Titanium Corporation vs. Commissioner of Internal Revenue

DECISION

DEL ROSARIO, P.J.:

This is a Petition for Review filed on January 11 , 2017 by petitioner Titanium Corporation praying that the Court: (a) cancels for lack of merit the following: (i) Final Decision on Disputed Assessment dated December 7, 2016; (ii) Amended Assessment Notices covering taxable year 2008 for Income Tax (Assessment No. IT-LA7267-08- 16-1226), Value Added Tax (Assessment No. VT-LA7267-08-16- 1226), and Expanded Withholding Tax (Assessment No. WE- LA7267-08-16-1226), all dated December 7, 2016, in the total amount of P28,290,307.88; and, (iii) Original Assessment Notices covering taxable year 2008 for Income Tax (Assessment No. IT-LA7267-08- 12-0165), Value Added Tax (Assessment No. VT-LA7267-08-12- 0165), and Expanded Withholding Tax (Assessment No. WE- LA7267-08-12-0165), all dated January 11 , 2012; and, (b) issues an order restraining respondent from further initiating collection proceedings to the prejudice of the petitioner.

THE PARTIES

Petitioner is a domestic corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with cA principal office at #733 Wood St., Malibay, Pasay City and duly registered with the Bureau of Internal Revenue - Revenue District Office No. 51 of Pasay City under Revenue Region No. 8, Makati City, Philippines. 1 Respondent Commissioner of Internal Revenue is the Chief of the Bureau of Internal Revenue, the government agency officially responsible for the assessment and collection of all national internal revenue taxes, fees and charges and the enforcement of all forfeitures, penalties and fines connected with such taxes.

Respondent may be served with summons, notices and other legal processes at the 41h Floor, BIR National Office Building, Agham Road, Diliman, Quezon City, Metro Manila.2

THE FACTS

On August 12, 2009, petitioner received the Letter of Authority (LOA) dated August 4, 2009 with No. 2008 00007267 authorizing Revenue Officer K. Jumawan under the supervision of Group Supervisor C. Dela Cruz of Revenue District Office No. 51 - Revenue Region No. 8 to examine/audit petitioner's internal revenue taxes for the period from January 1, 2008 to December 31, 2008. 3 Respondent CIR subsequently issued an Assessment Notice- Formal Assessment Notice 4 (FAN) and Assessment Notices for Income Tax (Assessment No. IT-LA7267-08-12-0165), Value Added Tax (VAT) (Assessment No. VT-LA7267-08-12-0165), and Expanded Withholding Tax (EWT) (Assessment No. WE-LA7267-08-12-0165), 5 all dated January 11, 2012, covering taxable year 2008, which were received by petitioner on January 16, 2012, 6 reiterating the alleged deficiency internal revenue taxes contained in the Preliminary Assessment Notice (PAN) dated December 9, 2011, as follows: Tax T}'P_e Income tax Value added tax Exoanded w/ tax

TOTAL

Basic

!

p 8,446,418.40 4,297,842.54 309,384.11 p 13,053,645.05 Surchar_ge

I

Interest

I

Total

p 4,813,301.44 p 13,259,719.84 2,637,580.08 6,935,422.62 176,306.55 485,690.67

P

7,627,188.08 1 P 20,680,833.13 1 Par. 1, Joint Stipulation of Facts and Simplification of Issues, CTA Docket, Vol. pp. 250-251.

2 Par. 2, Joint Stipulation of Facts and Simplification of Issues, CTA Docket, Vol.

p. 251. 3 Par. 3, Joint Stipulation of Facts and Simplification of Issues, CTA Docket, Vol.

p. 251. 4 Par. 4, Joint Stipulation of Facts and Simplification of Issues, CTA Docket, Vol.

p. 251. 5 Par. 5, Joint Stipulation of Facts and Simplification of Issues, CTA Docket, Vol.

p. 251. 6 Par. 6, Joint Stipulation of Facts and Simplification of Issues, CTA Docket, Vol.

p. 252. 0

On January 31, 2012, petitioner filed an administrative protest dated January 25, 2012 together with supporting documents on the Assessment Notice dated January 11, 2012 issued by respondent. 7 On December 7, 2016, respondent issued a Final Decision on Disputed Assessment (FDDA) involving petitioner's administrative protest and reiterating his assessment for Income Tax, VAT, and EWT covering taxable year 2008. 8 On the same date, respondent issued an Amended Assessment Notices covering taxable year 2008 for Income Tax (Assessment No. IT-LA7267-08-16-1226), VAT (Assessment No. VT-LA7267-08-16-1226}, and EWT (Assessment No. WE-LA7267-08-16-1226}, and FDDA for petitioner covering taxable year 2008. 9 Petitioner received the aforementioned documents on December 13, 2016. 10 With the simultaneous issuance of the aforesaid FDDA and Amended Assessment Notices, respondent notified and directed petitioner to either settle the same or to appeal with the Court of Tax Appeals (CTA) within thirty (30) days from receipt (December 13, 2016) or until January 12, 2017. 11 On January 11, 2017, petitioner filed the present Petition for Review. 12 On March 6. 2017, respondent filed his Answer 13 with the following special and affirmative defenses: (i) the right of the Bureau of Internal Revenue (BIR) to issue the subject FAN dated January 11, 2012 has not yet prescribed; (ii) the right of the BIR to assess petitioner of its deficiency taxes for taxable year 2008 was suspended pursuant to Section 223 of the National Internal Revenue Code (NIRC) of 1997, as amended, since the request for reinvestigation of the assessment filed by the taxpayer was evidently granted and actual reinvestigation was conducted by the BIR, which eventually resulted in the issuance of the Amended Assessment Notices dated December 7, 2016; (iii) the issuance by respondent of the assailed FDDA dated December 7, 2016 and Amended Assessment Notices for Income tax, VAT, and EWT all dated December 7, 2016 does not support the theory and allegations of petitioner that the BIR's right to 7 Par. 7, Joint Stipulation of Facts and Simplification of Issues, CTA Docket, Vol. I, p. 252. 8 Par. 8, Joint Stipulation of Facts and Simplification of Issues, CTA Docket, Vol. I, p. 252. 9 Par. 9, Joint Stipulation of Facts and Simplification of Issues, CTA Docket, Vol. I, p. 252. 10 Par. 10, Joint Stipulation of Facts and Simplification of Issues, CTA Docket, Vol. I, p. 252. 11 Par. 11, Joint Stipulation of Facts and Simplification of Issues, CTA Docket, Vol. I, p. 253. 12 CTA Docket, Vol. I, pp. 10-28.

13 CTA Docket, Vol. I, pp. 89-100. c!\ assess/collect deficiency Income tax, VAT, and EWT for taxable year 2008 has already prescribed; (iv) instead of filing a petition for review with the CTA within 30 days after the expiration of the 180-day period, petitioner opted to await the final decision of respondent; (v) respondent complied with the due process requirement mandated under Section 228 of the NIRC of 1997, as amended, and as implemented by Revenue Regulations (RR) No. 12-99, as amended; (vi) petitioner was duly appraised by respondent of the factual and legal basis on how and why respondent has arrived of a deficiency income tax, VAT, and EWT assessments for taxable year 2008, through the issuance of the Details of Discrepancies attached to the Assessment Notice; and, (vii) while petitioner's protest letter to the FAN is in the nature of a request for reinvestigation. On April 20, 2017, respondent filed his Pre-Trial Brief14; while petitioner filed its Pre-Trial Brief15 on April 21, 2017. The Pre-Trial Conference was held on June 22, 2017. 16 The parties filed their Joint Stipulation of Facts and Simplification of lssues17 on July 7, 2017, and the same was approved in the Pre-Trial Order18 dated July 17, 2017; the Court also terminated the Pre-Trial in the same Order. 19 During trial, petitioner presented testimonial and documentary evidence. Petitioner's formally offered exhibits, as contained in its Formal Offer of Evidence 20 were admitted in the Resolution dated October 20, 2017. 21 Respondent also presented testimonial and documentary evidence. Respondent's formally offered exhibits, as contained in his Formal Offer of Evidence 22 were admitted in the Resolution23 dated July 10, 2018.

On August 30, 2018, respondent filed a Manifestation and Motion 24 that he is adopting all his factual and legal arguments contained in the Special and Affirmative Defenses of his Answer dated March 3, 2017.

14 CTA Docket, Vol. I, pp. 1 04-1 09. 15 CTA Docket, Vol. I, pp. 110-120. 16 CTA Docket, Vol. I, pp. 229 & 230. 17 CTA Docket, Vol. I, pp. 250-255. 18 CTA Docket, Vol. I, pp. 260-263. 19 ld.

2° CTA Docket, Vol. I, pp. 305-341. 21 CTA Docket, Vol. II, pp. 426-429. 22 CTA Docket, Vol. II, pp. 487-498. 23 CTA Docket, Vol. II, pp. 528-529. 24 CTA Docket, Vol. II, pp. 566-568. ""

Considering the filing of petitioner's Memorandum25 on August 31, 2018 and respondent's Manifestation on August 30, 2018, the case was submitted for decision on October 8, 2018.26

ISSUE27

The parties agree that the issues for resolution are the following: (1) Whether or not the SIR's right to assess petitioner for internal revenue taxes covering taxable year 2008 has prescribed.

(2) Whether or not the SIR's right to collect petitioner for any deficiency in internal revenue taxes covering taxable year 2008 has prescribed.

(3) Whether or not SIR's right to assess and/or collect the deficiency Income Tax, VAT and EWT covering taxable year 2008 was suspended.

(4) Whether or not the Amended Assessment Notices for Income Tax, VAT and EWT, all covering taxable year 2008 were issued beyond the three (3) year period allowed by law. (5) Whether or not petitioner was deprived of the due process of law.

(6) Whether or not petitioner is liable for alleged deficiency Income Tax, VAT and EWT, all for taxable year 2008.

THE COURT'S RULING

The Court has jurisdiction over

the Petition for Review

It is undisputed that on December 13, 2016, petitioner received the FDDA with Amended Assessment Notices, all dated December 7, 2016. 28 Pursuant to Rule 8, Section 3 (a) of the Revised Rules of the 25 CTA Docket, Vol. II, pp. 536-565. 2s CTA Docket, Vol. II, p. 573.

27 CTA Docket, Vol. I, pp. 253-254. 28 Par. 10, Joint Stipulation of Facts and Simplification of Issues, CTA Docket, Vol. I, p. 252. c/1

Court of Tax Appeals (RRCTA), petitioner had thirty (30) days from December 13, 2016 or until January 12, 2017 to file its appeal with the Court. Thus, the Petition for Review filed on January 11, 2017 was timely filed. 29 Prescription of BIR's right to assess petitioner of EWT, VAT and Income Tax for taxable year 2008 Petitioner claims that the three (3)-year prescriptive period for respondent to assess petitioner for the following had already lapsed at the time of the issuance of the FAN on January 11, 2012: (i) deficiency EWT covering the months of January to December 2008; and, (ii) deficiency VAT covering the 151, 2nd, and 3rd quarters of taxable year 2008. Moreover, petitioner asserts that the issuance of the Amended Assessments for income tax, VAT and EWT by the respondent totally abandoned or rescinded the original Assessment Notice, and such issuance more than seven (7) years or way more than the period allowed by law rendered the assessments for income tax, VAT and EWT prescribed. 30 Respondent counter-argues that the right to issue the subject FAN dated January 11, 2012 has not yet prescribed and that such was suspended since petitioner's request for reinvestigation of the assessment was evidently granted and actual reinvestigation was conducted by the BIR which eventually resulted in the issuance of the Amended Assessment Notices dated December 7, 2016. 31 Section 203 of the National Internal Revenue Code (NIRC) of 1997, as amended, states:

"Section 203. Period of Limitation Upon Assessment and Collection. - Except as provided in Section 222, internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the return, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period: Provided, That in a case where a return is filed beyond the period prescribed by law, the three (3)-year period shall be counted from the day the return was filed. For purposes of this Section, a return filed before 29 CTA Docket, Vol. I, pp. 10-28.

30 Petitioner's Memorandum, CTA Docket, Vol. II, pp. 540-548. 31 Answer, CTA Docket, Vol. I, pp. 90-99. rj\ the last day prescribed by law for the filing thereof shall be considered as filed on such last day." (Boldfacing supplied) Based on the aforecited provision, it is vital for respondent to issue an assessment notice to the taxpayer within the three (3)-year period, reckoned from the last day prescribed by law for the filing of the return, or from the filing of the return, in case the return is filed after the prescribed period. An assessment issued beyond the prescriptive period mandated by law renders the CIR's power to assess nugatory.

The right to assess petitioner for deficiency EWT for the period January to October of taxable year 2008 has already prescribed; the assessment for deficiency EWT for the months

of November and December

2008 was made within the three (3)-year period Section 2.58 of RR No. 2-98, as amended by RR No. 17-03 provides for the period upon which the return of withholding taxes should be filed, viz.:

"Sec. 2.58. RETURNS AND PAYMENT OF TAXES WITHHELD AT SOURCE.

