly without factual or legal bases. Petitioner asserts that there was failure of respondent to present the required Certifications I Sworn Statements required under Revenue Memorandum Orders No. 42-2003 and 46-2004. That in the absence of the said Certifications/Sworn Statements, the assessment is based on unverified data and are therefore mere presumptions.

B. Disallowed Input Due to Failure to Comply with Invoicing Requirement The subject invoices having been issued by VAT-registered suppliers are substantially compliant with invoicing requirements and should not affect the related input tax claim of the petitioner.

EXPANDED WITHHOLDING TAX (EWT)

A. Disallowed Expenses Due to Non-Withholding of EWT Petitioner contends that its reconciliation on the alleged disallowed expenses due to non-withholding of EWT showed reduced difference that the ICPA was able to confirm through his independent audit./D

B. Purchases not subjected to EWT per Summary List of Purchases (SLP) vs Audit Information Tax Exemption and Incentives Division (AITEIO) The BIR examiners allegedly captured incorrect amount of sales and that respondent's deficiency assessment on EWT is simply based on a mere assumption and not on facts, and the same must be cancelled and set aside.

WITHHOLDING TAX ON COMPENSATION

Anent the salaries per Financial Statement (FS), petitioner alleges that the BIR examiners were not able to capture the correct amount of salaries, wages and employee benefits reported in petitioner's FS and ITR. As verified by the ICPA, salaries, wages and employee benefits per audited FS amounted to P94,792,410.93 and not P75,099,717.95 as claimed by the BIR. With regard to gross compensation per Alphalist, petitioner alleges that the BIR examiners did not capture the correct amount of compensation of minimum wage earners duly reflected in the Alphalist of employees. In addition, the gross compensation used by the BIR examiners in other items under this assessment refer only to the taxable compensation extracted by the BIR examiners from the Alphalist of Employees and did not consider the non-taxable compensation.

Petitioner also disagrees with the use of the maximum withholding rate of 32% in the assessment. Rather, petitioner contends that it may be more reasonable to follow the method used by the ICPA, considering that only a few of petitioner's employees earns more than P500,000.00 net taxable compensation. Lastly, petitioner submits that the ICPA was able to validate based on the evidence and reconciliations, that the difference between salaries and wages per financial statements against the alphalist per BIR assessment should be reduced to P1 ,971,379.05 and the corresponding basic deficiency tax assessment should also be reduced to P142,816.23.

DOCUMENTARY STAMP TAX (DST)

The DST due on all rental payments under existing lease contracts are allegedly being remitted to the BIR by the lessor!

Page II of61 verified by the ICPA. Hence, the DST deficiency assessment is without factual and/or legal bases.

COMPROMISE PENALTY

Petitioner disagrees with the imposition of the compromise penalty by respondent. Petitioner asserts that it may not be compelled to pay the same because by its very nature it implies mutual agreement between the parties in respect to the thing or subject which is so compromised. Allegedly, the choice of paying or not paying it distinctly belongs to the taxpayer. Respondent's counter-arguments: Respondent counter-argues that petitioner was informed of the factual and legal bases of the subject deficiency tax assessment through various assessment notices issued during the course of the administrative audit of its tax deficiencies. Clearly, the Details of Discrepancies found in the FLO/FAN attached to the Petition as Annex "F", confirms that respondent was informed of the factual and legal bases of the assessment pursuant to Section 228 of the 1997 NIRC, as amended.

Contrary to petitioner's arguments, RMO No. 46-2004 deserves no consideration in the determination of this case. RMO No. 46-2004 was issued to provide additional supplement and guidelines in handling Letter Notices. The instant case involves an audit of all its internal revenue taxes pursuant to Audit Criteria for Taxable Years 2009 and 2010. Thus, to belabor a discussion thereon would be futile considering the inapplicability of the cited RMO to this case.

Moreover, respondent submits that the law heavily presumes upon the favor of the propriety and exactness of tax assessments. Allegedly it is up to petitioner to present evidence to establish the inaccuracy or outright invalidity of the assessment made against it. Corollarily, petitioner's failure to do so further confirms the propriety and exactness of the assessment.

THE COURT'S RULING

The instant Petition for Review is partly meritoriousfl

Factual and legal bases of the assailed assessments In the FDDA, respondent assessed petitioner for deficiency income tax, IAET, VAT, EWT, WTC and DST in the aggregate amount ofP145,271,573.72, broken down as follows: Taxable incomeoer return P57,156,877.00 Add: Adiustments A. Under-declaration of sales A.1

1. Gross Profit on local ourchases !RMO 42-2003l A.1.1 199,443,221.84

2. Gross Income (per book vs ITRl A.1.2 5,566,488.79 205,009,710.63 B. Sales returns and allowances A.2 8,550,666.00 C. Disallowed exoenses A.3

1. Advertisino A.3.1 6,351,858.62

2. DePreciation A.3.2 21,372,846.00 D. Not subiected to EWT A.4 1 0 373 770.33 38 098 474.95 Taxable Income oer Audit 308,815,728.58 Rate 30% Tax due oer audit 92,644,718.57 Less: UnexPired excess of prior vear's MCIT over RCIT 16,397,961.00 Pavment for the 1' 3 ouarters 1,401,663.00 CWT oer audit 1,230,976.00 TotafOer return 19 030 600.00 Less: Unsuooorted CWT A.5 (20,593.49) CWT carried over to the next auarter (1 883 527.00l 17 126 479.51 Deficiencv income tax 75,518,239.06 Add: lnterestlfrom 04/16/2011 to 9/30/2015) 69,703,334.66 ComPromise Penaltv 50 000.00 697;~

TOTAL AMOUNT DUE

We look into the propriety of the assailed assessments issued against petitioner.

Income Tax A.1 Under-declaration of sales- ,.205,009, 710.63 A.1.1 Gross Profit on undeclared sales arising from undeclared purchases - ,.199,443,221.84 In the FDDA, respondent found petitioner has undeclared sales pursuant to Revenue Memorandum Order (RMO) No. 42-2003 and the same was subjected to income tax pursuant to Section 32 of the National Internal Revenue Code (NIRC), as amended. As a result, respondent derived the assessed amount from the following computation: 55

Amount of over claimed purchases per FLO Less: with supporting documents Difference on purchases per SLP vs AITEID Sales (P311,949,654.68/61%) Cost of sales (difference) Gross profit on Undeclared sales (Local) P344,886,509.34 32,936,854.66 P311 ,949,654.68 P511 ,392,876.52 311,949,654.68 P199,443,221.84 Petitioner argues that it has no under-declaration of sales and questions the legality and propriety of the tax assessment. According to petitioner, the Computer-Assisted Audit Tools (CAATs) extraction data under RMO No. 14-2011 are not evidence in themselves to support a tax assessment. Allegedly, the BIR failed to comply with the procedures laid down in Revenue Memorandum Order (RMO) No. 46-2004. Under said rules, the BIR must secure a Sworn Declaration of the third party, or in this case, the specific clients/customers of the Company that the amounts were indeed sales by the Company to petitioner. Thus, the deficiency assessments resulting from the comparison of the supposed third- party information, which is the Summary List of Sales (SLS) and the petitioner's report or the Summary List of Purchases (SLP) or any other information are mere naked assessment that has no leg to stand on absence of the sworn statements/ declarations from the said third-party sources. This assessment must be cancelled. After thorough examination and verification of the evidence presented in this case, the Court agrees with the findings of the I CPA.

Shown hereinbelow is the schedule of comparison made by respondent between Third Party Information (TPI) derived from Audit Information Tax Exemption and Incentives Division (AITEID) against purchases declared in petitioner's Summary List of Purchases (SLP) supporting their findings for P311 ,949,653.07 allegedly as overstated purchases, to wit: ,., Seq.

No.

I 2 3 4 5 6 7 8 9 10 II 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41

Supplier Name

VS MARKETING CORPORATION

BIG BOX TRADING HOUSE

INCORPORATED

GOLDEN ASTIPLAZ MARKETING INC

TARGET GROUP PHILIPPINES

INCORPORATED Total

MUCH PROSPERITY TRADING

Total

S A INTERNATIONAL SALES INC

ADVANI APPAREL INC

HOMME PLUS MARKETING COMPANY

PRIME VALUE ENTERPRISES

INCORPORATED

TWINLUCK GENERAL

MERCHANDISINGBRANCH

RAERONDSTARR MARKETING

FIRST LINEN COMMERCIAL

STRATAPRO COMPANY INC

STRATAPRO COMPANY INC

OBRA EXPRESS TRADING SYSTEMS INC

RESURGE MANUFACTURING COMPANY

INC

MADRAS CROWNPHIL INCORPORATED

PARK TRADE CENTER

EUROPLAST INDUSTRIES INC

KINAH GARMENTS ENTERPRISES

SELF GMT TRADING COMPANY

EQUESTRIAN TRADING

ASIATIQUE TRADING

MULTI GROVE GENERAL MERCHANDISE

BELLA TRADING AND SERVICES

RENZ MATTHEW INTERNATIONAL

TRADING CORPORATION

TRISECT GENERAL MERCHANDISE

ARIECE ENTERPRISE

TWIST ENTERPRISE

VISIONVIEW MARKETING

INCORPORATED

ASG SUNLIGHT TRADING COMPANY

CASAR! TRADING

NORTHERN-WEST ASIA TRADING

INCORPORATED

KENOMAX GREAT ENTERPRISES

INCORPORATED

BEACH RUBBER CO INC

ANGBAROCO

FUN SERVICES INC

WAMRUS TRADING INC

BETTERWAY GENERAL MERCHANDISE

INDUREX CLOTHING

FIRST A TRADING

Per SLS of Third Party Pl21.338,835.26 34.936,739.50 6.395,761.54 3,637.372.83 742,805.36 - - - - - - - - - - - - - - - - - - Less: BIR Per SMC's TPI's SLS > Adjuslment Over- (Submllled SLP SMC's SLP Documents & claimed Purchases Allowed Pl46,547.119.92 P25.208.284.66 p.

P25,208.284.66 49,142.721.41 14,205.981.91 - 14,205,981.91 10.422.057.43 4,026,295.89 - 4.026,295.89 3.516.065.09 -121,307.74 - -121,307.74 -62.5 -742,867.86 - -742,867.86 141,876,904.82 I 41,87 6. 904.82 141,876.904.82 83,915,910.57 83,915,910.57 83.915,910.57 62.701,586.82 62,70 I ,586.82 - 62.701.586.82 30,549,627.41 30,549.627.41 - 30.549,627.41 8.161.632.41 8.161,632.41 - 8,161.632.41 7.776,991.84 7.776,991.84 7.776,991.84 5.944.469.08 5,944.469.08 - 5.944.469.08 3,81 2,068.83 3,812.068.83 - 3.812,068.83 3.640.352.76 3,640,352.76 - 3.640,352.76 3.491.999.00 3.491,999.00 3.491,999.00 3.324.642.83 3.324.642.83 - 3.324,642.83 3.271,004.59 3.271,004.59 - 3.271.004.59 3,073.955.49 3.073,955.49 3.073,955.49 2,941.080.00 2.941.080.00 2,941,080.00 I . 934.460. 16 1,934.460.16 - 1,934.460.16 1.694.579.66 1.694.579.66 - 1,694,579.66 1.687,500.00 1,687,500.00 - 1,687,500.00 1,606,250.00 1,606,250.00 - 1,606,250.00 1.420.535.75 1.420.535.75 1.420,535.75 829.813.24 829.813.24 - 829,813.24 811,595.93 811,595.93 - 811,595.93 771.428.58 771.428.58 - 771.428.58 769,155.35 769,155.35 769,155.35 766,071.42 766,071.42 766,071.42 707,142.83 707,142.83 707,142.83 698.437.00 698.437.00 - 698.437.00 669.642.83 669.642.83 - 669,642.83 664.285.75 664.285.75 - 664,285.75 635.714.25 635,714.25 635.714.25 520.746.58 520.746.58 - 520.746.58 441.232.50 441.232.50 - 441.232.50 305.747.84 305.747.84 - 305.747.84 288,289.58 288,289.58 288,289.58 284.826.58 284.826.58 284.826.58 249,134.00 249,134.00 - 249,134.00 155.357.42 155,357.42 - 155,357.42 43 44 45 46 47 48 49 50 $2 53 54 55 56 57 58 59 60 6) 62 63 64 65 66 67 68 6?

70 7\ 72 73 74 75 76 77 78 79 SubTotal - Trade Suppliers ee eee een ee ee teense eee

HOLYMOON ENTERPRISES

Supplier Name

WPP MARKETING COMMUNICATIONS

INC

PRUDENTIAL GUARANTEE AND

ASSURANCE INC

DIMENSIONAL SERVICE CORPORATION

ACCURATE PRINTING INC

DIVERSEY PHILIPPINES INC

SPACE WORLD CORPORATION

PERFORMANCE MARKETING

INCORPORATED

RIGHT EIGHT SECURITY AGENCY INC

VICAN INVESTIGATION AND SECURITY

AGENCY INC

JOHNSONDIVERSEY PHILIPPINES

INCORPORATED ARMAK TAPE CORPORATION Total

SCANWELL GRAPHICS CORPORATION

MERCURY INTERNATIONAL SECURITY

PRINTING CORP. Total

A V PAULE CONSTRUCTION CO INC

Tatal

UNISPORT MARKETING CORPORATION

Total YU LINCOLN CO Tatal

MALLORCA ANTONIO FUENTESPINA

Total MICRO-D INTERNATIONAL INC Total Jobstreet com Philippnes Inc Total

DATRIMA PACKAGING INDUSTRIAL

CORP Total NG ISABELLE PE Total SALES EDWIN C Total

PRIMA PLASTIC MANUFACTURING

CORPORATION Total

SYMMETRIC GLASS CORPORATION

Total

ADVANCE ELECTRONICS

CORPORATION Total

IRVINE CONSTRUCTION CORPORATION

Total PUNONGBAYAN ARAULLO Total

GENERALI PILIPINAS INSURANCE CO

INC Total

SHOPPING CENTER MANAGEMENT

CORP -BACOLOD

FIRST ASIA REALTY DEVELOPMENT

CORP.

PILIPINAS MAKRO INC. Total

STANFIELD INTERNATIONAL

CORPORATION MARKETING CONVERGENCE iNC SHOEMART INC Total

SM LAND INC

SM INVESTMENTS CORPRENTAL

PREMIER CENTRAL INC

P167,051,514.49 P591,942,109.23 Per SLS of Third Party P29,115.72 376,163.96 3,161.37 8,035.71 30,509.82 77,678.57 14,821.43 18,934.12 890.03 55,926.60 160.71 9,035.59 2,745.54 2,863.52 5,903.58 13,977.23 20,945.09 26,785.71 30,000.00 99,514.28 59,892.86 73,660.71 2,046,383.94 107,142.86 200,000.01 2,080,267.87 571,861.98 1,151.125.35 446,165.59 14,633,687.31 2,873.17 277,563.39 448,001.84 1,756,390.03 1,831,384.02 3,319,782.93 3,599,01 1.78 -79,965.82 Per SMC’s SLP P117,474.4) 438,882.34 62,948.34 60,268.25 58,821 .50 101,500.08 33,125.08 24,380.43 5,979.42 60,767.83 8,679.08 51,300.16 1,966,696.75 4,250.00 28,571.50 1,579,375.16 320,931.00 94,335.17 700,771.74 14,640,317.83 274,457.32 354,580.08 742,423.65 7,208,745.34 2,637,595,.01 4,894,563.4] -79,965.82 P424,890,594,74 TPI's SLS > SMC’s SLP P88.358.69 62,718.38 59,786.97 92,232.54 28,311.68 23,821.51 18,303.65 5,446.31 §,089.39 4,841.23 -160.71 -356.5] 2,745.54 -2,863.52 5,903.58 -13,977,23 -20,945.09 -26,785.71 ~30,000.00 -48,214,12 -59, 892.86 -73,660.71 -79,687.19 -102,892.86 -371,428,51 -500,892.71 -250,930.98 -1,056,790.18 254,606.15 6,630.52 -2,873.17 ~3,106.07 -93,421.76 -1,013,966.38 5,377,361 .32 -682,187.92 1,295,551.63 Less: BIR Adjustment (Submitted Documents & Purchases Allowed 571,861.98 7,181,893.88 2,617,081.98 4,91 4,546.70 PO.00 P424,890,594.74 -79,965.82 Over- claimed P88,358.69 62,718.38 59,786.97 52,232.54 28,311.68 23,821.51 18,303.65 5,446.3) 5,089 39 4,841.23 -160.7) -356.5] -2,745.54 -2,863,.52 -5,903,58 -13,977.23 -20,945.09 -26,785.7} -30,000.00 ~48,214.12 59,892.86 -73,660.7] -79,687.19 -102,892.86 -171,428.51 -500,892.71 -822,792.96 -1,056,790.18 254,606.15 6,630.52 -2,873.17 -3,106.07 -93,421.76 -1,013,966.38 -1,804,532.56 -3,299,267.90 -3,618,995.07 NO 80 81 82 83 Seq.

No.

84 85 86 87 88 89 90 91 92 93 94 95 96 97 9B 99 100 101 102 103 104 105 106 107 108 109 110 Ill 112 113 114 115 116 117 118 119 120

PREMIER SOUTHERN CORPORATION

SM RETAIL INC Totol

SM PRIME HOLDINGS INC

LUMISPEC INDUSTRIAL SALES

Supplier Name

ARCENAL SYSTEMS ENGINEERING

ZENSHIN SYSTEMS CORPORATION

PHILIPPINE DAILY INQUIRER INC

PHILST AR DAILY INC

SUMMIT PUBLISHING CO INC

BESTILE CORPORATION

VALUE CARE HEALTH SYSTEMS INC

ADFOLIO ADVERTISING

PLDT

MILLIMETER DESIGN STRATEGIES INC

ABSCBN PUBLISHING INC

SUPERIOR MAINTENANCE SERVICES

INC

AMIGO CLUB ENTERTAINMENT INC

ANGEL INTERIORS CONSTRUCTION

CORP

VICTORIA VISUAL INTERNATIONAL

CORP

EOUICOM INC

IDEAL PEOPLE MODEL MANAGEMENT

co

STINGER SECURITY SERVICES INC

MANILA ELECTRIC COMPANY

TE LATRIZ INTERIORS

AIRFREIGHT 2100 INCORPORATED

WHEEL BENISON MOTORIST SQUARE

HARD WORK CONSTRUCTION

PAINTING CONTRACTOR CO

SUPRA MULTISERVICES INC

PC LIVE

DJA SECURITY SERVICES INC

CONTINUUM TECHNOLOGY

CORPORATION

CAPCON ALUMINUM SPECIALIST

INSTALLER

COMBINED BLUE DRAGON SEC

SERVICES INC

SAN FERNANDO ELECTRIC LIGHT

POWER CO INC

INTEGRATED COMPUTER SYSTEMS INC

ELINE BUILDERS

LEC STEEL MANUFACTURING

CORPORATION

HYPERVOLT CONTRACTOR

CORPORATION

KARISSA APPAREL INC

ADVANCE MICROSYSTEMS CORP

JRS BUSINESS CORPORA liON 6.592.975.92 12.490,905.76 103,119,074.82 Per SLS of Third Party - - - - - - - - - - - - - - - - - - 8.941.251.67 2.348,275.75 8,959,243.01 -6,610,967.26 10,037,756.75 -2,453,149,01 9,922,035.37 -12,375,184.38 I 03,412,391. I 6 293,316.34 103,127,031.58 -I 02,833,715.24 2,556,500.58 2.556,500.58 - 2,556,500.58 Less: BIR Per SMC's TPI's SLS > Adjustment Over- (SubmHied SLP SMC's SLP Documents & claimed Purchases Allowed I ,632, I 43.00 I ,632, I 43.00 I ,632,143.00 I ,284,019.40 1.284,019.40 - I ,284,019.40 I ,257,460.7 4 I ,257,460.7 4 - 1,257.460.74 1.166.427.08 1.166.427.08 - 1.166,427.08 599,331.00 599,331.00 599,331.00 542,934.00 542,934.00 542,934.00 537,493.92 537,493.92 - 537,493.92 533,695.83 533,695.83 - 533,695.83 503,846.82 503,846.82 - 503,846.82 465,428.67 465,428.67 - 465,428.67 450,816.75 450,816.75 450,816.75 444,792.34 444,792,34 444.792.34 373.493.25 373,493.25 - 373.493.25 352.433.25 352.433.25 - 352.433.25 347,321.59 347,321.59 - 347,321.59 333,991.83 333,991.83 - 333,991.83 329,897.42 329,897.42 329,897.42 290,202.82 290,202.82 - 290,202.82 281,856.76 281,856.76 - 281,856.76 257,034.42 257,034.42 - 257,034.42 251,977.74 251.977.74 - 251,977.74 246,163.16 246,163.16 - 246,163.16 227,232.17 227,232.17 227,232.17 226,919.25 226,919,25 226,919.25 206,785.67 206.785.67 206.785.67 185,986.90 185,986.90 185,986.90 176,785.75 176.785.75 - 176,785.75 153,817.91 153,817.91 - 153,817.91 152,801.50 152,801.50 - 152,801.50 142,092.08 142,092.08 - 142,092.08 135,290.25 135,290.25 - 135,290.25 130,043.00 130,043.00 - 130,043.00 116,056.83 116,056.83 116,056.83 115,595.41 115,595.41 115,595.41 113,678.66 113,678.66 - 113,678.66 I 07,670.59 107,670.59 107,670.59 106,294.32 106,294.32 - I 06,294.32 121 122 123 124 125 Seq.

No.

126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161

PHILIPPINE AIRLINES INC

MARKFIVE INC

FEDERAL MANAGEMENT AND

MAINTENANCE INC

RECO MODELING AGENCY

JOB CLEAN MANPOWER GENERAL

SERVICES Supplier Name

FELPORT INTERNATIONAL MARKETING

MANSOR SECURITY AND GENERAL

SERVICES

RAPID RADIO COMMUNICATIONS INC

GLASSTECH CORPORATION

FOUR CORNERS TECHNOLOGIES 4CT

INC

EDGE OF LIGHT INCORPORATED

ME RCA TOR MODEL MANAGEMENT INC

SALES DISPLAY CENTER

KIKOMO CAPS

PALADIN PROTECTIVE SECURITY

SERVICES INC

JLC CONSTRUCTION

MAXANDREA HOTEL

NET PACIFIC INC

CARPETWORLD MANUFACTURING

CORPORATION

TRIPLE 7 MANPOWER SERVICES INC

LM CAMUS ENGINEERING

CORPORATION

MEGA CORINTHIANS INTEGRATED

SECURITY INC

KENTUCKY FRIED CHICKEN

TARGET DISPLAY CO INC

LAMINWOOD DECO CORPORATION

YATAIINTERNATIONAL CORPORATION

INNOVE COMMUNICATIONS INC

MICROGENESIS BUSINESS SYSTEM

SIMPLY SUMPTUOUS INC

AHENSIY A MODELO INC

CMP FEDERAL SECURITY AGENCY INC

JMD INTERNATIONAL CORPORATION

BLUEFISH DIGITAL MEDIA TECH CORP

GLOBE TELECOM INC

POWER MASTER INC

REMORE CORPORA liON

PHILIPPINE GENERAL INSURANCE

CORPORATION

CORINTHIANS INTEGRATED SECURITY

INC

ENVIRONMENT GENERAL SERVICE INC

LAMBDAN SECURITY AND DETECTIVE

AGENCY INC

LYNX SECURITY AND INVESTIGATION

AGENCY 105,209.66 105,209.66 105,209.66 96,257.50 96,257.50 .

96,257.50 .

93,636.34 93,636.34 93,636.34 92.783.75 92.783.75 .

92,783.75 .

86,634,16 86,634.16 86,634.16 Less: BIR Per SLS of Per SMC's TPI's SLS > AdJustment Over- (SubmiHed Third Party SLP SMC's SLP Documents & claimed Purchases Allowed .

84,821.50 84,821.50 .

84,821.50 .

83,351.92 83,351.92 .

83,351.92 .

83,169.67 83,169.67 .

83,169.67 .

82,906.75 82,906.75 .

82,906.75 .

80,357.25 80,357.25 .

80,357.25 .

78,680.00 78,680.00 .

78,680.00 .

76,288.83 76,288.83 .

76,288.83 .

73,660.75 73,660.75 .

73,660.75 72,297.41 72.297.41 .

72.297.41 71,790.17 71,790.17 .

71.790.17 71,428.58 71,428.58 71,428.58 69,517.92 69,517.92 .

69,517.92 62,651.83 62,651.83 62,651.83 .

61,778.67 61.778.67 61,778.67 .

61.746.01 61.746.01 .

61.746.01 .

58,066.50 58,066.50 .

58,066.50 .

56,030.08 56,030.08 .

56,030.08 .

54,446.42 54,446.42 .

54,446.42 .

52.487.42 52,487.42 .

52,487.42 .

51' 128.92 51.128.92 .

51,128.92 51,071.67 51,071.67 .

51,071.67 50,925.33 50,925.33 .

50,925.33 50,890.00 50,890.00 50,890.00 .

49,652.49 49,652,49 49,652.49 .

49,484.68 49,484.68 .

49,484.68 .

48,287.49 48,287.49 .

48,287.49 .

47,142.99 47,142.99 .

47,142.99 .

46,188.51 46,188,51 .

46,188.51 45,149.33 45,149.33 45,149.33 44,867.16 44,867.16 44,867.16 44,598.42 44,598.42 44,598.42 44,147.42 44,147.42 44,147.42 43,908.33 43,908.33 43,908.33 42,527.00 42,527.00 .

42,527.00 .

41,922.08 41,922.08 .

41,922.08 .

41,505.25 41,505.25 .