(A) Monthly return and payment of taxes withheld at source.- (1)

XXX

XXX

XXX

(2)

WHEN TO FILE-

(a) For both large and non-large taxpayers, the withholding tax return, whether creditable or final (including final withholding taxes on interest from any currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements) shall be filed and payments should be made, within ten (10) days after the end of each month, except for taxes withheld for the month of December of each year, which shall be filed on or before January 15 of the following year; xxx" (Boldfacing supplied) r;f\ In the present case, the relevant dates for the filing of EWT Returns, the actual date of filing, and the last day for the BIR to assess are illustrated below:

Period

Due Date of Filing

Actual Date of Filing of

Last Day of

Return

Return

Assessment by BIR

January 2008

February 10, 2008 February 15, 200832 February 15, 2011

February 2008

March 1 0, 2008 March 13, 200833 March 13, 2011

March 2008

April 10, 2008 April 13, 200834 April 13, 2011

April2008

May 10, 2008 May 14, 200835 May 14, 2011

May 2008

June 10, 2008 June 10, 200836 June 10, 2011

June 2008

July 10, 2008 July 15, 200837 July 15, 2011

July 2008

August 10, 2008 September 13, 200838 September 13, 2011

August 2008

September 1 0, 2008 September 13, 200839 September 13, 2011

September 2008

October 1 0, 2008 October 13, 200840 October 13, 2011

October 2008

November 10, 2008 November 12, 200841 November 12, 2011

November 2008

December 10, 2008 January 14, 200942 January 14, 2012

December 2008

January _15, 2009 Ma_11 21, 200943 May 21, 2012 The FAN with the attached Assessment Notice for Expanded Withholding Tax (Assessment No. WE-LA7267-08-12-0165) was issued by respondent on January 11, 2012.44 In Barcelon, Roxas Securities, Inc. (now known as UBP Securities) vs. Commissioner of Internal Revenue, 45 the Supreme Court emphasized that the determination of whether an assessment was made within the prescriptive period is when it was released, 32 Exhibit "P-12-AD-ICPA", Electronic Copy of Exhibits in CD Form duly marked as Exhibit "P-31- ICPA".

33 Exhibit "P-12-AF-ICPA", Electronic Copy of Exhibits in CD Form duly marked as Exhibit "P-31- ICPA".

34 Exhibit "P-12-AH-ICPA", Electronic Copy of Exhibits in CD Form duly marked as Exhibit "P-31- ICPA".

35 Exhibit "P-12-AJ-ICPA", Electronic Copy of Exhibits in CD Form duly marked as Exhibit "P-31- ICPA".

36 Exhibits "P-12-A-ICPA", electronic Copy of Exhibits in CD Form duly marked as Exhibit "P-31- ICPA".

37 Exhibits "P-12-C-ICPA", Electronic Copy of Exhibits in CD Form duly marked as Exhibit "P-31- ICPA".

38 Petitioner filed an Amended Return, Exhibit "P-12-AR-ICPA", Electronic Copy of Exhibits in CD Form duly marked as Exhibit "P-31-ICPA". 39 Exhibit "P-12-1-ICPA", Electronic Copy of Exhibits in CD Form duly marked as Exhibit "P-31- ICPA".

40 Exhibit "P-12-K-ICPA", Electronic Copy of Exhibits in CD Form duly marked as Exhibit "P-31- ICPA".

41 Exhibit "P-12-0-ICPA", Electronic Copy of Exhibits in CD Form duly marked as Exhibit "P-31- ICPA".

42 Petitioner filed an Amended Return, Exhibit "P-12-BE-ICPA", Electronic Copy of Exhibits in CD Form duly marked as Exhibit "P-31-ICPA". 43 Petitioner filed an Amended Return, Exhibit "P-12-BJ-ICPA", Electronic Copy of Exhibits in CD Form duly marked as Exhibit "P-31-ICPA". 44 Based on the Records of the case, a perusal thereof shows that there are two EWT Returns that were filed by petitioner: (i) Pasay City Branch; and, (ii) Caloocan City Branch. 45 G. R. No. 157064, August 7, 2006 citing Collector of Internal Revenue vs. Bautista, 105 Phil. 1326, 1327 (1959).

~ mailed or sent by the CIR to the taxpayer. The relevant portion of the case reads:

"xxx an assessment is made within the prescriptive period if notice to this effect is released, mailed or sent by the CIR to the taxpayer within said period. Receipt thereof by the taxpayer within the prescriptive period is not necessary. At this point, it should be clarified that the rule does not dispense with the requirement that the taxpayer should actually receive, even beyond the prescriptive period, the assessment notice which was timely released, mailed and sent."

In the case at bar, the parties jointly stipulated that respondent issued the FAN on January 11, 2012, and the same was received by petitioner on January 16, 201246 As illustrated on the above table of relevant dates, the deficiency EWT assessment covering the period January to October 2008 was issued beyond the three (3)-year prescriptive period. The deficiency EWT assessment for the period of November and December 2008, however, was issued within the prescribed period reckoned from the filing by petitioner of its Amended Returns on January 14, 2009 for the month of November 2008 and on May 21, 2009 for the month of December 2008. Hence, respondent had until January 14, 2012 and May 21, 2012, respectively, within which to assess petitioner for the deficiency EWT covering the months of November and December 2008. Considering that the FAN was issued on January 11, 2012, the assessment for deficiency EWT for the months of November and December 2008 was made within the three (3)-year period prescribed under Section 203 of the NIRC of 1997, as amended.

The deficiency VAT Assessment for the 15 t, 2nd, 3'd and 4th quarters of the taxable period 2008 was issued within the three (3)-year prescriptive period.

Section 114 of the NIRC of 1997, as amended, provides for the period upon which a taxpayer liable for VAT must file its return, viz: •• Supra Notes 4, 5 and 6.

~

"Section 114. Return and Payment of Value-Added Tax.- (A) In General. - Every person liable to pay the value-added tax imposed under this Title shall file a quarterly return of the amount of his gross sales or receipts within twenty- five (25) days following the close of each taxable quarter prescribed for each taxpayer: Provided, however, That VAT-registered persons shall pay the value-added tax on a monthly basis.

XXX

XXX

xxx" The illustration below refers to the pertinent dates reflecting the date of filing of petitioner's VAT Returns for the taxable year 2008 juxtaposed to the last day the BIR may assess petitioner for deficiency VAT:

Date of Issuance

Last Day of of Assessment

Period

Due Date of

Date of Actual

Assessment for

No. VT-LA7267- covered

Filing

Filing

BIR

08-12-0165

1 '1 Quarter of

April 21, 200947 2008 April 25, 2008 April 21, 2012

2'• Quarter of

April21, 200948 April21, 2012 2008 July 25, 2008

3"' Quarter of

October 25, April 21, 200949 April 21, 2012 January 11, 2012 2008 2008

41" Quarter of

January 25, May 24, 200950 2008 2008 May 24, 2012 As shown on the table, the FAN and Assessment No. VT- LA7267-08-12-0165, both issued on January 11, 2012, assessing petitioner for deficiency VAT for the taxable year 2008 was issued within the three (3)-year prescriptive period provided under Section 203 of the NIRC of 1997, as amended. The income tax assessment was issued within the three (3)- year prescriptive period.

Section 77(8) of the NIRC of 1997, as amended, provides the period upon which a corporation must file its annual income tax return (ITR), to wit:

47 Petitioner filed an Amended Return, Exhibit "P-18-A-ICPA", Electronic Copy of Exhibits in CD Form duly marked as Exhibit "P-31-ICPA". 48 Petitioner filed an Amended Return, Exhibit "P-18-E-ICPA", Electronic Copy of Exhibits in CD Form duly marked as Exhibit "P-31-ICPA". 49 Petitioner filed an Amended Return, Exhibit "P-18-K-ICPA", Electronic Copy of Exhibits in CD Form duly marked as Exhit:.it "P-31-ICPA". 50 Petitioner filed an Amended Return, Exhibit "P-18-M-ICPA", Electronic Copy of Exhibits in CD Form duly marked as Exhibit "P-31-ICPA". \11

"Section 77. Place and Time of Filing and Payment of Quarterly Corporate Income Tax.-

XXX

XXX

XXX

(B) Time of Filing the Income Tax Return. - The corporate quarterly declaration shall be filed within sixty (60) days following the close of each of the first three (3) quarters of the taxable year. The final adjustment return shall be filed on or before the fifteenth (15th) day of April, or on or before the fifteenth (15th) day of the fourth (4th) month following the close of the fiscal year, as the case may be." (Boldfacing supplied) In this case, petitioner filed its annual ITR on April 15, 2009. 51 Pursuant to Section 203, respondent had until April 15, 2012 within which to assess petitioner. As already established, respondent issued and mailed the FAN on January 11, 2012. Hence, respondent's issuance of deficiency income tax assessment against petitioner is within the period prescribed by law. CJR's power to collect has not yet prescribed.

Anent petitioner's arguments that the SIR's power to collect from petitioner of any deficiency in internal revenue taxes covering taxable year 2008 has prescribed, the Court finds the same unmeritorious.

Section 203 of the NIRC of 1997, as amended, provides the reckoning date by which the CIR's power to collect commences, viz.: "Section 203.

Period of Limitation Upon Assessment and

Collection. - Except as provided in Section 222, internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the return, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period: Provided, That in a case where a return is filed beyond the period prescribed by law, the three (3)-year period shall be counted from the day the return was filed. For purposes of this Section, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day."

•• Exhibit "R-1", BIR Records, pp. 1-4. ~

Pursuant to the aforequoted Section, internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the return, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period. In cases where a return is filed beyond the period prescribed by law, the three (3)-year period shall be counted from the day the return was filed. In Commissioner of Internal Revenue vs. United Salvage and Towage (Phils.}, Inc., 52 the Supreme Court clarified that when the BIR issues the assessment within the three (3)-year period, it has another three (3) years, counted from the date the assessment notice had been released, mailed or sent to the taxpayer, within which to collect the tax due by distraint, levy or court proceeding, viz.: "Xxx, petitioner has three (3) years from the date of actual filing of the tax return to assess a national internal revenue tax or to commence court proceedings for the collection thereof without an assessment. However, when it validly issues an assessment within the three (3)-year period, it has another three (3) years within which to collect the tax due by distraint, levy, or court proceeding. The assessment of the tax is deemed made and the three (3)-year period for collection of the assessed tax begins to run on the date the assessment notice had been released, mailed or sent to the taxpayer." (Boldfacing supplied) In the present case, the CIR has three (3) years from issuance of assessment on January 11, 2012 to collect the deficiency EWT for November and December of taxable year 2008, deficiency VAT for the four quarters of taxable year 2008, and deficiency income tax assessment for the taxable year 2008. At first glance, the CIR's power to collect petitioner's deficiency taxes seems to have prescribed since it filed his Answer only on March 16, 2017. 53 The records of the case, however, reveal otherwise. Section 223 of the NIRC of 1997, as amended, clearly provides that when a taxpayer requests for a reinvestigation, the running of the period to assess and/or to collect is tolled, viz.: 52 G.R. No. 197515, July 2, 2014; See also Footnote 67 in Commissioner of Internal Revenue vs. Pilipinas Shell Petroleum Corporation I Pilipinas Shell Petroleum Corporation vs. Commissioner oflntemal Revenue, G.R. Nos. 197945,2014119 and 2014120, July 9, 2018. 53 Bank of the Philippine Islands vs. Commissioner of Internal Revenue, G.R. No. 139736 October 17, 2005 states "A judicial action for the collection of a tax may be initiated by the filing of a complaint with the proper regular trial court; or where the assessment is appealed to the CTA, by filing an answer to the taxpayer's petition for review wherein payment of the tax is prayed for. (Philippine National Oil Company v. Court of Appeals, G.R No. 109976, 26 April 2005; Fernandez Herrnanos, Inc. v. Commissioner of Internal Revenue, G.R. No. L-21551, 30 September 1969, 29 SCRA 552; Palanca, eta/. v. Commissioner of Internal Revenue, Ibid.)". r:A

"Section 223. Suspension of Running of Statute of Limitations. - The running of the Statute of Limitations provided in Sections 203 and 222 on the making of assessment and the beginning of distraint or levy a proceeding in court for collection, in respect of any deficiency, shall be suspended for the period during which the Commissioner is prohibited from making the assessment or beginning distraint or levy or a proceeding in court and for sixty (60) days thereafter;

when the taxpayer requests for a reinvestigation which is granted by the Commissioner; when the taxpayer cannot be located in the address given by him in the return filed upon which a tax is being assessed or collected: Provided, that, if the taxpayer informs the Commissioner of any change in address, the running of the Statute of Limitations will not be suspended; when the warrant of distraint or levy is duly served upon the taxpayer, his authorized representative, or a member of his household with sufficient discretion, and no property could be located; and when the taxpayer is out of the Philippines." To distinguish a request for reinvestigation from a request for reconsideration, the case of Bank of the Philippine Islands vs. Commissioner of Internal Revenue54 is instructive, to wit: "This Court gives credence to the argument of petitioner BPI that there is a distinction between a request for reconsideration and a request for reinvestigation. Revenue Regulations (RR) No. 12-85, issued on 27 November 1985 by the Secretary of Finance, upon the recommendation of the BIR Commissioner, governs the procedure for protesting an assessment and distinguishes between the two types of protest, as follows-

PROTEST TO ASSESSMENT

SEC. 6. Protest. The taxpayer may protest administratively an assessment by filing a written request for reconsideration or reinvestigation ... For the purpose of the protest herein-

(a) Request for reconsideration. - refers to a plea for a re-evaluation of an assessment on the basis of existing records without need of additional evidence. It may involve both a question of fact or of law or both.