41,505.25 162 163 164 165 166 167 168 169 17) 172 173 174 175 176 177 178 179 180 183 184 185 186 187 188 189 190 19) 193 woe ee ee ee owns wenn ene ee

DEFENSE SPECIALIST CORPORATION

ALL AROUND SERVICES AND

MERCHANDISING CORP

CARLSON TRADING

ROYAL SECURITY AGENCY INC

FIRESTAR SECURITY AGENCY

DK_P MARKETING CORPORATION

Supplier Name

STARFORCE SECURITY AND ALLIED

SERVICES INC

UYB PRINTING CORPORATION

CEBU PACIFIC AIR

SHELLSOFT TECHNOLOGY

CORPORATION

ROYAL MANDAYA HOTEL

CORPORATION

PRINCE KURL JUNIOR CORP

ERWIN V BARLETA

3S INTERNATIONAL FABRIC ATION

CORPORATION

MICA SECURITY AGENCY INC

LOLLIPOP SAFETY BALLOONS CENTER

LEGEND HOTELS INTL CORP

RJC SECURITY AND INVESTIGATION

AGENCY INC

ADVANCED DESIGNS PHILIPPINES INC

TOP GLASS AND ALUMINUM

CONTRACTOR CORP

LION INTEGRATED SERVICES INC

BEAGLE INVESTIGATIVE DETECTIVE

AGENCY INC

DAVAO JANITORIAL ALLIED SERVICES

EDWIN CALINGASAN

KATHERINE L MAGSANOC

MILLGOS SECURITY AGENCY

PLAGATA SECURITY SERVICES AGENCY

INC

JBL HYDRAULIC ENTERPRISES

MARSDAN SECURITY AGENCY CORP

CHERUBIM SECURITY PROTECTIVE

DETECTIVE AGENCY

PHILCOM CORP

ENGELBERT PHILS INC

DAVAO SECURITY INVESTIGATION

AGENCY INC

PACUBAS GENERAL SERVICES

LY ENTERPRISES

BDO1 500019222

PRIMER PRINTING INOUSTRIAL SALES

JOLLIBEE FOODS CORP

CEC INDUSTRIES INCORPORATED

NEW DIRECTION INC

ASALUS CORPORATION

Per SLS of Third Party 41,363.83 41,081.00 40,178.74 37,462.97 | 36,266.33 34,919.82 Per SMC's SLP 34,823.58 33,928.58 33,302.75 31,967.91 30,544.84 30,053.66 29,505.67 28,464.33 28,184.42 27,196.57 27,058.08 24,403.17 22,875.25 22,232.33 21,722.58 21,644.66 21,270.99 21,250.17 21,008.42 20,894.24 20,698.90 20,535.75 20,116.58 19,986.07 19,669.74 19,384.08 18,817.15 18,084.73 17,924.16 17,857.17 16,857.32 16,322.99 16,125.33 15,966.92 15,845.58 41,363.83 4},081.00 40,178.74 37,462.91 36,266.33 34,719.82 TPI's SLS > SMC's SLP 34,823.58 33,928.58 33,302.75 31,967.91 30,544.84 30,053.66 29,505.67 28,464.33 28,184.42 27,196.59 27,058.08 24,403.17 22,875.25 22,232.33 21,722.58 21,644.66 21,270.99 21,250.17 21,008.42 20,894.24 20,678.90 20,535.75 20,116.58 19,986.07 19,669.74 19,384.08 18,811.15 18,084.73 17,924.16 17,857.17 16,857.32 16,322.99 16,125.33 15,966.92 15,845.58 Less: BIR Adjustment (Submitted Documents & Purchases Allowed 41,363.83 41,081.00 40,178.74 37,462.91 36,266.33 34,919.82 Over- claimed 34,823.58 33,928.58 33,302.75 31,967.9) 30,544.84 30,053.66 29,505.67 28,464.33 28,184.42 27,196.59 27,058.08 24,403.17 22,875.25 22,232.33 21,722.58 21,644.66 21,270.99 21,250.17 21,008.42 20,894.24 20,698.90 20,535.75 20,116.58 19,986.07 19,669.74 19,384.08 18,811.15 18,084.73 17,924.16 17,857.17 16,857.32 16,322.99 16,125.33 15,966.92 15,845.58 nh 203 204 205 206 207 208 209 Seq.

No.

210 211 212 213 214 215 216 217 218 219 220 221 222 223 224 225 226 227 228 229 230 231 232 233 234 235 236 237 238 239 240 241 242 243

LAMBDAN SECURITY AGENCY INC

STARFORCE SECURITY SERVICES INC

CMP FEDERAL SECURITY AGENCYINC

LEE SONS PRINTING CORP

LA MAJA RICA HOTEL

MEDICARD PHILIPPINES INC

PROTECTION TECHNOLOGY INC

Supplier Name

ACTIVE TRAVEL TOURS INC

DMB FIRE SAFETY ENTERPRISES

NEW MABUHAY INTERNATIONAL

SECURITY AGENCY GENERA

SF ALLIED INDUSTRIAL PRODUCTS

RTL INDL SALES

BDO INSURANCE BROKERS INC

DEXTERTON CORPORATION

THE SYLVIA MANOR

ss

LABELLINE ENTERPRISES

LUNA PROMOTIONS AND TALENTS

MANAGEMENT SERVICES

EAGLEMATRIX SECURITY AGENCY INC

FORMS INTERNATIONAL ENTERPRISES

CORP

AD STYLE SIGNAGES MARKETING

DEFENSE SPECIALIST CORPORATION

SHERCON BUILDERS

SAGITTARIUS SECURITY AGENCY

NATIONAL BOOK STORE

ROBUST SECURITY CORPORATION

TRITONICS COMPUTER SERVICES

RIBBONAIRE ENTERPRISES

AC HOTEL CORPORATION

BJK ALUMINUM TRADING SERVICES

VALUE PLUS BUSINESS INNOVATION

FIRETRON SAFETY SYSTEM

SUPERVALUE INC FAO L 0 ARGANDA

HOTEL GRACELANE

UNICOM COMPUTER STORE

EM ZALAMEA ACTUARIAL SERVICES INC

A VESCO MARKETING CORPORATION

GAMMA DESIGN CENTER

VENIZ HOTEL CORPORATION

RKJ GENERAL SERVICES SALES INC

KINGS ROYAL HOTEL AND LEISURE PARK

CORP

SEAGULL ENTERPRISES

15,439.75 15,439.75 15,439.75 15.013.68 15.013.68 .

15,013.68 .

14,704.75 14,704.75 .

14,704.75 .

13.750.00 13,750.00 .

13.750.00 13,637.67 13,637.67 13,637.67 .

12,595.42 12,595,42 12,595.42 .

12,500.09 12,500.09 .

12,500.09 Less: BIR Per SLS of Per SMC's TPI's SLS > Adjustment Over- (SubmiHed Third Party SLP SMC's SLP Documents & claimed Purchases Allowed 11,942.09 11,942.09 .

11,942.09 11,795.50 11,795.50 11,795.50 .

11,652.42 11.652,42 .

II ,652.42 .

11,294.75 11,294.75 .

11,294.75 11.209.83 11,209.83 II ,209.83 10,800.00 10,800,00 10,800.00 .

10,767.91 10,767.91 .

10,767.91 .

10,612.75 10,612.75 .

10,612.75 10,312.59 10,312.59 .

I 0,312.59 10,000.00 10,000.00 .

10,000.00 .

9,975.08 9,975.08 9,975.08 .

9.732.17 9.732,17 .

9,732.17 .

9,696.50 9,696.50 .

9,696.50 9,616.16 9,616.16 9,616.16 .

8,929.08 8,929.08 8,929.08 .

8,412.67 8,412.67 .

8,412.67 .

8,024.51 8,024.51 .

8,024.51 7,990.17 7,990.17 .

7,990.17 7,611.66 7,611.66 .

7,611.66 7,351.82 7,351.82 7,351.82 .

7,312.50 7,312.50 7,312.50 .

7,155.58 7,155.58 .

7,155.58 .

7,143,00 7,143.00 .

7,143.00 .

6,482.34 6,482.34 .

6,482.34 6,401.00 6,401.00 .

6,401.00 6,112.49 6,112.49 .

6, 112.49 6,026.83 6,026.83 6,026.83 .

6,000.00 6,000.00 .

6,000.00 .

5,915.25 5,915.25 .

5,915.25 .

5,500,09 5,500.09 .

5,500.09 5,480.42 5,480.42 .

5.480.42 5,382.09 5,382.09 5,382.09 .

5,357.17 5,357.17 .

5,357.17 .

5,271.58 5,271.58 .

5,271/li 244 245 246 247 248 249 250 252 253 254 255 256 257 258 259 260 26) 262 263 264 265 266 267 268 269 270 271 272 273 274 275 276 277 278 279 280 28) 282 283 284 Seq.

No.

OASIS HOTEL

BORCEL TRANSPORT SERVICES

HERMACO COMMERCIAL

CHANG JIN PHILS INC

LIPA CITY TOURIST DEVELOPMENT CORP

HARBORTOWN HOTEL MGT

CORPORATION

EVERGREEN MANUFACTURING

CORPORATION

HAPPY HOME REPUBLIC RETAILERS INC

Supplier Name

JAMC MARKETING INC

ANTENOR SIGNS SERVICES

BATANGAS CITY REAL HOTEL

CORPORATION

ACRE AIRCONDITIONING SPECIALISTS

INC Et CIELITO INN BAGUIO

BUSINESS INN

PERMAR INDUSTRIES

ROBERT C SAQUIAN

SPARK LINES SERVICES INCORPORATED

LBC PRINTING PRESS

THE WORLDWIDE LIFESTYLE TIMEPIECES

INC

SIMPLY SUMPTOUS {NC

LOCKHEART MANAGEMENT

DEVELOPMENT

SYSTEM PRODUCTS AND INDUSTRIAL

OCANA HOLDINGS INCORPORATED

FUMACO INC

SPARK GRAPHICS INC

LUISITA CENTRAL PARK HOTEL INC

SHEENA LEIGH G MANALESE

ABUEME GENERAL MERCHANDISE

GRACIOUS HOTEL ANGELI

DC SALONGA INTERIORS

CONSTRUCTION

PURITAN INDUSTRIAL SECURITY AGENCY

CORP

CEASEFIRE INDUSTRIAL SALES AND

SERVICES

HOLLAND BLOOM FLOWER SHOP

NATIONAL ELECTRICAL SUPPLY

HARDWARE

PURITY PAPER INC

CHAIN MARKETING CORP

MANG INASAL RESTAURANT

ILOILO BUSINESS HOTEL

ALAS SECURITY SERVICES INC

SELECTIVE SECURITY SERVICES INC

MP ANALYSIS AND LABORATORY INC

- 5,107.16 - 4,980.33 - 4,812.50 ~ 4,596.08 - 4,553.66 - 4,303.58 - 4,285.75 4,071.50 Per SLS of Third Party Per SMC's SLP - 4,018.00 - 4,017.92 - 3,928.67 - 3,873.25 - 3,675.00 3,629.58 - 3,535.74 - 3,526.83 - 3,453.92 - 3,186.42 2,982.17 2,952.67 - 2,857.17 - 2,857.17 - 2,767.92 - 2,742.92 - 2,489.83 - 2,464.33 - 2,258.00 2,232.17 - 2,142.92 - 1,964.33 - 1,963.83 - 1,785.75 - 1,785.75 - 1,722.16 1,714.33 - 1,651,83 - 1,650.00 1,428.58 - 1,231.42 - 1,229.25 1,178.58 5,107.16 4,980.33 4,812.50 4,596.08 4,553.66 4,303.58 4,285.75 4,071.50 TPI's SLS > SMC's SLP 4,018.00 4,017.92 3,928.67 3,873.25 3,675.00 3,629.58 3,535.74 3,526.83 3,453.92 3,186.42 2,982.17 2,952.67 2,857.17 2,857.17 2,767,92 2,742.92 2,489.83 2,464,33 2,258.00 2,232.17 2,142.92 1,964.33 1,963.83 1,785.75 1,785.75 1,722.16 1,714.33 1,651.83 1,650.00 1,428.58 1,231.42 1,229.25 1,178.58 Less: BIR Adjustment (Submitted Documents & Purchases Allowed 5,107.16 4,980.33 4,812.50 4,596.08 4,553.66 4,303.58 4,285.75 4,071.50 Over- claimed 4,018.00 4,017.92 3,928.67 3,873.25 3,675.00 3,629,58 3,535.74 3,526.83 3,453.92 3,186.42 2,982.17 2,952.67 2,857.17 2,857.17 2,767.92 2,742.92 2,489.83 2,464.33 2,258.00 2,232.17 2,142.92 1,964.33 1,963.83 1,785.75 1,785.75 1,722.16 1,714.33 1,651.83 1,650.00 1,428.58 1,231.42 1,229.25 1,178.58 M 285 286 287 288 289 290 291 292 293 294 295 296 297 298 299 300 30) 302 303 304 305 306 307 308 309 310 311 312 313 314 315 316 317 318 319 320 321 322 323 324 325 326 327 eee ener

PHILAM INSURANCE COMPANY INC

ALPA ASIA HOTELS RESORTS INC

MRJJ ENTERPRISES INC

BOUNTY AGRO VENTURES INC

HTM LUNCHEONETTE

JAX LIGHTING INDUSTRIES COMPANY

MEGATRADE INDUSTRIAL

CONSTRUCTION SUPPLY

TIMES TRADING COMPANY

INCORPORATED

ADVANCE MICROSYSTEMS CORP

Supplier Name

TPT FOOD UNLIMITED

CEDAR SCIENTIFIC CLINICAL

LABORATORY

BPIMS INSURANCE CORP

JAPAN HOMES INC

GLASS TECH COMPANY

FSR SECURITY GENERAL SERVICES

NS OCANA INC

FEDERAL PHOENIX ASSURANCE CO INC

INNOVATRONIX INC

CITIHARDWARE GENSAN INC

PHILIPPINE SEVERAL CORP

HEAVENLY STITCHIN MOMENT CO

ILOILO INTERNATIONAL BOOKS

MAGAZINE

EXPRESSION STATIONERY SHOP INC

MERCURY DRUG

PHILCOPY CORPORATION

DC SALONGA INTERIORS

CONSTRUCTION

VISUAL COLOR INC

PRIMELINE PRODUCTS PHILIPPINES

INCORPORATED

FUNTASTIC INTERNATIONAL

INCORPORATED

RAINBOW WORLD FASHION SQUARE

CORP

WILSON ENTERPRISES

KSJ INTERNATIONAL INCORPORATED

PLANET CLASSIC CORPORATION

GOLDEN KITE MARKETING

ROYAL SPIRIT MKTG

EAST LIFE TRADING Total

UNCLE COTTAGE INDUSTRIES

4R EXPORTIMPORT Total

JC FASHION INC

JAKE COMMERCIAL INCORPORATED

SOURCES FUND - C/O MRS ORA

NATANIA ENTERPRISES INCORPORATED

CITIMODA TRADING CORPORATION

Total Per SLS of Third Party 1,156.00 982.17 982.17 798.25 750 625 607.17 587.33 586.58 Per SMC's SLP 557.16 535.75 449.66 392.83 308.92 227 207.75 127.42 116.08 97,75 58 44.67 42.5 36.17 23.42 8.92 1,522,173.00 -0.5 -23.25 52.75 -67,92 -75 -178,58 -187.5 -257.17 -276.83 -286.67 -300.92 -495.58 -750.08 -1,063.51 -1,125.08 -2,071.67 ~2,178,75 1,156.00 982.17 982.17 798.25 750 625 607.17 587.33 586.58 TPI's SLS > SMC's SLP 557.16 535.75 449.66 392.83 308.92 227 207.75 127.42 116.08 97.75 58 44.67 42.5 36.17 23.42 8.92 1,522,173.00 -0.5 -23.25 -52.75 -67.92 -75 -178.58 “187.5 -257.17 -276.83 -286.67 -300.92 -495.58 -750.08 ~1,063.51 -1,125.08 -2,07).67 -2,178.75 Less: BIR Adjustment (Submitted Documents & Purchases Allowed 1 522,173.00 1,356.00 982.17 982.17 798,25 750 625 607.17 589.33 586.58 Over- claimed 557.16 535.75 449.66 392.83 308.92 227 207.75 127,42 116.08 97.75 58 44.67 42.5 36.17 23.42 8.92 -23.25 ~52.75 -67.92 75 -178.58 -187.5 -257.17 -276.83 -286.67 -300.92 -495.58 ~750.08 -1,063.51 -1,125.08 ~2,071.67 -2,178.75 328 329 330 331 332 333 334 335 336 337 338 339 340 341 Seq.

No.

342 343 344 345 346 347 348 349 350 351 352 353 354 355 356 357 358 359 360 361 362 363

ROMCO ENTERPRISES

CK FASHION COLLECTION CORP Total

WILBORO MARKETING

BAVRAM TRADING INTERNATIONAL

INCORPORATED Total

FOREVER 21 PHILIPPINES INC

NOVELTY SPECIALIST INC Total

FRENS CAR CARE SALES CENTER

RAMCOLE INC

AV ANTGARD SHOPPING CORP Total

ACE HARDWARE PHILIPPINES INC

MAJOR SHOPPING MANAGEMENT

CORP

SODEXHO PASS INC

STAR APPLIANCE CENTER INC -BACOLOD -PCF

MERIDIEN BUSINESS LEADER INC

Supplier Name

MARKET STRATEGIC FIRM INC SUCAT

MANDURRIAO STAR INC SM BICUTAN

MAINSTREAM BUSINESS INC SM

BACOLOD

MANDURRIAO STAR INC SAN LAZARO

MADISON SHOPPING PLAZA INC SM

TAYTAY

MANILA SOUTHERN ASSOCIATES INC

MARl LAO

MADISON SHOPPING PLAZA INC SM

CAGAY AN DE ORO

METRO MAIN STAR ASIA CORP SM BAY

CITY

SUPER VALUE INC

MANDURRIAO STAR INC SM MARIKINA

METRO MANILA SHOPPING MECCA

COR PST A ROSA

SUPER SHOPPING MARKET INC

MERCANTILE STORES GROUP INC

DASMARINAS

INTERNATIONAL TOYWORLD INC

MERCANTILE STORES GROUP INC SM

CLARK

WATSONS PERSONAL CARE STORES

PHIL I

SUPER SHOPPING MARKET INC

SHOPPING CENTER MGT CORP

MAINSTREAM BUSINESS INC BAGUIO

MINDANAO SHOPPING DESTINATION

CORP

SURPLUS MARKETING CORPORATION

MARKET STRATEGIC FIRM INC

Sub-total- Non-trade Suppliers Grand Total Less: adjustment from BIR Grand Total .

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.

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.

.

.

.

.

Per SLS of Third Party .

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.

.

.

.

.

155,635,320.72 P322,686,835.21 P322,686,835.21 -3.714.50 ·3.714.50 .

-3.714.50 -4,678.76 -4,678.76 .

-4,678.76 -5.299.41 -5,299.41 -5,299.41 -8,103.00 -8,103.00 -8, I 03.00 -13,199.50 -13,199.50 -13,199.50 -13,964.33 -13,964.33 -13,964.33 -20.267.84 -20.267.84 .

-20,267.84 -45.473.99 -45.473.99 .

-45,473.99 -47.652.85 -47,652.85 .

-47,652.85 401,389.74 401,389.74 401,389.74 222,789.66 222,789.66 .

222,789.66 156,992.74 156,992.74 .

156,992.74 133,936.83 133,936.83 .

133,936.83 95.247.83 95.247.83 .

95,247.83 Less: BIR Per SMC's TPI's SLS > Adjuslment Over- (SubmiHed SLP SMC's SLP Documents & claimed Purchases Allowed 82.710.51 82.710.51 .

82.710.51 64.024.24 64,024.24 64,024.24 58,831.85 58,831.85 58,831.85 58,628.41 58,628.41 .

58,628.41 49,716.08 49.716.08 .

49,716.08 40,535.60 40,535.60 40,535.60 35,147.16 35,147.16 .

35,147.16 32,105.09 32.105.09 .

32,105.09 25.490.57 25.490.57 .

25.490.57 22,318.09 22,318.09 .

22,318.09 19,166.50 19,166.50 .

19,166.50 6,637.59 6,637.59 6,637.59 5,649.67 5,649.67 5,649.67 2,267.92 2,267.92 2,267.92 2.177.15 2.177.15 .

2,177.15 2,161.25 2,161.25 .

2,161.25 1,872.51 1.872.51 .

1,872.51 1.441.66 1.441.66 .

1,441.66 849.42 849.42 849.42 788.08 788.08 788.08 604.17 604.17 .

604.17 128.17 128.17 .

128.17 183.227.505.15 27,592,184.43 138,815,867.50 -Ill .223,683.07 P775. 169,614.38 P452.482.779.17 Pl38.815,867.50 P313,666,911.67 -1.717,258.60 P775, 169,614.38 P452,482, 779.17 P138,815,867.50 P311, 949,653.07

We uphold the findings of the ICPA that only 45 out of the 363 suppliers or 12.40% in percentage, of the total number of petitioner's suppliers were captured in the TPI data of the BIR. With respect to the other 318 suppliers, representing 87.60% of the total, there is no showing that the same were reported or have available TPI data. In this case, respondent's assessment arose from a presumption that the discrepancy were all inexistent purchases. The three (3) elements for the imposition of income tax are:

(1) there must be gain or profit, (2) that the gain or profit is realized or received, actually or constructively, and (3) it is not exempted by law or treaty from income tax. 56 Income tax is assessed on income received from any property, activity or service. 57 Such being the case, in the imposition or assessment of income tax, it must be clear that there was an income, and such income was received by the taxpayer.

Accordingly, the Court finds that the assessment was based merely on an unverified, undeclared purchases of petitioner. The records of the case are bereft of any showing that respondent verified or confirmed the amounts from the purported third-party information. Without such confirmation or any other satisfactory supporting documents, the subject undeclared purchases data is doubtful, inconclusive and unreliable. Contrary to respondent's stance, petitioner was able to obtain confirmation certificates, 58 as well as invoices, official receipts and other documents59 issued by its suppliers confirming their sale of goods or services to petitioner forTY 2010, which further supports petitioner's claim of legitimacy of its recorded purchases. Upon review and verification of the purchases reflected in petitioner's SLP for the TY 2010, petitioner's purchase transactions are actual and are duly supported by pertinent documents. Thus, the Court finds that the assessment of deficiency income tax amounting to 1"'199,443,221.84 arising from the alleged undeclared purchases is unwarranted. 56 Commissioner of Internal Revenue vs. The Court of Appeals. eta/., G.R. No. 108576, January 20, 1999.

57 Supra.

CIA Case No. 9290

A.1.2 Gross income per book vs. Income Tax Return (ITR)- P5,566,488.79. Anent this item, the alleged difference arose between a comparison made by respondent of the sales in petitioner's SLS vis- a-vis the sales and other income per petitioner's ITR in the amount of P5,566,488. 79, consisting of the following: Discount Fees (a) P5,566,318.00 Excess of sales per book over sales per VAT returns (b) 170.79 Total difference P5,566,488. 79 With regard to (a) Discount Fees. petitioner alleges that discount fees amounting to P5,566,318.00 represent discounts given by the petitioner to credit card companies for the latter's payment or settlement of credit card transactions of their cardholders; That discounts were not granted and not indicated in the tape receipts at the time of sale but were deducted from the credit card company's credit card settlement payments; That for income tax purposes the said discounts fees are valid deductible business expense but are not deductible for VAT purposes. Petitioner's argument deserves scant consideration. To refute the assessment, petitioner submitted documents such as Merchant Agreement, Memorandum of Agreement, Promotion Announcement60 and Schedule of sales discount generated from the general ledger61 . The Court finds that the said documents are not sufficient for the Court to ascertain and confirm, if indeed, discounts were actually granted to its customers. Thus, this assessment shall remain. With respect to (b) Excess of sales per book over sales per VAT returns, the noted difference of P170. 79 constitutes undeclared sales by the petitioner and thus, should be subjected to income tax.

A.2 Disallowed Sales Returns and Allowances P8,550,666.00

Respondent's verification of petitioner's documents disclosed that the amount claimed for sales return and allowances amounting to P8,550,666.00 was not properly documented. Hence, must allegedly be disallowed pursuant to Section 34 (A) (1) b of the NIRC, as amended, which states that "No deduction from gross income shall be allowed unless the taxpayer shall substantiate with sufficient evidence, such as official receipts or other adequate records."

The composition of the sales returns and discounts 1s as follows:

Description Amount Discount fees (a) P5,566,318.00 Sales Discount (b) 2 984 349.00 Total P8 550 667.00 With respect to (a) Discount Fees, petitioner reiterates that these represent discounts given to credit card companies for the latter's payment or settlement of credit card transactions of their cardholders; That said discounts are not granted and indicated in the tape receipts at the time of sale; That said discount fees are valid deduction for income tax purposes, however, is non-deductible for purposes of computing the 12% VAT sales. As per petitioner's books of accounts, separate general ledger codes/ accounts, it appears that Discount Fees have been reflected with total amount of P5,566,318.00, briefly summarized as follows: GL Number Description Amount 4030100 Discount Fees - Bankcard p 3,882,996.00 4030200 Discount Fees - SM (In-House Card) 177,395.00 4030300 Discount Fees - SMAC 1 ,256,112.00 4030400 Discount Fees- Sodexho 236,562.00 4030500 Discount Fees- Others (33.00) 4033010 Gift Card - MCI 13 284.00 Total p 5 566 318.00 In the schedule of sales discount generated from the General Ledger (GL)62 , the Court finds that the above GL account numbers representing discount fees cannot be traced in the submitted extracted general ledger. Hence, the Court cannot determine whether such discount fees were granted to its customers. Thus, this assessment shall remain.

On the other hand, petitioner alleges that (b) sales discount amounting to P2,984,349.00, represents discounts given to the customers which have been given at the time of sale and property indicated in the sales invoice; That these are valid deduction in the computation of the sales for ITR purposes, as well as, vatable base in conformity with Sec. 106 of the NIRC of 1997, as amended. Upon verification of petitioner's books of accounts, separate general ledger accounts, it appears that Sales Discounts have been reflected with a total amount of P2,984,349.00, broken down as follows:

GL Number Description Amount 4031110 Sales Discount- Outright Promo P1 ,882,794.00 4031120 Sales Discount- Outright Non-Promo 278,653.00 4131140 Sales Discount- Outright Wholesale 822,233.00 4032100 Sales Returns- Outright 669.00 Total P2 984 349.00 Further perusal of petitioner's schedule of sales discount generated from the general ledger63, the Court finds that the above- listed accounts are traceable to the extracted general ledger, thereby validly supporting petitioner's claim.

Therefore, this assessment must be cancelled. A.3 Disallowed Expenses- P27,724,704.62 In the FDDA, respondent found petitioner liable for disallowed expenses in the total amount of P27,724,704.62 noting that some expenses were not supported. Thus, the said amount was disallowed as deductible expense for income tax purposes. Below is the list of these expenses and the amount of transaction: Nature of expense Amount Advertising expense (a) P6,351 ,858.62 Depreciation (b) 21,372,846.00 Total P27, 724,704.62 Petitioner contests the above assessment and argues that the expenses should not be disallowed because these are valid expenses and are duly supported by official receipts and/or sales invoices.

With regard to (a) Advertising Expenses, records show that the advertising expense incurred or paid by petitioner pertains to the various display expenses, namely: the indoor and outdoor signages, stickers for the package counter, tarpaulins and billboards for the promotion of new and sale product and merchandise. Below is the breakdown of the said advertising expenses with its corresponding suppliers:

Supplier Philippine Daily Inquirer Philstar Daily Mad888 Summit Publishing Adfolio Advertising ABS-CBN Publishing Printing Excellence Shutterbug Ideal People Model WPP Marketing Markfive Inc.

lnnomark Distributors Color Commercial SM Mart Inc.

Michael De Guzman Erwin Barleta Bluefish Digital Reco Modelling Agency Katherine Magsanoc Mercator Model Management Chameleon Medelling Agency Lollipop Safety Balloons Cherry Anne Uy Melli meter Design New Directions Inc.

Space World Corporation Prime Spots Inc.

Label Line Enterprises Accurate Printing ECL Make up Industry Prince Kurl Junior Corp Victoriano Gozano First Asia Realty Others Total Amount 1,150,384.57 1,060,466.58 820,564.30 573,264.25 524,424.76 450,816.80 347,357.72 259,523.78 239,175.17 119,487.21 96,257.29 94,812.54 73,269.63 54,789.60 47,058.82 46,588.23 46,188.04 46,048.06 44,537.81 43,298.96 35,294.12 27,196.41 20,588.22 19,000.00 15,966.78 14,499.99 13,392.83 9,821.41 9,486.60 7,023.81 5,428.57 5,294.11 250.00 30,301.64 6,351,858.62 Exhibit "P-47-212" "P-47-213" "P-47-163" "P-47-264" "P-47-9" "P-47-3" "P-47-220" "P-47-248" "P-47-122" "P-47-295" "P-47-178" "P-47-125" "P-47-57" "P-47-251" "P-47-193" "P-47-89" "P-47-40" "P-47-228" "P-47-143" "P-47-187" "P-47-51" "P-47-158" "P-47-52" "P-47-196" "P-47-200" "P-47-256" "P-47-217" "P-47-147" "P-47-4" "P-47-288" "P-47-301" However, upon verification and scrutiny of the above transactions, it appears that only advertising expenses amounting to~

P4,462,081.47 are duly supported by proper documents, while there is a difference of P1, 889,777.15 that must be disallowed for the following reasons, to wit: Supplier Amount Exhibit Philippine Daily Inquirer 676,327.87 "P-47-212.1 - 8" Philstar Daily 806,797.13 "P-47-213.1- 9" Mad888 820,564.30 "P-47-163.1- 55" Summit Publishing 573,264.25 "P-47-264.1 - 7'' Adfolio Advertising 304,144.20 "P-47-9.1 - 19" ABS-CBN Publishing 285,884.00 "P-47-3.1 - 4" Printing Excellence 347,357.72 "P-47-220.1 - 33" Shutterbug 242,857.14 "P-47-248.1 - 6" Ideal People Model Supported by Billing Invoice "P-47-122.1 - 9" WPP Marketing 119,487.21 "P-47-295.1 - 24" Markfive Inc.