(b) Request for reinvestigation. - refers to a plea for re-evaluation of an assessment on the basis of newly-discovered or additional evidence that a taxpayer intends to present in the reinvestigation. It may also involve a question of fact or law or both. With the issuance of RR No. 12-85 on 27 November 1985 providing the above-quoted distinctions between a request for reconsideration and a request for reinvestigation, the two types of protest can no longer be used interchangeably and their differences so lightly brushed aside. It bears to emphasize that under Section 224 of the Tax Code of 1977, as amended, the running of the prescriptive period for collection of taxes can only be suspended by a request for reinvestigation, not a request for reconsideration. Undoubtedly, a reinvestigation, which entails the reception and evaluation of additional evidence, will take more time than a 54 Supra Note 43.

~ reconsideration of a tax assessment, which will be limited to the evidence already at hand; this justifies why the former can suspend the running of the statute of limitations on collection of the assessed tax, while the latter cannot."

The Court finds that the Letter Protest dated January 25, 201255 of the petitioner is a request for reinvestigation considering that it was accompanied by supporting documents.

The submission of petitioner's supporting documents is corroborated by the admission of the parties in their Joint Stipulation of Facts and Simplification of Issues. 56 Respondent, on this score, also treated the Letter-Protest as a request for reinvestigation as evidenced by the Letter dated March 26, 201257 that it sent to petitioner, which reads: "Sir/Madam:

Please be informed that the docket of the case under Letter of Authority No. 00007267 dated August 4, 2009, was forwarded to

Revenue

Officer

Narissa

B.

Ty

under Group

Supervisor

Consolacion 0. Cariaga with the instruction to pursue the re- investigation of your internal revenue tax liabilities for calendar year 2008 pursuant to Memorandum of Assignment No. RRB-051-PR0-03-012-000960 date March 20, 2012. Relative thereto, it is understood that all relevant documents and records are available for presentation within the period as stated in the Regional Director's letter dated March 15, 2012 so that proper re-evaluation of the case can be made by abovementioned revenue officers.

Thank you for giving this matter your preferential attention. Very truly yours, CORAZON M. MONTES

OIC-Revenue District Officer"

This was further corroborated by Revenue Officer Narissa B. Ty in her Judicial Affidavit58 that the BIR informed petitioner that it will conduct a reinvestigation, viz.:

55 Exhibit "P-9", CTA Docket, Vol. I, pp. 380-395, and Exhibit "R-12", BIR Records, pp. 573-588. 56 Supra Note 7.

57 Exhibit "R-15-a", and "R-15-b", BIR Records, p 604-B. 58 Exhibit "R-25", CTA Docket, p. 437. ~

"26:

Q:

Going back Ms. Witness, how did the BIR informed (sic) petitioner about your authority to conduct such a reinvestigation?

A.

The respondent CIR issued a BIR Letter dated March 26, 2012, duly informing petitioner about my authority to conduct such a reinvestigation of its Letter Protest dated 25 January 2012 against the subject BIR Formal Assessment Notice (Part I and II) dated 11 January 2012, as well as, the BIR Letter dated March 15, 2012 of the BIR Regional Director, RR8-Makati, requesting petitioner to submit relevant documents in support of its Letter Protest dated 25 January 2012 within 60 days from filing thereof. xxx" Furthermore, a comparison of the FAN and the Amended FDDA reveals that respondent actually conducted a reinvestigation of petitioner's tax liabilities which resulted in the amendment of the deficiency tax assessments:

FAN

FDDA with Amended Assessment Notices

Tax Type

Basic Tax Due

Tax Type

Basic Tax Due

Income Tax

p 8,446,418.40

Income Tax

,.

6, 706,166.54

VAT

,.

4,297,842.54

VAT

,.

4,082,514.70

EWT

,.

309,384.11

EWT

,.

228,008.33 Compromise Penalty ,.

13,000.00 Compromise Penalty _ p 13,000.00 - Apparently, during reinvestigation, respondent took into consideration petitioner's Letter Protest and the additional documents it submitted in support thereof; thus, the resulting decrease in the basic income tax, EWT, and VAT assessments as shown in the FDDA and Amended Assessment Notices. Indubitably, with the SIR's reinvestigation of petitioner's tax liabilities based on the latter's Letter Protest, the running of the statute of limitation to collect the assessed deficiency EWT for the period of November and December 2008, deficiency VAT for the four quarters of 2008, and deficiency income tax was suspended from March 26, 2012, the date of the issuance of respondent's letter informing petitioner of the reinvestigation of its tax liabilities, to December 13, 2016, the date petitioner received the FDDA with Amended Assessment Notices, all dated December 7, 2016. As a result, the three (3)-year period to collect the deficiency assessments was extended until December 8, 2017.59 59 Petitioner receiwcl the FAN and Assessment Notices dated January 11, 2012 Petitioner requested for re1nwstigat1on Respondent ganted petit'ioner's request for reinvestigation PetitiO!'lef receilled FDDA and Amended Notices dated December 7, 2016 Deadline of extended 3-year penod to collect (365"31ess 70 days) January 16, 2012 January 21,20121 March 26, 2012 December 13, 2016 December 08, 2017 Per'1od to collect 1s suspended \{\ As respondent filed his Answer on March 16, 2017, 60 respondent's judicial action for the collection of petitioner's deficiency income tax, VAT and EWT (for the months of November and December), covering the year 2008, was not time-barred.

The Issuance of an Amended

Assessment

Notice

did not abandon the Original FAN Petitioner contends that the issuance of the Amended Assessment Notices for deficiency income tax, VAT, and EWT abandoned or rescinded the original FAN issued on January 11, 2012; and such issuance of more than seven (7) years allowed by law rendered the assessment for VAT, EWT, and income tax prescribed. Petitioner further contends that the said Amended Assessment Notices abrogated the amount and the details of the assessment with the issuance of new assigned assessment numbers. In short, petitioner posits that the issuance of the Amended Assessment Notices is an entirely new assessment for taxable year 2008.

The Court finds petitioner's contention untenable. The Court notes that petitioner failed to specifically indicate what details were not included in the original FAN that were included in the FDDA and the Amended Assessment Notices. Allegations are not evidence, and without evidence, bare allegations do not prove facts. 61 Verily, upon scrutiny of FDDA with Amended Assessment Notices and comparing the same to the FAN, there is no modification or additional items that were not already contained in the original FAN.

As to the abrogated amount, the Court finds that the increase in the amount in the Amended Assessment Notices is due to the interest and not the basic tax due. Truth to tell, a comparison of the FAN and the FDDA with the Amended Assessment Notices reveal 60 Bank of the Philippine Islands vs. Commissioner of Internal Revenue, G. R. No. 139736 October 17, 2005 states "A judicial action for the collection of a tax may be initiated by the filing of a complaint with the proper regular trial court; or where the assessment is appealed to the CTA, by filing an answer to the taxpayer's petition for review wherein payment of the tax is prayed for. (Philippine National Oil Company v. Court of Appeals, G.R No. 109976, 26 April 2005; Fernandez Hermanos, Inc. v. Commissioner of Internal Revenue, G.R. No. L-21551, 30 September 1969, 29 SCRA 552; Palanca, eta/. v. Commissioner of Internal Revenue, Ibid.)". 61 Sabellina vs. Buray eta/., G.R No. 187727, September 2, 2015. \f\ that respondent considered petitioner's protest and reduced petitioner's basic tax liabilities. Stated differently, the FDDA with Amended Notices constitute respondent's decision on petitioner's request for reinvestigation. The FDDA and Amended Notices could not be regarded as new assessments since there was no change on the basis of the original income tax, VAT and EWT assessments issued against petitioner. The FAN contains factual and legal basis.

Anent the fifth and sixth issues, petitioner contends that it was deprived of the due process of law, and that it is not liable for the deficiency VAT, EWT and income tax assessments for lack of legal and factual basis.

After due consideration of petitioner's argument, the Court finds the same without basis.

Contrary to

petitioner's allegations, records reveal that respondent provided factual and legal bases for the assessment of VAT, EWT and income tax against petitioner as shown in the Details of Discrepancies 62 attached to the FAN. Since the assessment contains factual and legal basis, there is no violation of petitioner's right to due process.

Indeed, all presumptions are in favor of the correctness of tax assessments63 and it is incumbent upon the taxpayer to prove the contrary. 64 Having disposed of the legal issues, the Court shall now discuss the validity of the assessment by looking into the propriety of each item.

62 Exhibit "P·8", CTA Docket, Vol. I, pp. 377-378; Exhibits "R-9-b" & "R-9-c", CTA Docket, Vol. II, pp. 446-447.

63 Sy Po vs. Court of Tax A_opeals, G.R. No. 81446 August 18, 1988. 64 Commissioneroflntemal Revenue vs. Tuason, G.R. No. 85749, May 15, 1989. t!L.

I.

Deficiency Income Tax for Taxable Year 2008

Respondent assessed petitioner the amount of P17, 105,317.94 composed of P6, 706,166.54 basic deficiency income tax and P1 0,399,151.40 interest, computed as follows: 65 Taxable income (loss) per ITR ~ (12,265,079.48)

Add:

Unaccounted expenses ~1 '1 02,290.16 (Schedule 1 l Disallowed expenses due to 18,131,582.90 19,233,873.06 non-withhold ina (Schedule 2)

Total

p 6,968,793.58 ------

Add:

NOLCO

12,265,079.48

Adjusted Taxable Income

~ 19,233,873.06

Income Tax Due

6,731,855.57

Less:

Tax credits/payments - Prior year's excess credits other - than MCIT Creditable tax withheld - Payments made ~ 368,934.66 368,934.66 Less: Excess MCIT over NCIT 368,934.66 Excess amount carried - 368,934.66 - forward to the succeeding period

Basic Deficiency Tax

~ 6,731,855.57

Less:

Basic deficiency tax paid - 25,689.03 02/20/12 Basic deficiency tax still due ~ 6,706,166.54

Add:

Interest (04/16/09 to 1/13/17)

10,399,151.40

TOTAL AMOUNT DUE

p 17,105,317.94 The computation by respondent of the deficiency income tax hinges on the following items of assessment:

Item

Amount

Unaccounted Expenses

p 1,102,290.16 Disallowed Expenses due to Non-withhold ina 18,131,582.90

Net Operating Loss Carry-Over

12,265,079.48 Excess of MCIT over NCIT 368,934.66 A.

Unaccounted Expenses-fi#1, 102,290.16 Verification made by respondent disclosed that expenses amounting to t-1,102,290.16 were not explained nor accounted in petitioner's financial statements. Such amount represented the 65 Final Decision on Disputed Assessment, Exhibit "P-10", Docket, pp. 396-400. " difference between the expense items found in petitioner's financial statements (FS) or income tax return (ITR) vis-a-vis its Alphalist, as follows: 66

Expenses/Income

Per FS/ITR

Per Alphalist/1601 E

Unaccounted Expenses

Payments

Salaries and wages fD 24,542,996.33 p 25,611,402.48 p 1,068,406.15

Rent

49,196.40 83,080.41 33,884.01

Total

~ 24,592,192.73 ~ 25,694,482.89 ~ 1,102,290.16 Respondent imputed an undeclared source of income for P1, 102,290.16 on the assumption that since there are undeclared expenses incurred by petitioner, there were undeclared sources of income to pay the same.

While it is a settled rule that all presumptions are in favor of correctness of tax assessments, tax assessments should not be based on mere presumptions no matter how reasonable or logical said presumptions may be, and in order to stand the test of judicial scrutiny, such assessments must be based on actual facts. 67 Here, there is no factual basis to support the assessment that the alleged unaccounted expenses arising from the excess payments found in petitioner's Alphalist as compared to its FS/ITR, would translate to undeclared income on the part of petitioner. As stated in the Details of Discrepancies68 attached to the FDDA, 69 the assessment is based merely on the inference that undeclared expenses reflect undeclared sources of income.

For income to be taxable, the following requisites must exist: (a) there must be gain; (b) the gain must be realized or received; and, (c) the gain must not be excluded by law or treaty from taxation. 70 These requisites were not met in this case as respondent was not able to show that there was any gain actually or constructively realized or received by petitioner. Moreover, any claim of undeclared income is offset by the corresponding expense payment. Respondent merely presumed that there was a gain on the part of petitioner as a result of unaccounted expenses.

66 Details of Discrepancies, Exhibit "P-8", Docket, pp. 377-378. 67 Commissioner of Internal Revenue vs. Island Garment Manufacturing Corp., G. R. No. L -46644, September 11, 1967.

68 Exhibit "P-8", Docket, pp. 398-399. 69 Exhibit "P-10", Docket, pp. 396-397. 7° Chamber of Real Estate and Builders Association, Inc. vs. Romulo, G.R. No. 160756, March 9, 2010.

~

Thus, based on the foregoing, the Unaccounted Expenses item in the amount ofP1,102,290.16 is cancelled. B.

Disallowed

Expenses

due to Non-withho/ding- !'#18, 131,582.90 Respondent's verification disclosed that petitioner failed to withhold and remit EWT on certain expenses paid by petitioner; hence, said expenses were disallowed in accordance with Section 34 (K) of the NIRC of 1997, as amended. The amount of disallowance was computed as follows: 71

Expense/Income

Per FS/ITR

Per Alphalist/

Difference

Rate

EWTDue

Payments

1601E

Purchase of Goods:

Direct Materials

f09,656,874.30

Repairs and

142,441.52

Maintenance

Direct Charges-

13,358,265.60

Others

Office Supplies

268,606.43

Subtotal

f023,426, 187.85 f05,303, 718.61 f018, 122,469.24 1% f0181 ,224.69

Professional

879,395.47 768,609.89 110,785.58 15% 16,617.84

Fees

Management and

1,968,000.00 1,848,000.00 120,000.00 15% 18,000.00

Consultants

Purchase of Services/Contractors

Outside Services

11,695,585.20

Security Services

803,590.83

Advertising

1 ,452, 728.00

Research &

359,036.78

Development

Insurance

121,597.59

Representation &

266,100.54

Entertainment

Transportation

236,625.68 Communication, 1,948,693.48

Light & Water

Miscellaneous

4,485,613.94

Expense

Subtotal

f021 ,369,572.04 16,692,493.03 4,677,079.01 2% 93,541.58

Total

f047,643,155.36 1"24,612,821.53 1"23,030,333.83 1"309,384.11 Less: Total income payments attributable to the 4,898,750.93 81,375.78 deficiency EWT paid on 02/20/12 Disallowed Expenses due to Non-Withholding 1"18,131,582.90 f0228,008.33 71 Details of Discrepancies, Exhibit "P-8", Docket, p. 377. ~

1.

Purchase of Goods-P18, 122,469.24 Items of expenses found in the FS/ITR such as Direct Materials, Repairs and Maintenance, Direct Charges-Others, and Office Supplies totaling P23,426, 187.85 were compared to amounts in petitioner's Alphalist corresponding to expense items that were subjected to 1% EWT representing income payments made by the top 10,000 private corporations to suppliers of goods in the amount of P5,303, 718.61. The discrepancy of P18, 122,469.24 was considered by respondent as an invalid deduction for failure to withhold the 1% EWT corresponding to P181,224.69.

Review of petitioner's Alphalist in BIR Form 1601 E shows the following:

Month

Payments Made by Top 10,000

Exhibit

Corporations (EC158)

Income Payment

EWT

January

1" 875,267.14 1" 8,752.67

P-13-A-ICPA to P-13-B-ICPA

P-13-Y-ICPA to P-13-Z-ICPA

February

775,922.06 7,759.22

P-13-C-ICPA to P-13-D-ICPA

P-13-Y-ICPA to P-13-Z-ICPA

March

673,454.24 6,734.54

P-13-E-ICPA to P-13-F-ICPA

P-13-AC-ICPA to P-13-AD-ICPA

April

733,105.31 7,331.05

P-13-G-ICPA to P-13-J-ICPA

P-13-AE-ICPA to P-13-AG-ICPA

May

822,429.05 8,224.29

P-13-K-ICPA to P-13-L-ICPA

P-13-AH-ICPA

June

695,768.35 6,957.68

P-13-M-ICPA to P-13-N-ICPA

P-13-AI-ICPA

July

423,446.00 4,234.46

P-13-0-ICPA to P-13-P-ICPA

P-13-AJ-ICPA

August

351,504.00 3,515.04

P-13-0-ICPA to P-13-R-ICPA

P-13-AK-ICPA

September

504,889.00 5,048.89

P-13-S-ICPA to P-13-T-ICPA

P-13-AL-ICPA

October

324,269.00 3,242.69

P-13-U-ICPA to P-13-V-ICPA

P-13-AM-ICPA

November

198,484.00 1,984.84

P-13-W-ICPA

P-13-AN-ICPA

December

93,458.00 934.58

P-13-X-ICPA

P-13-AO-ICPA

Total

1" 6,471,996.15 1" 64,719.96 Comparison of the amount presented in the Alphalist vis-a-vis petitioner's FS72 and ITR for 200873 yielded the following result:

Item

Per FS/ITR

Direct Materials

p 9,453,248.25

Repairs &

142,441.52

Maintenance

72 Exhibits "P-4-A-ICPA" to "P-4-AQ-ICPA". 73 Exhibits "P-6-A-ICPA" to "P-6-G-ICPA".

Per Alphalist/1601 E

Difference

c{\

Direct Charges-Others

Office Supplies

Total

~ 15,980,322.32 272,232.93 25,848,245.02 ~ 6,471,996.15 ~ 19,376,248.87 a.

Direct Materials-P9,453,248.25 The examination made by Mr. Michael L. Aguirre, the Court- commissioned Independent Certified Public Accountant (ICPA), produced the following results with respect to this item of assessment: 74

Particulars

Amount

Exhibits

Subjected to 1% withholding

I"

481,649.24

P-13-A-ICPA to P-13-AO-ICPA

tax Subjected to 2% withholding 595,287.77

P-13-A-ICPA to P-13-AO-ICPA

tax Payments to EWT -exempt 91,042.12

P-25-A-ICPA to P-25-H-ICPA

entity P-26.1-A-ICPA to P-26.1-L-ICPA Payments for taxes and 3,280,533.63 P-26.6-A-ICPA to P-26.6-AD.2-ICPA licenses Adjustments for consumption 4,678,148.91 P-28-A.1-ICPA to P-28-CM.2-ICPA of supplies inventory Payments to regular 36,571.93 suppliers Payments from petty cash 51,257.15 P-26.1-M-ICPA to P-26.1-IF-ICPA fund Payments from petty cash 238,757.25 P-26.1-IG-ICPA to P-26.1-KF-ICPA supported only by reprinted

AP Batch Listing-Invoice

Total

~ 9,453,248.00 According to the ICPA, the income payments of P481 ,649.24 and P595,287.77 were traced to the Alphalist of petitioner, which were properly subjected to withholding of taxes at the rate of 1% and 2%, respectively. The Courts notes, however, that the Alphalist alone only proves that petitioner withheld taxes in 2008, and the Court cannot ascertain whether the amounts included therein were recorded as part of Direct Materials expense. Petitioner failed to adduce evidence that would show that the amounts found therein were included in Direct Materials as part of its cost of sales/services. The ICPA likewise found that petitioner made income payments in the amount of P91 ,042.12 to Market Place Christian Church Multi- Purpose Cooperative, which petitioner claims is an entity exempt from paying income tax. As proof of the entity's tax-exempt status, petitioner submitted the said entity's Certificate of Registration with the Cooperative Development Authority (CDA), 75 Certificate of Tax 74 1CPA Report, Exhibit "P-16", pp. 12-13. 7s Exhibit "P-25-A-ICPA".

rJI

Exemption,76 CDA Certificate of Operation, 77 and BIR Ruling on Tax Exemption. 78 Under Articles 61 and 62 of Republic Act (RA) No. 6938 or the Cooperative Code of the Philippines, duly registered cooperatives not transacting business with non-members, and certain cooperatives transacting business with both members and non-members are exempt from the payment of any government taxes and fees imposed under the Internal Revenue Laws and other tax laws. These provisions are implemented by RR No. 20-2001 dated November 12, 2001.

The Certificate of Tax Exemption issued under Section 7 of RR No. 20-2001 is the best evidence to show that a duly registered cooperative complied with the requirements to be tax exempt under the Cooperative Code. The Certificate of Tax Exemption granted to Market Place Christian Church Multi-Purpose Cooperative shows that it was only issued on February 21, 2013, hence, not covering the taxable period under assessment in this case. The BIR Ruling on Tax Exemption of Market Place Christian Church, which was issued on November 26, 2007, however, ruled that the "cooperative has complied with the conditions sine qua non provided under Revenue Regulations No. 20-2001 dated November 12, 2001, which is the Regulations Implementing Articles 61 and 62 of R.A. 6938, and that its accumulated reserves and undivided net savings do not exceed the threshold of P10 Million, this Office hereby grants this Certificate of Tax Exemption to Market Place Christian Church Multi-Purpose Cooperative[.]" With this SIR Ruling, which covered the period under assessment, the said Cooperative is exempt from the payment of income tax, and withholding of income payments to it is not required. To establish that business expenses are deductible for income tax purposes, such must pass the substantiation requirements under Section 34 (A) (1) (b) of the NIRC of 1997, which reads as follows: "No deduction from gross income shall be allowed under Subsection (A) hereof unless the taxpayer shall substantiate with sufficient evidence, such as official receipts or other adequate records: (i) the amount of the expense being deducted, and (ii) the direct connection or relation of the expense being deducted to the development, management, operation and/or conduct of the trade, business or profession of the taxpayer." 76 Exhibit ''P-25-B-ICPA" and "P-25-C-ICPA". 77 Exhibit "P-25-D-ICPA".

7' Exhibit "P-25-E-ICPA" to "P-25-H-ICPA", ri'

In the present case, petitioner submitted as evidence the Official Receipts issued by Market Place Christian Church Multi- Purpose Cooperative79 as evidence of its income payments to said Cooperative, as follows:

OR No.

Date

Exhibit

Income Payment

1967 2/14/2008 P-26.1-A ~ 110,365.46 2076 3/12/2008 P-26.1-B 104,685.93 2110 3/19/2008 P-26.1-C 102,969.12 2111 3/19/2008 P-26.1-D 95,026.36 2145 3/28/2008 P-26.1-E 84,445.06 2216 4/18/2008 P-26.1-F 84,542.51 2313 5/13/2008 P-26.1-G 91,623.97 2358 5/23/2008 P-26.1-H 82,994.41 2361 5/23/2008 P-26.1-1 91,407.78 2478 6/23/2008 P-26.1-J 91,686.37 2506 6/27/2008 P-26.1-K 94,056.09 2575 7/10/2008 P-26.1-L 93,196.45

Total

,.

1 '126,999.51 The ICPA found that only the amount of P91 ,042.12 out of P1, 126,999.51 is attributable to Direct Materials. The Court, however, cannot ascertain the veracity of this finding. Petitioner failed to offer evidence to prove that its payments amounting to P91 ,042.12 were incurred as part of its Direct Materials expense in its Cost of Sales. Absent petitioner's books and accounting records presented as evidence, the Court cannot validly vouch whether the amount of P91,042.12 can really be traced to the cost of Direct Materials. Without such evidence, the payments made to the tax-exempt Cooperative may have been included in other expense items which can be claimed as allowable deduction in the ITR. The amount of P3,280,533.63 was found by !CPA to pertain to payments for taxes and licenses, and thus not subject to withholding. Scrutiny of the FSIITR of petitioner shows that the total amount of fit10, 135,144.00 was included in the Taxes and Licenses account in petitioner's cost of services/sales. Petitioner, however, failed to present evidence that the amount claimed therein was included in the computation of the cost of Direct Materials. In its ITR, petitioner's cost of sales/services account is composed of various items in addition to Direct Materials. Hence, the Court could not ascertain the veracity of the !CPA's findings that the amount of fit3,280,533.63 pertained to Direct Materials expense.

The ICPA also found that the amount of P4,678, 148.91 is included in

Direct

Materials

representing adjustments for consumption of supplies in inventory. This amount represents the 79 Exhibits "P-26.1-A" to "P-26.1-L". cf' supplies of food ~nd beverage inventories that were initially recorded as asset accounts upon each purchase, and then expensed monthly using the periodic inventory system. To support the claim that the proper withholding has been made on these purchases, petitioner submitted its GIL Batch Listing and schedules of food and beverage inventory, 80 and certain sales invoices and official receipts issued to "My Place Sandbox."81 Review of the evidence presented does not establish that the purchases of inventory by petitioner were subjected to the proper withholding tax as the Court cannot ascertain whether those purchases were included in the Alpha list. In his findings, the ICPA found that the amount of ft51,257.15 were casual payments to non-regular suppliers of petitioner which are not subject to EWT. Petitioner, however, did not adduce evidence that the payments made were to non-regular suppliers. Petitioner failed to present as evidence the list of its regular suppliers as required by the rules. It must be noted that under Section 2.57.2 (M) of RR No. 2-98, as amended by RR No. 14-2008 dated November 26, 2008, petitioner, as withholding agent of EWT, is required to submit its list of regular suppliers to the BIR, to wit: "The withholding agent shall submit on a semestral basis a list of its regular suppliers of goods and/or services to the Large Taxpayers Assistance Division/Large Taxpayers District Office in the case of large taxpayers duly notified as such pursuant to RR 1-98, as amended, or Revenue District Office (RDO) having jurisdiction over the withholding agent's principal place of business on or before July 31 and January 31 of each year."