32,989.69 "P-47-178.1" I nnomark Distributors 2,169.64 "P-47-125.1- 2" Color Commercial 67,562.50 "P-47-57, 1 - 3" SM Mart Inc.

Supported by Statement of Account "P-47-251.1 - 8" Michael De Guzman dSupported by Billing Invoice "P-47-193.1- 2" Erwin Barleta Supported by Statement of Account "P-47-89.1 - 3" Bluefish Digital 35,308.85 "P-47-40.1 - 9" Reco Modelling Agency Supported by Billing Invoice "P-47-228.1 - 3" Katherine Magsanoc Supported by Billing Statement "P-47-143.1" Mercator Model Management 72,000.00 "P-47-187.1- 3" Chameleon Medelling Agency Supported by Billing Statement "P-47-51.1 - 2" Lollipop Safety Balloons 27,196.43 "P-47-158.1- 3" Cherry Anne Uy Supported by Billing Statement "P-47-52.1 - 2" Melli meter Design 19,000.00 "P-47-196.3" New Directions Inc.

Supported by Billing Invoice "P-47-200.1" Space World Corporation Invoice without signature "P-4 7-256.1 - 2" Prime Spots Inc.

8,928.58 "P-47-217.1- 2" Label Line Enterprises 14,300.00 "P-47-147.1 - 4" Accurate Printing 5,691.96 "P-47-4.1 - 3" ECL Make up Industry Without Documents Prince Kurl Junior Corp Without Documents Victoriano Gozano "P-47-288.1" First Asia Realty 250.00 "P-47-301" Others Without Documents Total 4,462,081.47 Therefore, the Court finds that this assessment item must be cancelled partially. The disallowed advertising expenses shall b~ modified and reduced to P1,889,777.15 (P6,351,858.62 less P4,462,081.47), which shall remain. With respect to (b) Depreciation expenses in the amount of P21 ,372,846.00, the Court finds that petitioner was able to establish the validity and reasonableness of the claimed depreciation expenses by presenting Lapsing Schedule of Property and Equipment as well as the Lapsing Schedule of Fixed Assets Acquired Year 201064 which was reconciled with the Audited Financial Statements of the petitioner for the year 2010.65 Hence, this assessment shall be cancelled. A.4 Disallowed Expenses for Non-withholding of Tax - ~10,373,770.33 In the FLO, respondent made a comparison of the purchase of goods and services reported in petitioner's ITR and Financial Statement (FS) against the income payments reflected in the alphalist per 1604E, which resulted to an alleged difference of P10,373,770.33. The said difference was construed as purchases not subject to EWT by petitioner, thus, disallowed as deductible expense for IT purpose and was assessed deficiency 30% IT, details of which are as follows: Account Per ITRJFS Per1604E Difference . (A) Purchases 628,676,516.93 627,223,616.00 1 ,452,900.93 (B )Contractors 77,408,462.75 69,048,317.50 8,360,145.25 (C)Rent Expense 109,135,101.00 108,901,376.40 233,724.60 (D)Management Fees 10 790 329.14 10 463 329.59 326 999.55 TOTAL 826 010 409.62 815,636,639.49 10,373,770.13 A. Purchases sub;ect to 1% EWT- P1, 452. 900.93 Allegedly, the following purchases were not subjected to 1% EWT:

Purchases of materials per vat returns (a. f) P619,735,428.50 Fuel and Oil 292,694.00 Office supplies 3,679,448.00 Addition to PPE 9Note 7 f/s)-465 Leasehold Improvement 1,096,872.75 Data ProcessinQ Equipment 1,162,056.00

CIA Case No. 9290

Furniture and Fixtures Store and Office Equipment Repairs and Maintenance TOTAL 766,332.00 1,274,781.00 668 905.00 628,676,517.25 Less: Income payments subjected to 1% EWT 627 223 616.00 DISCREPANCY P1 452 901.25

a. 1 Purchases of Materials- P619. 735.428.50 The above alleged purchases of materials used by petitioner are composed of the following: Per VAT return:

1st quarter66 P142, 194,459.84 2nd quartero:;r 126,084,490.84 3rd quarter00 136,112,237.83 4th quartero:;~ 215 344 240.25 Total P619, 735.428.76 Petitioner contends that respondent considered the total amount of purchase of goods per VAT return. It should be taken into consideration that the purchases per VAT returns reflect all the purchases incurred by the company for the taxable year including fuel and oil and office supplies, which were separately assumed in the assessment.

After careful examination, records reveal that the correct amount of net purchases of goods related to cost of sales should be P618,282,527.84 based on the data reflected in petitioner's audited financial statements, as follows: Cost of Sales10 Add: Ending Inventory" Goods available for sale Less: Beginning lnventoryl£ Purchases 66 Exhibit "P-56-1 ". 67 Exhibit "P-56-2".

68 Exhibit "P-56-3".

69 Exhibit "P-56-4".

70 Exhibit "P-55", Statement of Comprehensive Income. 71 Exhibit "P-55", Statement of Financial Position 2010. 72 Exhibit "P-55", Statement of Financial Position 2009~ P602,440,285.84 176 912 736.00 779,353,021.84 161 070 494.00 P618,282,527 .84

From the foregoing, petitioner had properly withheld 1% EWT from all of its purchases of goods. Hence, the assessment will be cancelled, with details as follows: Purchase of materials per F/S (a.1) P618,282,587.84 Fuel and Oil 292,694.00 Office Sup~ies 3,679,448.00 Addition to PPE (Note 7 FS) Leasehold lm_Qrovement 1,096,873.00 Data Processing Equipment 1 '162,056.00 Furnitures and Fixtures 766,332.00 Store and Office Equipment 1,274,781.00 Repairs and Maintenance 668 905.00 TOTAL 627,223,676.84 Less: Income payments subjected to 627,223,616.00 1%EWT DISCREPANCY P60.84 73 B. Contractors subject to 2% EWT - P8.360, 145.00 With regard to this item, the following are the income payments to contractors that were allegedly not subjected to 2% EWT, to wit:

Interest expense/Finance charge (b.1) ,.3, 106,651.00 Janitorial and messengerial services 1,599,757.00 Outside Services 2,130,640.00 Advertising and promotions (b.2) 6,010,851.86 Communication, light and travel 43,445,324.00 Miscellaneous 92,713.00 Handling and delivery charges 2,916,777.00 Other charges (b.3) 1 ,948,288.00 Repairs and maintenance 2,330,535.32 Security services 1,014,538.12 Insurance expense 818,012.00 Representation expense (b.4) 1,033,958.00 Transportation expense (b.5)_ 1,818,028.00 Leasehold Improvement 9 142 389.00 Total 77,408,463.00 Less: Income payment per 1604E 69 048 317.00 Difference PS 360 145.00 73 The discrepancy of P60.84 is immaterial and will not affect the assessment. ~ b.1) Interest Expense/Finance Charge- F3. 106.651.00 Anent this item, the Court finds that this assessment must remain because no documents were presented to refute this assessment.

b.2) Advertising and Promotions- F6.010.851.86 Petitioner argues that the advertising expenses reflected in its FS or ITR include not only income payment that are subject to 2% EWT but also items which are subject to 15% EWT and exempt from EWT, with details as follows: DescriJllion Amount Exempt 2% Marketing - Display P140,666.53 P140,666.53 Marketing- Publicity 250,587.35 250,587.35 MarketinQ - Newspaper 1,235,782.28 1,235,782.28 - Marketing - Others 4,897,333.44 4,221,457.30 Less: subject to 15% -675,876.14 - MarketinQ - Recruitment 125,370.00 125,370.00 Marketing TV Ads - Production Cost 13,787.98 13,787.98 Marketing - GWP, PWP AND Giveaways 23 201.21 23 201.21 Total PS 010 851.86 P1 235 782.25 P4 775 070.37 Furthermore, petitioner contends that the advertising expense of P1 ,235, 782.28 represents payment to Media for advertisement in newspaper of general circulation which is exempt from EWT pursuant to Section 2.57.2 of Revenue Regulations (RR) No. 2-98. 74 A perusal of the records show that petitioner only submitted a schedule of Marketing-Newspaper accounf5 and not the actual general ledger with account number 6009090 or documents such as invoices/official receipts. Mere schedule is not sufficient to refute the assessment. Hence the assessment must be sustained. As to Marketing-Others account amounting to P675,876.14, petitioner claims that the same was already subjected to 15% EWT under Professional Fees account. However, petitioner failed to provide documents to prove the same. Thus, the assessment on 74 "SECTION. 2.57.2- Income Payment Subject to Creditable Withholding Tax and Rates Prescribed Thereon. - XXX XXX XXX (E) Income payments to certain contractors - xxx ( 4) Other contractors - XXX XXX XXX

(h) Advertising agencies, exclusive of gross payments to media; 75Exhibit "P-57''. ~ Advertising and Promotions amounting to P6,01 0,851.86 must remain.

b.3) Other Charges- P1.948.288.00 Petitioner alleges that the Interest Expense/Finance Charge that was reflected in its audited FS amounting to P3,106,651.00 76 already includes the Other Charges of P1 ,948,288.00. However, a perusal of petitioner's 2010 Statement of Comprehensive Income and Notes to Financial Statements No. 8, 77 show that it is not indicated therein, whether "Other Charges of P1 ,948,288.00" was included in the Finance Charges account. Hence, the assessment shall remain.

b.4) Representation Expense- P1.033.958.00 Petitioner contends that the representation expense of P1 ,033,958.00 refers to the reimbursement of various expenses made to its employees which were incurred in pursuit of its business, and that reimbursement-of-cost are not considered as income payment and hence, not subject to EWT. However, the Court finds that petitioner did not submit supporting documents for the Court to validate whether these expenses are indeed representation expenses, not subject to 2% EWT. Hence, this assessment shall remain. b.5) Transportation and Travel- P1.818.028.00 On this item, petitioner contends that the transportation expense of P1 ,818,028.00, which was assessed by respondent as subject to 2%, includes income payments which are exempt from EWT amounting to P202,319.09, which represents Per Diem Allowance account, to wit: Description Amount Exempt T and T Local -Airfare P164,087.86 - T and T Local - Hotel Accommodation 271,202.94 - T and T Local - Per Diem Allowance 202,319.09 202,319.09 T and T Local - Others 627,729.33 -

Transportation and Travel -Corp.

552 689.26 - 552 689.26 Total P1 818 028.48 P202 319.09 P1 615 709.39 Records show that petitioner only submitted its Policy of Per Diem Allowance78 which the Court finds as insufficient proof that Per Diem Allowance was given to its employees. Hence, must be sustained.

C. Rent expense subject to 5% EWT- ~233. 724.60 Anent this item, the Court finds that the difference of rent expense amounting to P233, 724.60 is a valid assessment upon examination of rent expense account per Financial Statement and BIR Form 1604-E, to wit: Rent expense per FS79 P1 09,135,101.00 Less: Income payment per BIR Form 1604-E80 108 901 376.40 Difference P233 724.60 D. Professional fees- 15% amounting to ~326.999.55 Respondent found petitioner liable for professional fees not subjected to 15% EWT with details as follows: Professional Fees (d.1l P333,000.00 Manaqement and Consultancy Fee 9,781,453.00 Re class: part of advertisinq expense (d.2) 675,876.14 Total 10,790,329.14 Less: Income payment per 1604E 10 463 329.59 Difference P326 999.55

d. 1) Professional Fees- ~333. 000.00 Upon verification of the records, the composition of assessed professional fees is as follows: GLCode Account 6016100 Prof Fees-Audit 6016600 Prof Fees- Others Total 78Exhibit "P-59".

79 Exhibit "P-55", Notes to Financial Statements No. 11.1. 80 Exhibit "P-45"~ Amount P158,000.00 175 000.00 P333 000.00

The above composition of professional fees includes accounts which are exempted from EWT specifically the professional fees - audit amounting to P158,000.00 and some of the other professional fees amounting to P169,000.00.

These represents income payments made to a General Professional Partnership (GPP) which is exempted from expanded withholding taxes pursuant to RR No. 2-98,81 as amended by RR No. 14-02,82 which provides as follows: "SECTION 2.57.5.

Exemption from Withholding.

- The withholding of creditable withholding tax prescribed in these Regulations shall not apply to income payments made to the following:

XXX XXX XXX (B) Persons enjoying exemption from payment of income taxes pursuant to the provisions of any law, general or special, such as but not limited to the following: XXX XXX XXX

(4) General professional partnerships." However, upon perusal of the records, the Court finds that the professional fees are supported only by billing statements83 instead of official receipts. Petitioner also submitted documents such as BIR Certificate of Registration84 and Articles of Partnership85, but these documents are not sufficient to prove that professional fees have been paid to the general professional partnership. Hence, the assessment shall remain. d.2) Other Fees subjected to 15% EWT- P675.876.14 Petitioner alleges that income payments made to individual professionals amounting to P675,876.14 were properly subjected to 15% EWT, but were reflected under the FS account of Marketing- Others.