The ICPA likewise found that the amount of P238,757.25 was traced to petitioner's cash disbursement book but were not supported by official receipts or invoice but only petitioner's AP Batch Listing- Invoice from its accounting system; hence, petitioner was unable to substantiate this amount.

In sum, for reasons as afore-discussed, the amount of ft9,453,248.25 for Direct Materials was properly disallowed as an expense.

80 Exhibits "P-28-A.1-ICPA" to "P-28-CM.2-ICPA". 81 Exhibits "P-30-A.1-ICPA" to "P-30-A.6-ICPA". ci\ b.

Repairs and Maintenance-tD142,441.52 The ICPA found that the amount of P109, 107.35 may be traced from the Alphalist. The amount of P5, 181.79 represented payments from the petty cash fund to non-regular suppliers, and the amount of P28, 152.86 was supported by AP Batch Listing Invoice. Petitioner, however, failed to adduce evidence that would show that this item of assessment was properly included in the Repairs and Maintenance expense as part of its cost of sales/services. Review of the Alphalist alone only establishes the fact of withholding. As discussed, petitioner likewise failed to present sufficient evidence to prove that all of the alleged purchases amounting to P5, 181.79 were casual purchases of goods. Likewise, petitioner failed to substantiate the amount of P28, 152.86 with official invoices and receipt. Hence, the disallowance of the item on Repairs and Maintenance in the amount ofP142,441.52 is upheld.

c.

Direct Charges-Other-P15,980,322.32 The examination made by the ICPA showed that this item of assessment is composed of the following:

Particulars

Amount

Exhibits

Subjected to 1% withholding tax p 897,718.19

P-13-A-ICPA to P-13-AO-ICPA

Subjected to 2% withholding tax 7,059,113.36

P-13-A-ICPA to P-13-AO-ICPA

Payments to EWT -exempt 777,180.41

P-25-1-ICPA to P-25-P-ICPA

entity_ P-26.3-A-ICPA to P-26.3-U-ICPA Payments for taxes and 6,854,610.55 P-26.6-A-ICPA to P-26.6-AD.2-ICPA licenses

Adjustments for

(1 '132,267.37) reimbursements of expenses Payments from petty cash fund 23,295.36 P-26.3-V-ICPA to P-26.3-HR-ICPA Payments from petty cash 1,500,681.50 P-26.3-HS-ICPA to P-26.3-11-ICPA supported only by reprinted AP

Batch Listing-Invoice

Total

p 15,980,332.00

I

---- · - - The ICPA found that income payments of P897,728. 19 and P7,059, 113.36 were traced to the Alphalist. Petitioner, however, failed to present evidence that would ascertain that these payments were duly recorded and included in the Direct Charges-Other expense account that were included in petitioner's cost of sales/services as found in the FS/ITR. The ICPA likewise found that income payment in the amount of P777,180.41 were made to Maynilad Water Co., Inc. (Maynilad), a company registered with the Board of Investments (BOI). Petitioner claims that the payment made to Maynilad is exempt from withholding tax under Section 2.57.5 (B) (2) of RR No. 2-98. To prove Maynilad's income tax-exempt status, petitioner submitted Maynilad's Certificate t1\ of Registration with the 801, 82 with attached terms and conditions of income tax holiday, 83 and BIR Ruling dated August 5, 2008 ruling that Maynilad is exempt from the coverage of the withholding tax system. 84 To establish the fact of income payments made to Maynilad, petitioner presented Statements of Account issued by Maynilad to Sta. Mesa Tourist Development Corporation, Anito Classic II, and An ito Lodge. 85 Petitioner likewise presented the SEC Certificate of Filing of the Articles and Plan of Merger between petitioner and Sta. Mesa Tourist Development Corp. and Supreme Harmony Corp. 86 and BIR Certificate of Registration. 57 Despite being established by evidence on record that Maynilad was an income-tax exempt entity, petitioner still failed to adduce evidence that income payments were made to Maynilad. Petitioner did not present evidence that will prove that the supposed payments to Maynilad were duly recorded in Direct Charges-Others account as part of petitioner's cost of sales/services. Moreover, petitioner only submitted Statements of Account of its absorbed corporations, which fails the substantiation required by Section 34 (A) (1) (b) of the NIRC of 1997.

The amount of f'6,854,610.55 for payment of taxes and licenses was found by the ICPA to be allocated in this item of assessment. Petitioner, however, did not present evidence that the payments made were included as part of its "Direct Charges-Others" account, the same way as it failed to prove that it allocated part of these payments to "Direct Materials", as previously discussed. The I CPA finally found that fit1, 132,267.37 worth of adjustments had to be made regarding correcting entries on water, electricity and communication expenses. He likewise found that P23,295.36 were casual purchases made to non-regular suppliers, and that P1 ,500,681.50 were purchases traced to the cash disbursement book but no official receipt or invoice was presented. For failure to present evidence to prove these transactions by non-presentation of the correcting entries in the journal, the list of regular suppliers, and the 82 Exhibit "P-25-1-ICPA".

83 Exhibits "P-25-J-ICPA" to "P-25-N-ICPA". 84 Exhibits "P-25-0-ICPA" to "P-25-P-ICPA". 85 Exhibits "P-26.3-A-ICPA" to "P-26.3-U-ICPA". 86 Exhibits "P-27-A-ICPA" to "P-27-AD-ICPA". 87 Exhibits "P-27-AE-ICPA" to "P-27-AI-ICPA". ~ official receipts or invoice required for substantiation, the disallowance of this item of expenses is upheld. In view of the foregoing, the assessment arising from the disallowance of the Direct Charges-Other item in the amount of P15,980,322.32 is sustained.

d.

Office Supplies-P268,606.43 Similar to the previous items, the ICPA found that the amount of t-170, 197.51 herein may be traced from the Alphalist, and P102,034.49 pertains to various purchases from non-regular suppliers, of which P47,844.11 was traced to the cash disbursement book. As discussed, petitioner failed to adduce evidence to show that the amounts withheld were included in the Office Supplies expense account, and that the supposed casual payments to non-regular suppliers is properly substantiated. Hence, the disallowance of this item of Office Supplies in the amount of t-268,606.43 is upheld. In summary, amount of disallowed Purchases of Goods should be as follows:

Expense/Income Payments

Income Payment

PerFSIITR

Direct Materials

'" 9,453,248.25

Repairs and Maintenance

142,441.52

Direct Charges-Others

15,980,322.32

Office Supplies

268,606.43

Subtotal

'" 25,844,618.52 Per A/pha/ist/1601 E p 6,471,996.15

Disallowed Purchases of Goods

p 19,372,622.37 Nonetheless, since the amount of discrepancy for income payments constituting purchase of goods as computed by the Court exceeded the amount of t-18, 122,469.24 as determined by respondent's examiner, consistent with due process of law, the amount of disallowance as determined by respondent's examiner must prevail.

2.

Professional Fees-P879,395.47 Review shows that the amount of P359,896.14 is traceable to petitioner's Alphalist in BIR Form, as follows: c'\

Month

Income

Payment

January

p 55,193.13 12,000.00

February

68,222.23 -

March

36,481.16 -

April

27,000.01 -

May

22,555.56 -

June

- -

July

55,666.60 -

August

28,333.34 -

September

18,333.34 -

October

26,333.34 12,000.00

November

18,333.00 -

December

18,333.33 - Per p 398,785.04 Alpha/ist/1601 E

Per FS/ITR

,. 875,506.58

Difference

P(476,721.54)

Rate

10% ,.

15% 10% 15% 10% 15% 10% 15% 10% 15% 10% 15% 10% 15% 10% 15% 10% 15% 10% 15% 10% 15% 10% 15% p p ,.

-

EWT(WC010/

Exhibit

WC011)

5,519.31

P-13-A-ICPA to P-13-B-ICPA

1,800.00

P-13-Y-ICPA to P-13-Z-ICPA

6,822.22

P-13-C-ICPA to P-13-D-ICPA

-

P-13-Y-ICPA to P-13-Z-ICPA

3,648.12

P-13-E-ICPA to P-13-F-ICPA

-

P-13-AC-ICPA to P-13-AD-

I CPA

2,700.00

P-13-G-ICPA to P-13-J-ICPA

-

P-13-AE-ICPA to P-13-AG-

I CPA

2,255.56

P-13-K-ICPA to P-13-L-ICPA

-

P-13-AH-ICPA

-

P-13-M-ICPA to P-13-N-ICPA

-

P-13-AI-ICPA

5,566.66

P-13-0-ICPA to P-13-P-ICPA

-

P-13-AJ-ICPA

2,833.33

P-13-Q-ICPA to P-13-R-ICPA

-

P-13-AK-ICPA

1,833.33

P-13-S-ICPA to P-13-T-ICPA

-

P-13-AL-ICPA

2,633.33

P-13-U-ICPA to P-13-V-ICPA

1,800.00

P-13-AM-ICPA

1,833.30

P-13-W-ICPA

-

P-13-AN-ICPA

1,833.33

P-13-X-ICPA

-

P-13-AO-ICPA

59,817.76 131,325.99 {71 ,508J13) - - - ---- The ICPA found that income payment in the amount of fD30,000.00 was made to an EWT-exempt entity, specifically to "Rayala Alonso and Partners," a general professional partnership (GPP).

It must be noted that under Section 26 of the NIRC of 1997, as amended, GPPs are, as an entity, exempt from the payment of income taxes and consequently, from withholding tax. Section 2.57.5 (B) {4) of RR No. 2-98, as amended by RR No. 14-02, likewise provides:

"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:

(A)

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: rl\

(1)

XXX

XXX

XXX

XXX

(4) General Professional Partnerships." To support its claim, petitioner submitted the partnership's SEC Certificate of Registration and Articles of Partnership, 88 and official receipt89 showing payment of said amount to the said GPP. Thus, petitioner was able to substantiate that the P30,000.00 income payment was made to a GPP.

The I CPA also found that payments were made out of the petty cash fund in the total amount of P15,902.80. However, as the ICPA found that no invoice or receipt was presented to substantiate these transactions, albeit petitioner submitted the printed AP Batch Listing from its accounting system.

In sum, the disallowance of the item of Professional Fees is upheld but in the modified amount of P446, 721.54, computed as follows:

Item

Amount of Income Payment

Per FS/ITR

p 875,506.58

Less: Traced to AlphalisUBIR Form 1601E

p 398,785.04

Income Payment to GPP

30,000.00 p 428,785.04

Balance

p 446,721.54 - -- -- 3.

Management and Consultancy-t-1 ,968,000.00 Review of petitioner's Alphalist in BIR Form 1601E as compared to its FS90 and ITR for 200891 shows the following:

Month

Income Payment

January

p 360,824.73

February

-

March

12,000.00

April

- 88 Exhibits "P-25-Q-ICPA" to "P-25-U-ICPA". 89 Exhibit "P-26.5-A-ICPA".

90 Exhibits "P-4-A-ICPA" to "P-4-AQ-ICPA". 91 Exhibits "P-6-A-ICPA" to "P-6-G-ICPA".

EWT(WC051)

Exhibit

p 54,123.71

P-13-A-ICPA to P-13-B-ICPA

P-13-Y-ICPA to P-13-Z-ICPA

-

P-13-C-ICPA to P-13-D-ICPA

P-13-Y-ICPA to P-13-Z-ICPA

1,800.00

P-13-E-ICPA to P-13-F-ICPA

P-13-AC-ICPA to P-13-AD-

I CPA

-

P-13-G-ICPA to P-13-J-ICPA

P-13-AE-ICPA to P-13-AG-

rJ\

May

June

July

August

September

October

November

December

Per Alphalistl

p

1601E

Per FS/ITR

p

Difference

p - - 12,000.00 48,000.00 12,000.00 - 1,621,000.00 143,000.00 2,208,824. 73 p 1,572,000.00 p 636,824.73 p

I CPA

-

P-13-K-ICPA to P-13-L-ICPA

P-13-AH-ICPA

-

P-13-M-ICPA to P-13-N-ICPA

P-13-AI-ICPA

1,800.00

P-13-0-ICPA to P-13-P-ICPA

P-13-AJ-ICPA

7,200.00

P-13-Q-ICPA to P-13-R-ICPA

P-13-AK-ICPA

1,800.00

P-13-S-ICPA to P-13-T-ICPA

P-13-AL-ICPA

-

P-13-U-ICPA to P-13-V-ICPA

P-13-AM-ICPA

243,150.00

P-13-W-ICPA

P-13-AN-ICPA

21,450.00

P-13-X-ICPA

P-13-AO-ICPA

331,323.71 235,800.00 95,523.71 Since the income payments for management and consultancy services actually exceeded the aggregate amount of expenses as shown in FS/ITR, this assessed item of expense has been validly withheld with the 15% EWT. Hence, the disallowance of the item of Management and Consultancy in the amount of P1 ,968,000.00 is cancelled.

4.

Purchases of Services/Contractors-t-21 ,369,572.04 Review of petitioner's Alphalist in BIR Form 1601 E reveals the following:

Prime Contractors/Sub-

Month

Contractors (WC120)

Exhibit

Income Payment

EWT

January

p 2,553,584. 76 ~ 51,071.70

P-13-A-ICPA to P-13-B-ICPA

P-13-Y-ICPA to P-13-Z-ICPA

February

2,292,195.39 45,843.91

P-13-C-ICPA to P-13-D-ICPA

P-13-Y-ICPA to P-13-Z-ICPA

March

2,578,264.17 51,565.28

P-13-E-ICPA to P-13-F-ICPA

P-13-AC-ICPA to P-13-AD-ICPA

April

1,634,675.99 32,693.52

P-13-G-ICPA to P-13-J-ICPA

P-13-AE-ICPA to P-13-AG-ICPA

May

2,554,872.44 51,097.45

P-13-K-ICPA to P-13-L-ICPA

P-13-AH-ICPA

June

1,017,877.37 20,357.55

P-13-M-ICPA to P-13-N-ICPA

P-13-AI-ICPA

July

1,525,954.00 30,519.08

P-13-0-ICPA to P-13-P-ICPA

P-13-AJ-ICPA

~

August

September

October

November

December

Total

975,697.14 951,241.50 1,067,339.23 2,970,695.00 116,746.30 ~ 20,239,143.29 19,513.94

P-13-Q-ICPA to P-13-R-ICPA

P-13-AK-ICPA

19,024.83

P-13-S-ICPA to P-13-T-ICPA

P-13-AL-ICPA

21,346.78

P-13-U-ICPA to P-13-V-ICPA

P-13-AM-ICPA

59,413.90

P-13-W-ICPA

P-13-AN-ICPA

2,334.93

P-13-X-ICPA

P-13-AO-ICPA

~ 404,782.87 Comparison of the amount shown in the Alphalist vis-a-vis petitioner's FS92 and ITR for 200893 yield the following result:

Purchases of Services/

Per FS/ITR

Per Alphalistl

Difference

Contractors

1601E

Outside Services

~ 11,695,585.20

Security Services

803,590.83

Advertising

1,461,455.36

Research and Development

415,925.13

Insurance

121,598.00

Representation and Entertainment

266,100.54

Transportation

253,830.68 Communication, light and water 1,891 ,804. 76

Miscellaneous

1 '739,849.18

Total

p 18,649,739.68 p 20,239,143.29 p (1 ,589,403.61) The analysis shows that the income payments for services/contractors per the

Alphalist

actually exceeded the aggregate amount of related expenses per FS/ITR. Thus, this item of assessment is likewise cancelled.

In summary, the amount of P18,569, 190.78 is sustained as disallowed expenses due to non-withholding, computed as follows:

Expense/Income

Per FS/ITR

Payments

Purchase of Goods: ,.

23,426,187.85

Professional Fees

845,506.58

_Total

~ 24,271,694.43 92 Exhibits "P-4-A-ICPA" to "P-4-AQ-ICPA". 93 Exhibits "P-6-A-ICPA" to "P-6-G-ICPA".

Per Alphalist/1601 E

Difference

,.

5,303, 718.61 ,.

18,122,469.24 398,785.04 446,721.54 ~ 5,702,503.65 ~ 18,569,190.78 ~

C.

Net

Operating

Loss

Carry

Over

(NOLCO)-

F12, 265,079.48 Respondent added back the amount of supposed net loss of petitioner for taxable year 2008 in the amount of t-12,265,079.48 upon the allegation that petitioner operated on taxable income for the period.

It must be noted that in its amended ITR for taxable year 2008, 94 petitioner incurred a net operating loss of only P8,753,679.98. Respondent failed to provide the factual and legal bases for the disallowance of the stated amount as he only alleged, as stated in the Details of Discrepancy attached to the FDDA, that petitioner operated on a taxable income instead of a net operating loss. The requirement to state in writing the factual and legal bases of an assessment is part of a taxpayer's right to due process. 95 Failure to observe such requirement renders the assessment void. 96 Moreover, examination of petitioner's ITRs for taxable years 2009,97 201098 and 2011 99 show that petitioner was subjected to the minimum corporate income tax (MCIT), instead of the normal corporate income tax (NCIT) of 30% of taxable income since petitioner operated on a net operating loss position in all those years, as follows:

Taxable

Gross

Taxable

MCIT

NCIT

Exhibit

Year

Income

Income (loss) 2008 14,218,612.95 {8,753,679.98) 284,372.26 -

P-6-A-ICPA to P-6-F-

I CPA

2009 4,071,373.23 (15,281 ,206.86) 81,427.46 -

P-24-A-ICPA to P-24-D-

I CPA

2010 5,230,258.29 {4,452,535.42) 104,605.17 -

P-24-E-ICPA to P-24-H-

I CPA

2011 12,542,914.00 (116,301.00) 250,858.28 -

P-24-J-ICPA to P-24-Q-

I CPA

Under Section 27 (E) of the NIRC of 1997, as amended, the MCIT is imposed on the "gross income" of the taxpayer domestic corporation at the rate of two percent (2%). Gross income, for purposes of the MCIT, is defined as "gross sales less sales returns, 94 Exhibits "P-6-A-ICPA" to "P-6-F-ICPA". 95 Commissioner of Internal Revenue v. Liquigaz Philippines Corp., G.R. Nos. 215534 & 215557, April18, 2016.

96 Section 228, NIRC of 1997.

discounts and allowances and cost of goods sold."10° Cost of goods sold includes "all business expenses directly incurred to produce the merchandise to bring them to their present location and use."101 In the computation of MCIT, the benefit of NOLCO is not included as it is not considered a sales return or discount, nor is it part of the cost of goods sold.

Section 6.5 of RR No. 14-2001 dated August 27, 2001 provides:

"6.5. NOLCO in Relation to the Minimum Corporate Income Tax (MC/T). - In general, domestic and resident foreign corporations subject to the normal income tax rate are liable to the 2% MCIT, if applicable, computed based on gross income, whenever the amount of the MCIT is greater than the normal income tax due (computed with the benefit of NOLCO, if any), pursuant to Sections 27 and 28 of the Code. Thus, such corporation cannot enjoy the benefit of NOLCO for as long as it is subject to MCIT in any taxable year. Provided, however, that the running of the three-year period for the expiry of NOLCO is not interrupted by the fact that such corporation is subject to MCIT in any taxable year during such three-year period." (Boldfacing supplied) In this case, it was shown by petitioner that during the three (3) years succeeding 2008, it was not able to avail of the benefit of NOLCO due to the imposition of the MCIT in those years. Since such benefit was not availed of, it is improper for respondent to add back the amount of NOLCO for taxable year 2008 as part of petitioner's adjusted taxable income. Hence, this item of assessment is cancelled.

D.

Excess MCIT Over NC/T-,.368,934.66

Respondent

disallowed the amount of P368,934.66 representing petitioner's excess MCIT over NCIT which he alleged was carried forward and credited against the NCIT for the three (3) years succeeding to taxable year 2008. As with the previous item of assessment, respondent failed to state the factual and legal bases for the disallowance of this amount, which renders it void. It was likewise improper for respondent to disallow the said excess MCIT over NCIT because any tax benefit derived by petitioner from the carry-over of said amount redounds to the succeeding taxable year 2009. Since the tax benefit is in the succeeding year, which is outside the scope of the present 1oo Section 27 (E) (4}, NIRC of 1997. 101 /d.

cA assessment, petitioner, at most, may only be assessed in the said succeeding year.

It must be noted that under Section 27 (E) (2) of the NIRC of 1997, as amended, the excess of MCIT over NCIT can only be carried forward and credited in the immediately succeeding three taxable years, provided that the corporate taxpayer is subjected to the NCIT. Conversely, when the taxpayer is still subjected to MCIT, no carry forward of the excess is applicable. As already found by the Court, petitioner was subjected to MCIT in the three (3) years succeeding taxable year 2008. Since MCIT was imposed on those succeeding years, the excess of MCIT over NCIT cannot be carried forward and applied in those years, and no tax benefit was availed of by petitioner. Therefore this item of assessment is cancelled. It must be noted that on February 20, 2012, petitioner paid P25,689.03 representing deficiency income tax as evidenced by Payment Form (BIR Form No. 0605). 102 Said payment would be credited to its remaining basic deficiency income tax for taxable year 2008.

In sum, deficiency basic income tax for taxable year 2008 stands at P1 ,811 ,815.27, computed as follows: Taxable income (loss) per ITR ~(12,265,079.48)

Add:

Unaccounted expenses -

(Schedule 1J

Disallowed expenses due to 1"18,569, 190.78 18,569,190.78 non-withholding (Schedule 2)

Total

1"6,304, 111.30 -- -------

Add:

NOLCO

-

Adjusted Taxable Income

~.304, 111.30

Income Tax Due

2,206,438.96

Less:

Tax credits/payments - Prior year's excess credits other - than MCIT Creditable tax withheld - Payments made ~368,934.66 368,934.66 Less: Excess MCIT over NCIT - Excess amount carried - - 368,934.66 forward to the succeeding period

Basic Deficiency Tax

1"1 ,837,504.30

Less:

Basic deficiency tax paid - 25,689.03 02/20/12 Basic deficiency tax still due 1"1,811,815.27 1o2 Exhibit "P-7-A-ICPA" ~ 11.

Deficiency VAT for 1st to 4th Quarters of Taxable Year 2008 Respondent assessed petitioner of deficiency VAT for the full taxable year 2008 in the amount of P10,592, 168.28, computed as follows: 103 VA Table receipts per return P64,470,011.27

Add:

Adjustments

Receipts not subjected to VAT ~3,011 ,834.89

(Schedule 3)

Unsupported exempt sales 24,604,871.76 Unaccounted expenses (Schedule 1,102,290.16 28,718,996.81 1) Adjusted VA Table sales P93, 189,008.08

Output Tax (12%)

P11,182,680.97

Less:

Tax Credits/Payments

Prior yea~s excess tax credits p 75,019.57 Deferred input tax carried forward 568,137.86 from previous period Input tax claimed per returns 3,636,326.24 ~4.279,483.67 Less: Unsupported input tax ~ 790,090.24

(Schedule 4)

Input tax carried forward to 191,612.49 succeeding period/quarter Deferred input tax carried 383,200.61 1,364,903.34 2,914,580.33 over to succeedinQ period

Tax Due

p 8,268,100.64

Less:

Payment per returns 3,970,258.10 Basic deficiency tax due ~ 4,297,842.54

Less:

Basic deficiency tax paid - 215,327.84 02/20/12 Basic deficiency tax still due p 4,082,514.70

Add

!Interest (01/26/09 to 1/13/17) 6,509,653.58

TOTAL AMOUNT DUE

~1 0,592,168.28 1.

Receipts not Subjected to VAT-P3,011 ,834.89 Verification by respondent found that certain receipts by petitioner were not subjected to VAT, as follows:

Gross Receipts per FS

Decreases in AIR, net of VAT p 1,702,119.64 Revenues for the year 88,913,500.22 Other income 1,471,098.06 p 92,Q86J17.92_

Less: Gross Receipts per VAT Returns

p 89,074,883.03 Receipts not subjected to VAT p 3,011,834.89 103 Final Decision on Disputed Assessment, Exhibit "P-10", Docket, pp. 396-400. ~

Re-computation by the ICPA showed the following:

Gross Receipts per FS

Decreases in Trade

,.

1,702,119.64 Receivables, net of VAT Trade Receivables, end- ,.

2008, 122,888.39 (1"137,635.00/112%) Trade Receivables, end- 13,035.71 109,852.68 2008, (1"14,600.00/112%) Revenue for the year 2008 88,913,500.22 Other income 1,332,930.00 ,.

90,356,282.90 ·----

Less: Gross Receipts per VAT Returns

,.

89,074,883.03 Receipts not subjected to VAT ,.

1,281,399.87 The ICPA's revalidation is found to be in order. Here, only the change in the balance of the Trade Receivables account was considered, and not the change in the balance of the whole Accounts Receivable account. This is justified since Note 6 of petitioner's FS104 shows that the total receivables account in petitioner's balance sheet likewise consists of non-VATable accounts such as Non-Trade Receivables and Advances to Officers and Employees. In its Memorandum, 105 petitioner posits that the Other Income of P1 ,332,930.00 reported in petitioner's FS pertains to the refund of deposits amounting to t-826,087.85 from the Manila Electric Company, which petitioner contends are not considered sale of goods or services in the ordinary course of trade or business to be considered subject to VAT. Petitioner, however, failed to present any evidence to support such claim, and only alleged it in its pleadings. This was likewise observed by the ICPA in his Report. Hence, the amount of P1 ,281,399.87 is sustained as receipts were not subjected to VAT.