81 Implementing Republic Act No. 8424, "An Act Amending the National Internal Revenue Code, as Amended Relative to the Withholding on Income subject to the Expanded Withholding Tax and Final Withholding Tax, Withholding of Income Tax on Compensation, Withholding of Creditable Value-Added Tax and Other Percentage Taxes.

82 Subject: Amending Further Pertinent Provisions of Revenue Regulations No. 2-98, as amended.

We cannot sustain petitioner's argument. In this item, petitioner failed to provide the general ledger reclass entry to verify whether it was properly recorded and subjected to 15% EWT. Hence, the assessment on this item shall remain.

In light of the foregoing examination/reconciliation pertaining to the Disallowed Expenses for Non-withholding of Tax in the total amount of P10,373,770.33, the same shall be reduced to P8,920,869.20, broken down as follows: Purchases - Contractors P8,360, 145.25 Rent 233,724.60 Management Fees 326,999.55 TOTAL P8,920,869.20 A.5 Disallowed creditable tax withheld- P20,593.49 Respondent alleges that petitioner has unsupported creditable withholding taxes (CWT) computed as follows: Tax withheld per ITR P1 ,230,976.00 CWT 1 210 382.51 Difference P20,593.49 Petitioner refutes this assessment and argues that tax credits claimed in its ITR were fully supported by BIR form 2307. In addition, respondent did not include in the FAN how the alleged CWT amounting to P1 ,210,382.51 was calculated. Thus, this item of assessment should allegedly be considered null and void. Upon review and verification of the Summary of Alphalist of Withholding Agents of Income Payments Subjected to Withholding Tax at Source (SAWT)86 and the BIR Form 230787 presented, the total amount of tax withheld with supporting documents is P1,217,469.77. The amount ofP13,506.23 should be disallowed as tax credit as this is not duly supported by valid documents, to wit:

CWT Claimed per BIR P1 ,230,976.00 Less: Verified and validated CWT 1,217,469.77 Unsupported CWT P13,506.23 In summary, We find petitioner liable for deficiency Income Tax in the reduced basic amount of P6,596,532.27, computed as follows:

Taxable Income Per Return 57' 156,877.00 Add: Adjustments A. Under- Declaration of Sales

1. Gross Profit on Local Purchases -

2. Gross Income (Per Books vs. ITR) 5,566,488.79 B. Sales Returns and Allowances 5,566,318.00 C. Disallowed Expenses 1 . Advertising 1,889,777.15

2. Depreciation - D. Not Subjected to EWT 8,920,869.20 21,943,453.14 Taxable Income Per Audit 79,100,330.14 Income Tax Rate 30% Tax Due Per Audit 23,730,099.04 Less:

Unexpired Excess of Prior Year's MCIT 16,397,961.00 Payment (1st to 3rd Quarters) 1,401,663.00 CWT per Audit 1,230,976.00 Total Per Return 19,030,600.00 Less:

Unsupported CWT 13,506.23 CWT carried over to the next quarter 1 ,883,527.00 17,133,566.77 Deficiency Income Tax 6,596,532.27

IMPROPERLY ACCUMULATED EARNINGS TAX

In the FDDA, petitioner was assessed for deficiency Improperly Accumulated Earnings Tax (IAET) 1n the aggregate amount of P19,510, 137.27, computed as follows: Taxable income 2010 P57,166,877.00 Add: Income subjected to final tax 2,808,153.00 NOLCO 8041195.00 1 0 849 348.00 Total 68,016,225.00 Less: Income tax paid 2 632 629.00 Total 65,383,596.00 Add: Retained earnings from prior years (A) 124 285 696.00

Accumulated earnings as of December 31, 2010 189,669,292.00 Less: Amount that mav be retained 100% of Paid UP Capital 50,000,000.00 Dividends Paid on 2011 50 000 000.00 (1 00 000 000.00) Amount subject to improperly accumulated earnings tax 89,669,292.00 Rate of Tax 10% Deficiencv IAET 8,966,929.20 Add: Surcharge (25%) 2,241,732.33 Interest rtrom 01/11/11 to 9/30/2015) 8,276,475.74 Compromise penalty 25 000.00 10 543 208.07

TOTAL AMOUNT DUE

P19,510,137.27 Respondent claims that there was indication that petitioner accumulated the earnings and profits instead of distributing said earnings through dividends declaration. Hence, petitioner is liable for deficiency improperly accumulated earnings tax pursuant to RMC No. 35-2011, in relation to Section 29 of the Tax Code. Petitioner counter-argues that only P24,285,696.00 representing un-appropriated retained earnings should be considered in the IAET computation and that the previous years' appropriation of P100,000,000.00 should have been deducted from the beginning balance of Retained Earnings to determine if petitioner has improperly accumulated earnings. Further, the P100,000,000.00 was reserved for its future business expansion. The assessment must be cancelled. Section 29 of the NIRC of 1997, as amended, and implemented by Section 3 of RR 2-2001 88, reads as follows: "SEC. 29. Imposition of Improperly Accumulated Earnings Tax. - (A) In General. - In addition to other taxes imposed by this Title, there is hereby imposed for each taxable year on the improperly accumulated taxable income of each corporation described in Subsection B hereof, an improperly accumulated earnings tax equal to ten percent ( 1 0%) of the improperly accumulated taxable income.

88 Subject: Implementing the Provision on Improperly Accumulated Earnings Tax Under Section 29 of the Tax Code of 1997. ~

(B) Tax on Corporations Subject to Improperly Accumulated Earnings Tax. - (1) In General. - The improperly accumulated earnings tax imposed in the preceding Section shall apply to every corporation formed or availed for the purpose of avoiding the income tax with respect to its shareholders or the shareholders of any other corporation, by permitting earnings, and profits to accumulate instead of being divided or distributed. XXX XXX XXX (C) Evidence of Purpose to Avoid Income Tax.- XXX XXX XXX (2) Evidence Determinative of Purpose. - The fact that the earnings or profits of a corporation are permitted to accumulate beyond the reasonable needs of the business shall be determinative of the purpose to avoid the tax upon its shareholders or members unless the corporation, by the clear preponderance of evidence, shall prove to the contrary. XXX XXX XXX (E) Reasonable Needs of the Business. - For purposes of this Section, the term 'reasonable needs of the business' includes the reasonably anticipated needs of the business."

Based on the foregoing, the IAET equivalent to 10% of the improperly accumulated earnings shall be imposed on a corporation that permits its earnings and profits to accumulate beyond the reasonable needs of the business, instead of being distributed as dividends to its shareholders or members, unless the corporation, by clear preponderance of evidence, shall prove to the contrary. Pertinent thereto, Section 3 of RR No. 2-2001 enumerates what constitutes accumulation of earnings for the reasonable needs of the business, to wit: "SECTION 3. Determinative of Reasonable Needs of the Business. - xxx (16 XXX XXX XXX For purposes of these Regulations, the following constitute accumulation of earnings for the reasonable needs of the business: a) Allowance for the increase in the accumulation of earnings up to 100% of the paid-up capital of the corporation as of Balance Sheet date, inclusive of accumulations taken from other years; b) Earnings reserved for definite corporate expansion projects or programs requ1rmg considerable capital expenditure as approved by the Board of Directors or equivalent body; c) Earnings reserved for building, plants or equipment acquisition as approved by the Board of Directors or equivalent body; d) Earnings reserved for compliance with any loan covenant or pre-existing obligation established under a legitimate business agreement; e) Earnings required by law or applicable regulations to be retained by the corporation or in respect of which there is legal prohibition against its distribution;

f) In the case of subsidiaries of foreign corporations in the Philippines, all undistributed earnings intended or reserved for investments within the Philippines as can be proven by corporate records and/or relevant documentary evidence." (Emphasis Supplied) Based on the foregoing, the computation of improperly accumulated earnings under Section 29 of the NIRC of 1997, as amended and implemented by Section 3 of RR 2-2001, excludes the earnings and profits of a corporation set aside for the reasonable needs of the business. In this case, petitioner alleges that the reasonable needs of the business fall under Section 3(b) of RR No. 2-2001. To sho"jP that retained earnings were appropriated by petitioner, the latter submitted copies of Secretary's Certificate for the appropriations of retained earnings for future expansion amounting to P60,000,000.0089 and P40,000,000.0090 were made in December 1 2004 and December 22, 2006, respectively. Records also show the utilization of appropriated retained earnings of P1 00,000,000.00 according to its business expansion, in a summary of its business expansions from the year 2005 to 201291 : Table 19 RI>AN"" INITIAL I OPENING FIXED INVENTORY TOTAL BRANCH DATE DATE ASSETS INVESTMEN!

INVESTMENT 0229 (SM City· San Lazaro 1) 9 May 05 14 Jul 05 5,135,367.72 4,081,667.47 9,217,035.19 0242 (SM City· Sta. Rosa 1) 2 Jan 06 16 Feb 06 5,609,040.16 5,093,550.26 10,702,590.42 0272 (SM City· Clark 2) 21 Feb 06 11 May 06 4, 773,683.19 4,581,688.96 9,355,372.15 0244 (SM Mall of Asia 2) 3 Jan 06 20 May 06 4,910,969.70 10,256,025.41 15,166,995.11 0287 (SM City · Lipa 1) 1 Jun 06 21 Sep 06 3, 193,193.57 4, 791 ,630.90 7,984,824.47 0294 (SM City · Bacolod 2) 18 Jan 07 1 Mar 07 4,967,181.44 4,681,152.41 9,648,333.85 0399 (SM City-Taytay 1) 12 Jun 07 8 Nov 07 3,494,199.34 4,582,584.59 8,076,783.93 0443 (SM City-Marikina 1) 25 Jan 08 13 Sep 08 2,944,160.75 5,142,410.83 8,086,571.58 0472 (SM City. Tarlac 1) 15 Jun 10 29 Jul10 3,356,154.58 3,150,116.12 6,506,270.70 0848 (SM City· Masinag 1) 22 Feb 11 5 May 11 3,057,851.57 3,002,875.65 6,060,727.22 0863 (Cubao Mall1) 20 Oct 11 2 Dec 11 3,094,751.88 3,433,351.47 6,528,103.35 0316 (SM City· General Santos 1) 11Jul12 9 Aug 12 4,803,209.04 3,477,674.34 8,280,883.38

TOTAL INVESTMENT

49,339,762.94 56,274,728.41 105,614,491.35 Furthermore, on October 3, 2011, petitioner's Board of Directors approved the declaration of cash dividends amounting to P50,000,000.00, an amount that was previously allocated as appropriated retained earnings. 92 Thus, the allegation of respondent that petitioner accumulated profits instead of dividend distribution is not correct. The Court also considered the findings below of the ICPA, that in computing the IAET, the retained earnings from prior years amounting to P124,285,696.0093 as computed by respondent includes the appropriated retained earnings amounting to P100,000,000.0094.

The P100,000,000.00 should have been deducted from the beginning balance of retained earnings in the

computation of IAET.

The computation of retained earnings available for dividend declaration after excluding the appropriated retained earnings, is as follows: Total Retained Earnings, January 1, 2010 p 124,285,696.00 Less: Appropriated Retained Earnings as at January 1, 2010 100.000,000.00 Unappropriated Retained Earnings, January

1. 2010 24.285,696.00 Add: Adjustments Taxable income 2010 57,166,877.00 Add: Income subjected to final tax 2,808,153.00 NOLCO 8,041 '195.00 10,849,348.00 Total 68,016,225.00 Less: Income tax paid 2,632,629.00 Total 65,383,596.00 65,383,596.00 Unappropriated Retained Earnings, December 31, 2010 89,669.292.00 Less: Amount that may be retained 100% of Paid Up Capital 50,000.000.00 Dividends paid in 2011 50,000,000.00 100,000,000.00 100,000,000.00 Amount subject to improperly accumulated earnings tax ( 1 0,330,708.00) Rate of tax 10% Deficiency IAET p.

In sum, the assessment on Improperly Accumulated Earnings Tax must be cancelled.

VALUE ADDED TAX

In the FDDA, petitioner was assessed for deficiency Value-Added Tax in the total amount of P229,470,890.49, computed as follows:

Taxable sales per vat returns 1"1 ,004,248,112.85 Add (Deduct) Adjustments: A. Undeclared income Gross profit on undeclared purchases ( 1) 408 654 047.59 Total taxable sales 1 ,412,902,160.44 VAT Rate 12% VAT Due thereon 169,548,259.25 Less: Input tax/payments/credits Input tax per return 98,260,443.17 Less: Input tax failing invoicing requirements (2) 69 280 694.50 28 979 7 48.67 VAT Payable per audit 140,568,510.58 Less: VAT payment 22 249 330.34 Net VAT payable due thereon 118,319,180.24 Add: Interest (from 1/26/11 to 9/30/2015) Compromise penalty

TOTAL AMOUNT DUE

111,101,710.25 50 000.00 111151710.25 1"229,470,890.49

(1) Undeclared income amounting to P408.654.047.59. In the FDDA, respondent found petitioner has undeclared sales pursuant to RMO No. 42-2003 and the same should allegedly besubjectedtoVATpursuanttoSection 106,107, 108oftheNIRC, as amended. As a result, respondent arrived at the assessed amount based on the following computation: Overclaimed of purchases P311 ,949,654.65 Add: Mark up (100-61%) (31% X 311,949,654) 96,704,392.94 Amount subject to VAT P408 654 047.59 Petitioner reiterates its argument that just like the Income Tax assessment, the VAT assessment is also without factual or legal bases. Petitioner asserts that respondent failed to present the required Certifications/Sworn Statements required under RMO 42- 2003 and RMO 46-2004. The assessment on this item must be cancelled. In view of the findings of the Court on the assessed deficiency income tax, no deficiency VAT assessment should arise from undeclared sales. As discussed, respondent's assessment arose from a presumption that the discrepancy were all inexistent purchases, and therefore the imposition of VAT thereon is likewise incorrect. As such the imposition of VAT assessment pertaining thereto shall be cancelled.