2.

Unsupported Exempt Sales-P24,604,871.76

Respondent's

verification showed that the amount of P24,604,871.76 were exempt sales which petitioner failed to substantiate with necessary documentary evidence, thus considered taxable sales pursuant to Sections 106 and 108 of the NIRC of 1997. Petitioner contends the amount of P20,283,266.00 represent exempt sales arising from lease of dormitories and rooms with a rate per unit not exceeding ft10,000.00. Petitioner contends that these 1o4 Exhibit "P-4-V-ICPA".

105 Petitioner's Memorandum, Docket Vol. II, p. 561. ~-..

rental receipts are not subject to VAT under Section 109 (1) (Q) of the NIRC of 1997, as amended, as follows: "SEC. 109. Exempt Transactions.-

(1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from the value-added tax.

XXX

XXX

XXX

(Q) Lease of a residential unit with a monthly rental not exceeding Ten thousand pesos (P10, 000): Provided, That not later than January 31, 2009 and every three (3) years thereafter, the amount herein stated shall be adjusted to its present value using the Consumer Price Index as published by the National Statistics Office (NSO);

XXX

XXX

xxx" To support its claim that the rental income is VAT-exempt, petitioner presented its 2008 Quarterly VAT Returns, 106 2008 Summary List of Sales (SLS), 107 official receipts, 108 petitioner's Articles of Incorporation, 109 and Lease Terms and Conditions. 110 It must be noted that Section 113 (B) of the NIRC of 1997, as amended, provides for the requirements relative to the issuance of VAT invoices and VAT official receipts, to wit: "SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons.-

XXX

XXX

XXX

(B) Information Contained in the VAT Invoice or VAT Official Receipt. - The following information shall be indicated in the VAT invoice or VAT official receipt:

XXX

XXX

XXX

(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax. Provided, That:

XXX

XXX

106 Exhibits "P-18-A-ICPA" to "P-18-R-ICPA". 107 Exhibits "P-19-A-ICPA" to "P-19-AN-ICPA". 108 Exhibits "P-21-A-ICPA" to "P-21-CLQ-ICPA". 109 Exhibits "P-5-A-ICPA" to "P-5-U-ICPA". 11o Exhibits "P-29-A-ICPA" to "P-29-JD-ICPA".

XXX

cJ\

(b) If the sale is exempt from value-added tax, the term "VAT -exempt sale" shall be written or printed prominently on the invoice or receipt;

XXX

XXX

XXX"

(Boldfacing supplied) Section 4.113.1 of RR No. 16-2005 dated September 1, 2005 or the Consolidated Value Added Tax Regulations of 2005 reiterates the provisions of Section 113 (B) of the NIRC of 1997, as amended, as follows:

"SEC. 4.113.1. Invoicing Requirements-

XXX

XXX

XXX

(B) Information contained in VAT invoice or VAT official receipt. - The following information shall be indicated in VAT invoice or VAT official receipt:

(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT; Provided, That:

XXX

XXX

XXX

(b) If the sale is exempt from VAT, the term "VAT- exempt sale" shall be written or printed prominently on the invoice or receipt;

XXX

XXX

XXX"

(Boldfacing supplied) The ICPA's revalidation showed that of the total amount of P24,604,871.76, only the amount of P20,283,266.00 were supported by VAT official receipts, and fit4,321,605.76 remain unsupported. Upon examination, these official receipts did not apparently comply with the invoicing requirements under Section 113 (B) (2) of the NIRC of 1997, as amended, and Section 4.113.1 (B) (2) (b) of RR No. 16- 2005, speci~cal!y, the t~rm "VAT-exempt sale" was not written or printed prominently on the said VAT official receipts. The importance of this requirement is stated in the case of Commissioner of Internal Revenue v. Phil. Gold Processing & Refining Corp.,·111 where the CTA En Bane emphasized that the imprinting of the word "zero-rated", or in this case !'VAT•exernpti sale", was added to distingUish sales that are ·subject to zero percent (0%) 1.11 CTAEB No. 1460 (CTA Case No 8652), Dec 7, 2017 cf\ VAT and those that are VAT exempt. In Commissioner of Internal Revenue v. Toledo Power, lnc., 112 the Supreme Court ruled that: "[T]he words 'zero-rated' appeared on the

VAT

invoices/official receipts presented by the (petitioner] in support of its refund claim. Although the same was merely stamped and not pre-printed, the same is sufficient compliance with the law, since the imprinting of the word 'zero-rated' was required merely to distinguish sales subject to 10% VAT, those that are subject to 0% VAT (zero-rated) and exempt sales, to enable the Bureau of Internal Revenue to properly implement and enforce the other VAT provisions of the Tax Code."

Review of the official receipts shows that no writing, printing or even stamping of the words "VAT-exempt sales" were made prominently on receipts issued during the whole year 2008 to petitioner's residential lessees of ~1 0,000.00 and below, 113 except for only 10 receipts 114 in the amount of P68,200.00. Even considering that the proper stamping of the words "VAT exempt sale" were made in the said receipts, petitioner still failed to present proof that the amounts represented rental income for the lease of petitioner's dormitory facilities. The copies of the Lease Terms and Conditions115 which petitioner presented were mere statements detailing the names of the lessees and the stipulations of the lease, and which were only signed by an employee of petitioner without the conformity of the lessees. These are self-serving pieces of evidence uncorroborated by the actual lease agreements showing the consent of the lessees to be bound under a contract of lease for residential purposes with the rate P10,000.00 and below per month that would qualify as a tax- exempt transaction.

The legal effect of the failure to prominently write or print the words "VAT-exempt sale" in the VAT official receipts is provided for in Section 113 (D) (2) of the NIRC of 1997, as amended, to wit: "SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons.-

XXX

XXX

XXX

(D) Consequence of Issuing Erroneous VAT Invoice or

VAT Official Receipt.-

XXX

XXX

XXX

112 G.R. No. 183880, January 20, 2014. 113 Exhibits "P-21-A-ICPA" to "P-21-CLQ-ICPA" and "P-29-A-ICPA" to "P-29-JD-ICPA". 114 Exhibits "P-21-A-ICPA" to "P-21-J-ICPA". 115 Exhibits "P-29-A-ICPA" to "P-29-JD-ICPA". ~

(2) If a VAT-registered person issues a VAT invoice or VAT official receipt for a VAT-exempt transaction, but fails to display prominently on the invoice or receipt the term VAT exempt sale', the issuer shall be liable to account for the tax imposed in Section 106 or 108 as if Section 109 did not apply." For petitioner's failure to issue VAT official receipts which prominently show the written, printed or stamped words "VAT-exempt sale", and to prove that they arose from rentals from residential lessees with monthly rate of P1 0,000.00 and below, the amount of P6,969,678.48 representing tax-exempt sales as claimed in the VAT returns of petitioner shall be considered as sales subject to VAT pursuant to Section 113 (D) (2) of the NIRC of 1997. 3.

Unaccounted Expenses-P1, 1 02,290.16 As previously discussed, there are no factual and legal bases to support this item of assessment as it is based merely on respondent's presumption that the difference between petitioner's salaries and rent expenses per FS/ITR and per Alphalist constituted undeclared income. Hence, the item of Unaccounted Expenses in the amount of P1, 102,290.16 is cancelled.

4.

Unsupported Input Tax-P790,090.24 Respondent's verification disclosed that the amount of P790,090.24, which petitioner claimed as input VAT per return, was not supported by receipts and invoices, or were supported by non- VAT receipts and invoices. The Details of Discrepancy shows the following computation:

Particulars

Amount

Input Taxes claimed per VAT Returns ~ 3,636,326.24

Less: Input Taxes per Schedule of Purchases Submitted

2,846,236.00

Unsupported Input Tax

p 790,090.24 In his Report, the ICPA found that the t-790,090.24 discrepancy arose from the difference of input VAT claimed per VAT returns for 2008 against the Summary List of Purchases for the first, second and fourth quarters of 2008, as follows:

Period

Per VAT

PerSLP

Difference

Reference

Returns

1 '1 Quarter

P1,204,600.04 ~1 ,290,072.27 P(85,742.33)

P-18-A-ICPA to P-18-D-ICPA

011

P-20-A-ICPA to P-20-1-ICPA

2"' Quarter

1,002,418 89 - 1,002,418.89

P-18-E-ICPA to P-18-H-ICPA

3'' Quarter

592,149.73 653,621.93 (61 ,472.20)

P-18-1-ICPA to P-18-L-ICPA

P-20-R-ICPA to P-20-Z-ICPA

41" Quarter

837,157.58 902,541.80 (65,384.22)

P-18-M-ICPA to P-18-R-ICPA

P-20-AA-ICPA to P-20-AG-

I CPA

Total

P3,636,326.24 P2,846,236.00 P790,090.24 The alleged input VAT discrepancy was found to be attributable to the 2nd quarter of 2008. Examination of the Summary List of Purchases for the said period shows claimed total input VAT of P1 ,004,255.1 0, as follows:

Month

Input Tax per SLP

Exhibit

April

~ 287,021.40

P-20-J-ICPA to P-20-L-ICPA

May

383,604.99

P-20-M-ICPA to P-20-0-ICPA

June

333,628.71

P-20-P-ICPA to P-20-Q-ICPA

Total

p 1,004,255.10 Revalidation of the ICPA showed that only the amount of P914,568.77 is substantiated, while the amount of P89,686.33 is unsupported. However, upon further examination by the Court, the amount of P251 ,338.05 shall be further disallowed for invalid substantiation or the presented VAT invoices/official receipts failed to comply with the invoicing requirements under the law, broken down as follows:

Payee

Date

Invoice/

Amount

Input VAT

Exhibit

OR No.

I Gross)

Failure to Provide Correct TIN of VAT Payer

Groce~s Comer

3-Mny-08

88162 ~ 6,256.25 ~ 750.75

P-22-F-ICPA

Groce~s Comer

3-May-08

88161 3,063.42 367.61

P-22-G-

I CPA

Darts Electric

11-Apr-08

38740 261.17 31.34

P-22-U-

Works, Inc.

I CPA

Home Center

16-Apr-08

133607 1,339.25 160.71

P-22-U-

Construction

I CPA

Supply Corp.

The Bread

12-Apr-08

15811 258.92 31.07

P-22-AI-

Market Corp.

I CPA

The Bread

3-Jun-08

16148 130.33 15.64

P-22-AJ-

Market Corp.

I CPA

The Bread

1 0-Jun-08

16188 157.17 18.86

P-22-AK-

Market Corp.

I CPA

CNTC

9-May-08

1282 2,857.17 342.86

P-22-AL-

Enterprises

I CPA

CNTC

15-Apr-08

1257 2,142.83 257.14

P-22-AM-

Enterprises

I CPA

Grocer's Comer

4-Apr-08

87511 2,188.83 262.66

P-22-AP-

I CPA

Groce~s Comer

3-May-08

88163 2,141.50 256.98

P-22-AQ-

I CPA

Mansion

4-Jun-08

32121 2,455.33 294.64

P-22-CU-

Electrical Supply

I CPA

Mansion

10-Jun-08

32136 3,821.42 458.57

P-22-CV-

Electrical Supply

I CPA

~

1198 12,857.17 1,542.86

ICPA

a

Enterprises ICPA

BJVN Printing 2-May-08 1839 2,142.83 257.14 P-22-FV- Merch.

RJC Security and 18-Apr-08 8,095.00 971.40

Investigation

Agence

RJC Security and 9-May-08 7,589.00 910.68

Investigation

Agenc

7) z + i?)

RJC Security and 23-May-08 7,589.00 910.68 P-22-GA-

Investigation ICPA

Agenc'

RJC Security and 6-Jun-08 7,083.08 849.97 P-22-GB-

ICPA

8,050.33 966.04 P-22-GC-

Investigation ICPA

Agenc

ICPA

Agenc

RJC Security and 20-Jun-08

Investigation

Grocer’s Corner 5-Apr-08 87513 752.36 | P-22-GP-

ICPA

835.75 100.29 | P-22-GQ-

ICPA

1,144.17 137.30 | P-22-GR-

ICPA

Grocer's Comer 12,560.25 1,507.23 P-22-GS-

ICPA

Grocer's Corner 5-Apr-08

Grocer’s Comer 8-Jun-08

2,455.33 Silver Star 42-Apr-08 294.64 P-22-HI- Resources Co., ICPA Inc.

Silver Star 8-May-08 37240 2,289.25 274.71 P-22-HJ- Inc.