(2) Disallowed input tax for failure to complv with invoicing requirement- P69,280.694.50. In the FDDA, respondent's findings disclosed that input tax claimed per VAT returns failed to comply with the invoicing requirements pursuant to Section 113 of the NIRC, as amended, and thus must be disallowed The breakdown is as follows· ' No address of buyer P14,719,516.83 Invalid TIN 17,771,967.51 No TIN of buyer 36,789,210.20 TOTAL P69,280,694.54

A perusal of the records show that respondent failed to provide details of the alleged disallowances which supposedly violated invoicing requirements pursuant to Section 113 of the NIRC, as amended. Hence, the Court agrees with the results of the examination made by the ICPA, to wit: Input VAT W/out TIN & Address W/out TIN W/out Address Total Exhiblt 2nd Generation Garment Advani Apparel 1,863,426.97 108,912.88 5,271.44 7,040,426.55 1,678,907.43 85,090.76 114,184.32 "P-66-1" 1, 763,998.19 "P-66-2" Asiatique Trading 192,750.00 Big Box Trading 4,612,078.13 212,357.28 Equestrian Trading 202,500.00 FGU Builders First Asia Realty Golden Astiplaz Homme Plus Marketing Prime Value Raerondstarr Marketing Resurge Manufacturing 183,214.29 1,290,503.08 183,214.29 589,897.80 88,670.11 4,012,189.21 170,785.83 2,570,187.01 265,434.79 651,449.54 121,225.81 398,957.14 S@ A International 11,058,490.76 210,779.02 SM Mart Inc.

52,316.89 SM Prime Holdings 9,541,906.45 SM Retail Inc.

57,623.40 Stratpro Company 457,448.26 Twinluck General 794,320.75 99,694.35 VS Marketing 9,366,957.46 247,995.11 459,468.48 967,105.07 1,638,930.83 "P-66-3" 12,846.87 13,628.58 20,163.22 3,055.72 45,413.60 4,820.85 126,894.18 121,552.54 - 183,214.29 "P-66-4" 101,516.98 "P-66-5" 184,414.41 "P-66-6" 285,598.01 "P-66-7" 124,281.53 "P-66-8" 256,192.62 "P-66-9" 4,820.85 "P-66-10" 226,588.53 "P-66-11" 369,547.65 "P-66-12" 54,936,643.69 3,387,976.90 898,206.24 967,105.07 5,253,288.21 Upon examination of supplier's invoices, the Court finds that the invoices/official receipts presented by petitioner are generally compliant with invoicing requirements except for some invoices/official receipts with total equivalent input VAT of P5,253,288.21 that are found to be not in compliance with invoicing requirementfrt

Furthermore, considering that the examination of the ICPA only covered 79.295% of the supplier's invoices subject to the disallowed input VAT, an extrapolation of the estimated input VAT to be allowed due to failure to comply with invoicing requirements was made as follows:

Actual disallowed input VAT per review and verification Add: Prorated disallowed input VAT Disallowed input VAT by BIR 69,280,694.50 Less: Total input VAT verified vs. supplier's invoice 54,936,643.69 Input VAT without supplier's invoice available on file 14,344,050.81 Multiply by: {5,253,288.21/54,936,643.69) 9.56% Total disallowed estimated input VAT for failure to comply with invoicinQ requirements 5, 253,288.21 1,371,642.46 6,624,930.67 I The Court finds that the disallowed input tax for non- compliance with invoicing requirements assessed by respondent amounting to P69,280,694.50 should be reduced to P6,624,930.67. In summary, petitioner is liable for basic deficiency VAT in the amount of P6,624,930. 70, computed as follows: Taxable Sales per VAT Returns 1 ,004,248,112.85 Add: Adjustments Undeclared Income:

Gross Profit on Undeclared Purchases - Total Taxable Sales 1 ,004,248,112.85 VAT Rate 12% VAT Due 120,509,773.54 Less: Input Tax Payments/Credits Input Tax Per Return 98,260,443.17 Less: Input Tax failing Invoicing Requirements 6,624,930.67 91,635,512.50 VAT Payable Per Audit 28,874,261.04 Less: VAT Payments 22,249,330.34 Net VAT Payable 6,624,930.70

EXPANDED WITHHOLDING TAX

Respondent assessed petitioner of deficiency Expanded Withholding Tax in the total amount of P739,029.64. broken down as follows:~ I

A. Disallowed expenses due to non-withholding of EWT (1) P242,468.08 B. Purchases not subjected to EWT (2)_ 130 035.60 Deficiency expanded withholdinQ tax 372,503.68 Add: Interest (01.16.11 to 9.30.15) 350,525.96 Compromise 16 000.00 366 525.96

TOTAL AMOUNT DUE

P739 029.64

(1) Disallowed expenses due to non-withholding of EWT - Ft242.468.08.

The above alleged purchases not subjected to EWT were computed by respondent, with details as follows: Account Per ITRIFS Per1604E Difference EWT Due (a) Purchases - 1% 628,676,516.93 627,223,616.00 1 ,452,900.93 14,529.01

(b) Contractors - 2% 77,408,462.75 69,048,317.50 8,360,145.25 167,202.91

(c) Rent expense -5% 109,135,101.00 108,901 ,376.40 233,724.60 11,686.23

(d) Management Fees -15% 10,790,329.14 10 463 329.59 326 999.55 49 049.93 Total 826 010 409.62 815 636 639.49 10 373 770.13 242 468.07 As already discussed in the portion of income tax assessment, only the transactions on purchases not subjected to 1% EWT will be cancelled in the amount of P1 ,452,900.93 with the corresponding EWT of P14,529.01. The remaining amount of P8,920,869.40 and its corresponding EWT of P227,939.07 shall remain, to wit: Account Difference EWT Due Purchases - 1% - - Contractors - 2% 8,360,145.25 167,202.91 Rent Expense - 5% 233,724.60 11,686.23 Management Fee - 15% 326,999.55 49,049.93 TOTAL 8,920,869.40 227,939.07

(2) Purchases not subtected to EWT per SLP vs A/TIED - Ft130, 035. 60.

The alleged deficiency EWT amounting to P130,035.60 arising from the comparison of the purchases reported in petitioner's SL~ as against the AITIED or SLS of its supplier can be broken down as follows:

1. Related Party Suppliers p 80,908.23

2. Unrelated Suppliers 49,127.37 TOTAL P130,035.60

1. Transactions with related-partv suppliers- PBO. 908.23 The Court finds that petitioner submitted a Confirmation Certificate95 from the related party suppliers. Hence, the alleged deficiency EWT of P80,908.23 should be reduced to P21 ,401.95, computed bellow:

Difference per BIR Matching Less: Adjustment as a result of independent review Difference per BIR Matching

SM INVESTMENTS CORPRENTAL

SM RETAIL INC

Less: Difference per I CPA review

SM INVESTMENTS CORPRENTAL

SM RETAIL INC

Net difference 682,187.92 2,453,149.01 3,135,336.93 5,836.39 (115,721.36) j109,884.97) Deficiency EWT (using EWT Rate of 5%, 2% and 1 %) 1"4,248,704.31 3,245,221.90 1,003,482.41 1"21,401.95

2. Transactions with unrelated suppliers- P49. 127.37. For this particular item, the Court cannot ascertain this transaction. As found by ICPA, there is no data obtained from the SLS of petitioner's unrelated suppliers and no documents were presented to verify the remaining P49, 127.37 alleged deficiency EWT assessed by respondent. Thus, this assessment must be upheld.

Hence, the assessment on purchases not subjected to EWT should be reduced to P70,529.32 (P21 ,401.95 plus P49, 127.37). In summary, petitioner is liable for basic deficiency EWT amounting to P298,468.39, broken down as follows:

Disallowed Expenses due to Non-Withholding of EWT Purchases Not Subjected to EWT 227,939.07 70,529.32 TOTAL 298,468.39

WITHHOLDING TAX ON COMPENSATION

In the FDDA, respondent assessed petitioner for deficiency withholding tax on compensation in the total amount of P5,921 ,671.78, computed as follows: r;alaries per FS 1 P'75.099.717.95 Less: Gross compensation per alphalist 2 65,606,106.75 ft;mount not subjected to WT 9,493,611 .20 Multiply by: Rate 3 32% Basic deficiency tax 3,037,955.584 fA_dd: Interest (from 1/15/2011 to 9/30/15) 2,858,716.20 Compromise- over-withholding 25 000.00 2 883 716.20

OTAL AMOUNT DUE

P5,921 ,671.78 Petitioner argues that respondent was not able to capture the correct amount of salaries and wages and employees benefits reported in the company's FSIITR. The total amount of salaries and wages should be P94,792,411.00 and not P75,099,717.95 which respondent used in their assessment, details of which are as follows:

Salaries and Wages P74,836,913.80 SSS, Philhealth, Medicare 6,332,864.53 OEB - 13th Month 5,945,218.22 OEB - Leave Conversion (A) 1,814,221.55 OEB- Others (B) 3,718,029.77 Retirement Benefit Expenses (C) 2,145,163.06 Total P94 792 410.93 Upon examination of the records, the Court finds that the correct amount of Salaries and Wages is indeed P94,792,411.00 per Notes to Financial Statements No. 11.1 Be Furthermore, a reconciliation was made on the salaries, wages and employee benefits reflected in audited FS and the gross

compensation reported in the Alphalist of Employees (1604-CF)97 as shown below:

Salaries, wages and employee benefits per AFS P94,792,411.00 Less: Part of the salaries expense excluded in alphalist of employees

(a) Employer share of SSS,PHIC& PAG-IBIG P6,332,864.53

(b) OEB-Ieave Conversion 1 ,814,221.55

(c) Other Employee Benefits 3,718,029.77

(d) Retirement benefits expense 2, 145,163.06 14,010,278.91 Salaries, wages and employee benefits, net of exclusive items 80,782,132.09 Less: Gross compensation per alphalist 80,624,974.52 Difference or excess of gross compensation per FS against alphalist of employees P157,157.57

(a) Employer share of SSS, PHIC & PAG-/8/G The Court finds that the SSS, PHIC & PAG-IBIG totaling to P6,332,864.53 represent employer's share of mandatory statutory contributions.

However, a perusal of the Alphalist on Compensation98 reveals that only P3,771.012.26 were reported, to wit:

Resigned Employees for 201 ow P803,232.95 Employees with No Previous Employers luu 1,479,834.47 Minimum Wage Earners 101 1,487,944.84 Total P3,771 ,012.26 Thus, the difference of P2,561 ,852.27 (P6,332,864.53 less P3,771,012.26) shall be subjected to withholding tax on compensation.

(b) DEB-leave Conversion Anent this item, the OEB-Ieave Conversion amounting to P1,814,221.55 per GL represent monetized value of unused vacation leave credits which were not subjected to withholding

taxes, and as such were not reflected in the alphalist of employees by the Petitioner.

We find that petitioner failed to present details of OEB-Ieave Conversion amounting to P1 ,814,221.55 claimed as exempt from Withholding Tax on Compensation. Hence, this shall not be excluded from the computation of Withholding Tax on Compensation deficiency.

(c) Other emplovee benefits With respect to Others Employee Benefits amounting to P3,718,029.77, petitioner contends that these expenses pertain to the medical cash allowance, achievement awards, Christmas gifts, and other privileges/benefits of relatively small value which are considered as de minimis benefits given to the petitioner's employees which are not subject to withholding tax, and as such not reflected in the alphalist of employees of petitioner. Pursuant to Section 2.78.1 of RR No. 2-98, De mmtmts benefits are facilities or privileges furnished or offered by an employer to his employees that are of relatively small value and are offered or furnished by the employer merely as a means of promoting the health, goodwill, contentment, or efficiency of his employees. The same provides that de minimis benefits and certain income payments are not subject to withholding tax, to wit: "SECTION 2. 78.1. Withholding of Income Tax on Compensation Income. - (A) Compensation Income Defined. - x x x XXX XXX XXX

(3) Facilities and privileges of a relatively small value. - Ordinarily, facilities and privileges (such as entertainment, medical services, or so called 'courtesy discounts on purchases), furnished or offered by an employer to his employees generally, are not considered as compensation subject to withholding if such facilities or privileges are of relatively small value and are offered or furnished by the employer merely as a means of promoting the health, goodwill, contentment or efficiency of his employee~

In the instant case, upon verification only the amount of P470,214.13 are supported with documents, as follows: Amount Exhibit Asalus Corporation 3,582.19 "P-4 7 -23.2" Association of CPA 7,000.00 "P-4 7-26.1" Besthealth Medical 360.00 "P-4 7 -35.2" Besthealth Medical 540.00 "P-47 -35.1" Drugcheck Phils 720.00 "P-47-76.1" D-Tech Laboratory 540.00 "P-47-77.1" Global Health 640.00 "P-47-108.1" Jed Diagnostic 560.00 "P-47-134.1" Lakambini Diagnostic 2,520.00 "P-47-148.3" Medhaus Medical 2,010.00 "P-47-181.1" South Super Medical 540.00 "P-4 7-255.1" Value Care 1,012.00 "P-4 7 -284.22" Value Care 618.75 "P-47-284.3" Value Care 27,104.91 "P-4 7 -284.4" Value Care 13,200.00 "P-47-284.5" Value Care 409,266.28 "P-47 -284.6" TOTAL 470,214.13 Therefore, unsupported de mtmmts benefits amounting P3,247,815.64 (P3,718,029.77 less P470,214.13) shall be subjected to withholding tax on compensation.

(d) Retirement benefits expense Petitioner claims that the amount of P2, 145,163.06 pertains to net retirement benefit expense as reflected in its FS in relation to its retirement plan which are valid deductions from gross income as provided by the Tax Code are exempt from withholding tax. The Court finds that this assessment must be cancelled. Section 32 (B) (6) (a) of the NIRC of 1997, as amended, provides:

"SEC. 32. Gross Income. r1 XXX XXX XXX (B) Exclusions from Gross Income - The following items shall not be included in gross income and shall be exempt from taxation under this Title:

XXX XXX XXX

(6) Retirement Benefits, Pensions, Gratuities, etc. - (a) Retirement benefits received under Republic Act No. 7641 and those received by officials and employees of private firms, whether individual or corporate, in accordance with a reasonable private benefit plan maintained by the employer: Provided, That the retiring official or employee has been in the service of the same employer for at least ten (1 0) years and is not less than fifty (50) years of age at the time of his retirement: Provided, further, That the benefits granted under this subparagraph shall be availed of by an official or employee only once xxx" Based on the foregoing, retirement benefits received by officials and employees of a private firm under a pension plan that has been qualified by the CIR, shall not be included in the gross income and shall be exempt from income tax and consequently from withholding tax prescribed in Section 79(A) of the NIRC of 1997, as amended.

In this case, We agree with the findings of the ICPA that the retirement benefits amounting to P2, 145,163.06 represent current service cost reflected in the 2010 actuarial valuation which is under a BIR registered retirement plan, wherein retirement benefits are paid to all regular full-time employees exempted from withholding of tax on compensation. Records show that petitioner submitted the certification issued by BIR related to retirement plan and the 2010 actuarial valuation 102 and 2010 actuarial valuation 103 in order to show petitioner's retirement benefits plan. Finding the same sufficient, the assessment must be cancelled.

In summary, petitioner is liable for basic deficiency withholding tax on compensation in the amount of P563,347.80, as presented below:

Difference of Gross Compensation pe FS against Alphalist Disallowed Salaries and Wages (SSS,PHIC&PAG-IBIG) Disallowed Salaries and Wages (OEB-Leave Conversion) Disallowed Salaries and Wages (Others) Total Multiply by the Estimated Average Withholding Tax Rate Basic Deficiency Withholding Tax on Compensation 157,157.50 2,561,852.27 1,814,221.55 3,247,815.64 7,781,046.96 7.24% 563,347.80 The estimated average withholding tax rate is computed as follows:

Total Withholding Tax on Compensation Remitted Divide by: Taxable Compensation per Alphalist Resigned Employees No Previous Employers Minimum Wage Earners Estimated Average Withholding Tax Rate

DOCUMENTARY STAMP TAX

14,418,620.95 31 ,895,968.81 224,624.51 3,372,902.07 46,539,214.27 7.24% Respondent assessed petitioner for alleged deficiency documentary stamp tax (DST) for the lease contracts entered into by the company, computation of which is shown below: Lease Contracts (Note 14 f/s)- 458 P1 09,134,100.00 2 000.00 109,136,100.00 Rate (Section 194) (3+.001) 0.001 109136.10 Total DST 109,136.10 Less: Payment 69 Deficiencv DST 109 067.10 Add: lnterest(from 1/16/2011 to9/30/15) 102,632.14 Compromise 12 000.00 114 632.14

TOTAL AMOUNT DUE

P223 699.24 Petitioner contends that the DST due on all rental payments under existing lease contracts are being remitted to the BIR by the lessor fl'()

The Court partially upholds the assessment. The findings of the ICPA is that documentary stamp taxes on rental were being paid by lessors and are being included in the lessors' Billing or Statement of Account to petitioner for reimbursement. Investigation showed that the total DST paid by petitioner to the lessor verified against statement of accounts available on file amounted to P81 ,403.00104 only or 75% of the assessed amount.

However, this Court cannot assume that all the DST due on all rental payments under the existing lease contracts are being remitted to the BIR by the lessor in behalf of petitioner and correspondingly being paid by petitioner. Although, a certificate from SM Prime Holdings, 105 one of the petitioner's lessor, was also submitted confirming its remittance of DST on leased properties, this is not sufficient to prove that all of the DST due were paid. Therefore, the deficiency DST assessment amounting to P27,664.10(P109,067.10 less P81,403.00) will be assessed to petitioner.

COMPROMISE PENAL TV

In the FDDA, respondent assessed petitioner of compromise penalty in the total amount of P178,000.00, broken down as follows: Income Tax P50,000.00 IAET 25,000.00 VAT 50,000.00 EWT 16,000.00 WTC 25,000.00 DST 12,000.00 TOTAL P"178,000.00 Pursuant to Revenue Memorandum Order No. 19-07,106 compromise penalties are only amounts suggested in settlement of criminal liability, and may not be imposed or exacted on the taxpayer in the event that a taxpayer refuses to pay the same. It is well-settled that the Court cannot compel a taxpayer to pay the compromise penalty because by its very nature, it implies a mutual 104 Exhibit "P-73".

105 Exhibit "P-72".

106 Subject: The Consolidated Revised Schedule of Compromise Penalties for Violations of National Internal Revenue Code. fi"' agreement between the parties in respect to the thing or subject matter that is so compromised, and the choice of paying or not paying it distinctly belongs to the taxpayer. 107 Absent a showing that petitioner consented to the subject compromise penalties, as it was in fact, assailing the tax impositions herein, the imposition of the said compromise penalties should be deleted. Simply put, the imposition of the compromise ~enalty without the taxpayer's conformity is illegal and unauthorized. 1 8 Hence, the compromise penalties imposed by respondent in the total amount of P178,000.00 for petitioner's alleged deficiency must likewise be cancelled.

IMPOSITION OF THE DEFICIENCY

AND DELINQUENCY INTERESTS

When the subject tax assessments were made, the imposition of deficiency and delinquency interests were governed by Section 249 of the NIRC of 1997, as amended, to wit: "SEC. 249. Interest. - (A) In General. - There shall be assessed and collected on any unpaid amount of tax, interest at the rate of twenty (20%) per annum, or such higher rate as may be prescribed by the rules and regulations, from the date prescribed for its payment until the amount is fully paid. (B) Deficiency Interest. - Any deficiency in the tax due, as the term is defined in this Code, shall be subject to the interest prescribed in Subsection (A) hereof, which interest shall be assessed and collected from the date prescribed for its payment until the fill payment thereof. (C) Delinquency Interest. - In case of failure to pay: XXX XXX XXX 107 The Philippines International Fair, Inc. vs. The Collector of Internal Revenue, et. a/., G.R. Nos. L-12928 and L-12932, March 31, 1962. 108 Commissioner of Internal Revenue vs. Lianga Bay Logging Co., Inc., eta/., G.R. No. L-35266, January 21, 199jt (3) A deficiency tax, or any surcharge or interest thereon on the due date appearing in the notice and demand of the Commissioner, there shall be assessed and collected on the unpaid amount, interest at the rate prescribed in Subsection (A) hereof until the amount is fully paid, which interest shall form part of the tax." However, with the advent of Republic Act No. 1 0963, otherwise known as the "Tax Reform for Acceleration and Inclusion" (TRAIN Law), which took effect on January 1, 2018, Section 249 was amended as follows: "SEC. 249. Interest. - (A) In General. - There shall be assessed and collected on any unpaid amount of tax, interest at the rate of double the legal interest for loans or forbearance of any money in the absence of an express stipulation as set by the Bangko Sentral ng Pilipinas from the date prescribed for payment until the amount is fully paid: Provided, That in no case shall the deficiency and delinquency interest prescribed under Subsections (B) and (C) hereof be imposed simultaneously. (B) Deficiency Interest. - Any deficiency in the tax due, as the term is defined in this Code, shall be subject to the interest prescribed in Subsection (A) hereof, which interest shall be assessed and collected from the date prescribed for its payment until the full payment thereof, or upon issuance of a notice and demand by the Commissioner of Internal Revenue, whichever comes earlier. (C) Delinquency Interest. - xxx xxx xxx."

(Emphasis supplied) Based on the foregoing, the following amendments to the imposition of interests are noted: 1.

The interest rate is reduced to "double the legal interest rate for loans or forbearance of any money in the absence of an express stipulation as set by the Bangko Sentral ng Pilipinas.'t> Currently, the legal interest rate is 6%, 109 hence the interest rate to be applied on any unpaid amount of tax shall be 12% which is lower than the twenty (20%) interest imposed under Section 249 of the N I RC of 1997. 2.

In no case shall the deficiency interest and delinquency interest be imposed simultaneously. As such, the overlapping of interest penalties under the NIRC of 1997 has been effectively eliminated. 3.

The period for the application of deficiency interest is modified to run from the date prescribed for its payment until the full payment thereof, or upon issuance of a notice and demand by the CIR, whichever comes earlier. Hence, under the TRAIN law, the running of the period for the computation of the deficiency interest may be interrupted by the issuance of a notice and demand by respondent. It bears noting that under the NIRC of 1997, the deficiency interest shall be assessed and collected from the date prescribed for its payment until the full payment thereof and is not interrupted by the issuance of a notice or demand from respondent. The principle is well entrenched that statutes, including administrative rules and regulations, operate prospectively only, unless the legislative intent to the contrary is manifest by express terms or by necessary implication. 110 There being no clear legislative intent to retroactively apply the provisions of the TRAIN law, the same should only be applied prospectively, i.e., beginning from January 1, 2018. Furthermore, it bears emphasis that tax burdens are not to be imposed, nor presumed to be imposed, beyond what the statute expressly and clearly imports, tax statutes being construed strictissimi juris against the government. Any doubt on whether a person, article or activity is taxable is generally resolved against taxation .111 109 BSP MB Circular No. 799, Series 2013 which took effect on July I, 2013.

Considering the foregoing principles, the effects of the amendments under the TRAIN Law, particularly the imposition of interests, shall be applied to this case. Thus, as of January 1, 2018, the interests to be imposed must already be at 12%, and there must no longer be a simultaneous imposition of deficiency and delinquency interests.

WHEREFORE, in light of the foregoing considerations, the Petition for Review is PARTIALLY GRANTED. Accordingly, the assessment issued by respondent against petitioner for the calendar year ending December 31, 2010, covering deficiency Improperly Accumulated Earnings Tax is CANCELLED and SET ASIDE. On the other hand, the deficiency Income Tax, VAT, EWT, WTC and DST assessments are AFFIRMED with MODIFICATION. Accordingly, petitioner is ordered to pay respondent the total amount of P50,627,809.49 representing basic deficiency, 25% surcharge, 20% deficiency interest and 20% delinquency interest imposed thereon under Sections 248(A)(3), 249(8) and (C) of the NIRC of 1997, as amended, computed until December 31, 2017, as determined below:

Income VAT EWT WTC DST TOTAL Basic Tax Due 6,596,532.77 6,624,930.70 298,468.39 563,347.80 27,664.10 14,110,943.76 25% Surcharge 1 ,649,133.19 1,656,232.68 74,617.10 140,836.95 6,916.03 3,527,735.94 Sub-Total 8,245,665.96 8,281,163.38 373,085.49 704,184.75 34,580.13 17,638,679.70 20% Deficiency Interest: 16-Apr-11 to 30-Sep-15 (6,596,532.77 X 20% X 1629/365) 5,888,083.22 5,888,083.22 26-Jan-11 to 30-Sep-15 (6,624,930.70 x 20% x1694/365) 6,149,387.73 6,149,387.73 16-Jan-11 to 30-Sep-15 (298,468.39 X 20% X 1704/365) 278,679.53 278,679.53 15-Jan-11 to 30-Sep-15 (563,347.80 X 20% X 1705/365) 526,305.75 526,305.75 16-Jan-11 to 30-Sep-15 (27 ,664.1 0 X 20% X 1704/365) 25,829.93 25,829.93 tKJ

Total Amount Due, Sep. 30, 2015'? 14,133,749.19 14,430,551.10 651,765.01 1,230,490.50 60,410.06 30,506,965.86 20% Deficiency Interest:

01-Oct-15 to 31-Dec-17 (6,596,532.77 x 20% x 823/365) 2,974,765.19 2,974,765.19 01-Oct-15 to 31-Dec-17 (6,624 ,930.70 x 20% x823/365) 2,987,571.49 2,987 571.49 01-Oct-15 to 31-Dec-17 (298,468.39 x 20% x 823/365) 134,596.98 134,596.98 01-Oct-15 to 31-Dec-17 (563,347.80 x 20% x 823/365) 254,046.71 254,046.71 01-Oct-15 to 31-Dec-17 (27,664.10 x 20% x 823/365) 12,475.37 12,475.37 20% Delinquency Interest:

01-Oct-15 to 31-Dec-17 (14,133,749.19 x 20% x 823/365) 6,373,740.04 6,373,740.04 01-Oct-15 to 31-Dec-17 (14,430,551.10 x 20% x 823/365) 6,507,585.51 6,507,585.51 01-Oct-15 to 31-Dec-17 (651,765.01 x 20% x 823/365) 293,919.24 293,919.24 01-Oct-15 to 31-Dec-17 (1,230,490.50 x 20% x 823/365) 554,900.65 554,900.65 01-Oct-15 to 31-Dec-17 (60,410.06 x 20% x 823/365) 27,242.45 27,242.45 Total Amount Due, Dec. 31,2017 | 23,482,254.42 23,925,708.10 1,080,281.23 2,039,437.86 100,127.88 50,627,809.49 In addition, petitioner is liable to pay delinquency interest at the rate of 12% on the unpaid amount as of September 30, 2015, computed from January 1, 2018 until full payment thereof, pursuant to Section 249(C) of the NIRC of 1997, as amended by Republic Act No. 10963, also known as Tax Reform for Acceleration and Inclusion (TRAIN) and as implemented by RR No. 21-2018, on the following amounts:

Income Tax Value Added Tax Expanded Withholding Tax Withholding Tax on Compensation Documentary Stamp Tax

WE CONCUR:

P14,133,749.19 14,430,551.10 651,765.01 1,230,490.50 ER~.UY Associate Justice 60,410.06 ~· ~ .4'-- MA. BELEN M. RINGPIS-LIBAN 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. ER~.UY Associate Justice Chairperson, 3'd Division

CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution and the 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. Presiding Justice