Distribution, Inc. ICPA Asia Food 23-Jun-08 9403 1,097.33 131.68 P-22-HL-

Manufacturing

Asia Food 49-Jun-08 9267 1,036.58 P-22-HM-

Manufacturing

Asia Food 9516 1,477.25 177.27 P-22-HN-

Manufacturing

Canning ICPA

Manufacturing

Asia Food 8893 1,253.17 150.38 P-22-HO-

Canning ICPA

Asia Food 8784 P-22-HP-

Canning ICPA

Manufacturing

P-22-HQ-

ICPA

Asia Food 14-Jun-08 9130 926.33

Canning

Manufacturing

Asia Food 27-May-08 8623 1,134.83 P-22-HR-

Canning ICPA

Manufacturing

Asia Food 2-May-08 1,551.33 P-22-HS-

Canning ICPA

Manufacturing

Asia Food 12-May-08 1,191.08 P-22-HT-

Canning ICPA

Manufacturing

Asia Food 16-May-08 8345 1,258.92 151.07 P-22-HU-

Canning ICPA

Manufacturing

6-May-08 88213 5,034.83 604.18 | P-22-IB- iCPA Philippine Long 41-Jul-08 PKQOR000102218 1,409.00 169.08 P-22-ID-

Distance ICPA

Telephone Co.

Enterprises, Inc. ICPA

ICPA

ICPA

Care 1st Corp. 10-Mar-08 23081 4,152.83 P-22-IH-

ICPA

San Miguel Corp. 15-Apr-08 510992293 3,593.75 431.25 | P-22-lI-ICPA

Contract

Packaging . ICPA Asia Food 10-Apr-08 7558 759.67 91.16 P-22-IL- Canning ne ICPA

Manufacturing

Philippine Long 21-May-08 2,488.83 P-22-IN-

Distance ICPA

Telephone Co.

Canning ICPA

Manufacturing

Asia Food 22-Apr-08 7807 66.28 P-22-IP-

Canning ICPA

Manufacturing

Canning

Manufacturing

Asia Food 29-Apr-08 7972 554.08 66.49

Canning

Manufacturing

Asia Food 30-Apr-08 8003 348.25 41.79 P-22-1S-

Canning ICPA

Manufacturing

Asia Food 20-May-08 8431 930.00 111.60 P-22-IT-

Canning ICPA

Manufacturing

Asia Food 16-May-08 8338 760.25 91.23 P-22-IU-

Manufacturing

Asia Food 13-May-08 8281 ,058.17 126.98 P-22-lV-

Canning ICPA

Manufacturing

P-22-IW-

ICPA

Canning

Manufacturing

Asia Food 26-May-08 8582 485.75 58.29 P-22-IX-

Canning ICPA

Manufacturing

Asia Food 4-Jun-08 8815 95.14 P-22-IY-

Canning ICPA

Manufacturing

Polymer 30-May-08 93101 1,208.75 145.05 P-22-JA- Products (Phil.), ICPA Inc.

25759 3,270.00 392.40 P-22-JB-

ICPA

Silver Star 10-Apr-08 36957 1,037.92 124.55 P-22-JD- Resources Co., ICPA Inc.

Silver Star 6-May-08 37204 1,464.75 175.77 P-22-JE- Resources Co., ICPA Polymer 8-May-08 93002 2,968.75 356.25 P-22-IZ- Products (Phil.), ICPA Inc.

Grovery Corp.

Silver Star

Resources Co., Inc.

5-Jun-08 3,081.25 369.75 P-22-JF-

ICPA

San Miguel Corp. 9-Apr-08 510986097 2,833.93 | P-22-JG-

ICPA

San Miguel Corp. 14-May-08 1,965.32 | P-22-JH-

ICPA

Canning , San Miguel Corp. 2-Jun-08 511040427 30,496.42 3,659.57 P-22-Jl-

ICPA

1,137.50 136.50

ICPA

Manufacturing

Asia Food 13-Jun-08 9079 123.00 P-22-JK-

Canning ICPA

Manufacturing

Asia Food 6-Jun-08 805.33 96.64 P-22-JL-

Canning ICPA

Manufacturing

Asia Food

29-Apr-08

Asia Food 6-May-08 822.33 98.68 P-22-JM-

Canning ICPA

Manufacturing

Asia Food 17-May-08 8373 1,006.25 120.75 P-22-JN-

Canning ICPA

Manufacturing

Manufacturing

Asia Food

Canning

Canning ICPA

Manufacturing

Asia Food 12-Apr-08 7601 1,101.33 132.16 P-22-JS-

Canning ICPA

Manufacturing

Asia Food 20-Jun-08 1,593.33 P-22-JT-

ICPA

Canning

Asia Food 22-Apr-08 7808 788.83 94.66 P-22-JQ-

Canning ICPA

Manufacturing

Asia Food 12-May-08 8270 1,241.08 148.93 P-22-JO-

ICPA

7957 186.75 P-22-JP-

ICPA

Manufacturing

Canning

1,290.17 P-22-JU-

ICPA

Marketing

2,567.83

Manufacturing

St. Paulina's 4-Jun-08 St. Paulina's 3-May-08 308.14 P-22-JV-

Marketing ICPA

Distance ICPA

Telephone Co.

Philippine Long 29-May-08 1,309.25 157.11

Distance

Telephone Co. _ Philippine Long 1-Jul-08 PKQORO00102214 4,409.00 169.08

Distance

1-Jul-08 PKQORO00102217 1,409.00 169.08 P-22-KB- Telephone Co.

Philippine Long 29-May-08 PKQORO00094902 1,409.00 169.08 P-22-KC- Telephone Co.

Philippine Long 29-May-08 PKQOR000094903 1,409.00 169.08 P-22-KD-

Distance ICPA

Telephone Co.

Fairdeal 4-Apr-08 3225 4,432.17 171.86 P-22-KE- Industries, Inc.

Philippine Long

CTA CASE NO

Fairdeal

Chemical

Industries, Inc.

Fairdeal

Chemical

Industries, inc.

Fairdeal

Chemical

industries, Inc.

Fairdeal

Chemical

Industries, Inc.

Fairdeal

Chemical

Industries, Inc.

Philippine Long

Distance

Telephone Co.

Philippine Long

Distance

Telephone Co.

. 9515

8-Apr-08

2-May-08

2-Jun-08

7-Jun-08

21-Apr-

Philippine Long 17-Jun-08

Distance

Telephone Co.

Philippine Long 47-Jun-

Distance

Telephone Co.

Philippine Long

Distance

Telephone Co.

Philippine Long

Distance

Telephone Co.

Philippine Long

Distance

Telephone Co.

Silver Star

Resources Co., Inc.

Silver Star

Resources Co., Inc.

Silver Star

Resources Co.,

J

°

Pacific Glass

Corp.

Fairdeal

Chemical

Industries, Inc.

Fairdeal

Chemical

Industries, inc.

Fairdeal

Chemical

Industries, Inc.

Fairdeal

Chemical

Industries, Inc.

Fairdeal

Chemical

Industries, Inc.

San Miguel Corp.

San Miguel Corp.

08 08

14-Jul-08

14-Jul-08

14-Jul-08

18-Jun-08

22-Feb-08

§-Jun-08

31-Mar-08

10-Jun-08

4-Apr-08

8 San Miguel Corp.

San Miguel Corp.

San Miguel Corp.

3282 3648 3719 4190 4340

PKQOR000086681

PKQORO00098707

PKQOR000098705

PKQORO00098708

PKQOR000105373

PKQORG00105374

PKQORO00105375

37667 36496 37528 199120 4364 3233 ~~ 85.93 171.86 128.89 85.93 167.97 151.08 317.31 312.84 154.44 2,574.00 308.88 2,811.50 1,540.17 4,600.92 1,540.17 7,735.75 716.08 1,074.08 337.38 184.82 184.82 928.29 128.29

P-22-KF-

ICPA

P-22-KG-

ICPA

P-22-KH-

ICPA

P-22-KI-

ICPA

P-22-KL-

ICPA

P-22-KM-

ICPA

P-22-KN-

ICPA

P-22-KO-

ICPA

P-22-KP-

ICPA

P-22-KQ-

ICPA

P-22-KR-

iCPA

P-22-KS-

ICPA

P-22-KT-

ICPA

ICPA

P-22-KV-

ICPA

P-22-KW-

ICPA

5-Apr-0 3245 1,074.08 129.89 77-May-08 3739 716.08 85.93 9-May-08 3775 4,074.08 128.89 P-22-KZ-

ICPA

2-May-08 511010514 3,919.67 470.36 P-22-LA-

ICPA

10-Jun-08 511048499 3,919.67 470.36 P-22-LB-

ICPA

13-May-08 511019730 4,861.58 583.39 P-22-LC-

ICPA

27-May-08 511033926 3,919.67 470.36 P-22-LD-

ICPA

1-Apr-08 510979445 4,803.58 576.43 P-22-LE-

San Miguel Corp. 15-Apr-08 510992271

Polymer

Products (Phil.), Inc.

Polymer

Products (Phil.), Inc.

HRI Marketing

Care 1st Corp.

Care 1st Corp.

Care ist Corp.

Ohana Trading

Corp.

Ohana Trading

Corp.

Zest-O Corp.

Zest-O Corp.

St. Paulina’s

Marketing

St. Paulina’s

Marketing

St. Paulina’s

Marketing

St. Paulina’s

Marketing

Philippine Long

Distance

Telephone Co.

Philippine Long

Distance

Telephone Co.

Philippine Long

Distance

Telephone Co.

Philippine Long

Distance

Telephone Co.

Philippine Long

Distance

Telephone Co.

Philippine Long

Distance

Telephone Co.

Philippine Long

Distance

Telephone Co.

Philippine Long

Distance

Telephone Co.

Philippine Long

Distance

Telephone Co.

Philippine Long

Distance

Telephone Co.

Philippine Long

Distance

Telephone Co.

Philippine Long

Distance

Telephone Co.

510987663 4,927.67 3,919.67 16-Apr-08 92096A 3,562.50

8-May-08

7-May-08

13-Jun-08

29-Apr-08

§-Mar-08

10-Jun-08

16-Jun-08

13-May-08

30-Apr-08

8-Apr-07

16-Jun-08 93182A 3,817.00 23353 23726 89642 87566 820394 53724 §3329 52801 1,141.08 3,114.67 2,488.42 135.67 4,971.75 1,950.92 714.25 1,674.08 825.92 591.32 470.36 458.04 427.50 136.93 622.93 498.34

Pr|> Cl> >Cl>

373.76 298.61 229.02 596.61 234.11 85.71 200.89 99.11 lal aie ail aed

14-Jul-08

22-May-08

14-Jul-08

PKQORO00093383

PKQOR000105379

1,737.00 2,246.08 208.44 269.53

14-Jul-08 PKQORO00105378

PKQOR000105376 2,294.50 275.34

14-Jul-08

PKQOR000096401 2,171.08 P- §-Jun-08 PKQOR000096399 1,737.00 208.44

ICPA

P-22-LF-

P-22-LG-

P-22-LH-

ICPA

P-22-L]-

ICPA

P-22-LJ-

P-22-LK-

P-22-LL-

P-22-LM-

ICPA

P-22-LN-

ICPA

P-22-LO-

ICPA

P-22-LP-

ICPA

P-22-LQ-

ICPA

P-22-LR-

ICPA

P-22-LS

P-22-LU-

ICPA

P-22-LV-

ICPA

P-22-LW-

ICPA

Oo

AY

EE. :

P-22-LX-

ICPA

P-22-LY-

ICPA

P-22-LZ-

ICPA

P-22-MA-

ICPA

P-22-MB-

ICPA

P-22-MC-

ICPA

P-22-MD-

ICPA

P-22-ME-

ICPA

22-MF-

ICPA

P-22-MG-

iCPA

Philippine Long 5-Jun-08 PKQORO00096402

Distance

Telephone Co.

Philippine Long §-Jun-08 PKQORO00096397

Distance

Telephone Co.

1,812.00 217.44 | P-22-MH-

ICPA

Philippine Long

29-May-08

29-May-08

2,171.08 260.53 P-22-Ml-

ICPA

22-May-08 PKQORO00093389 2,246.08 269.53 P-22-MJ-

Distance ICPA

Telephone Co.

Philippine Long 22-May-08 PKQOR000093387 2,294.50 275.34 P-22-MK-

Distance ICPA

Telephone Co.

Philippine Long PKQORO00094905 1,409.00 169.08 P-22-ML-

Distance ICPA

Telephone Co.

Philippine Long PKQORO00094907 1,409.00 169.08 P-22-MM-

Distance ICPA

Telephone Co.

Philippine Long 14-Jul-08 PKQOR000105370

Distance ICPA

Telephone Co.

Philippine Long 14-Jul-08 PKQORO000105371 1,409.00 169.08

Distance

Telephone Co.

Philippine Long 14-Jul-08 PKQOR000105372 1,409.00 169.08

Distance

Telephone Co.

Philippine Long 29-May-08 PKQOR000094906 1,409.00 169.08 P-22-MQ-

Distance ICPA

Telephone Co.

HRI Marketing 15-Apr-08 4072 503.58 60.43

ICPA

ICPA

St. Paulina’s 5-Apr-08 52772

Marketing

Fairdeal 11-Apr-08 3360 760.00 91.20 P-22-MT-

Chemical

Industries, Inc.

Chemical

Industries, Inc.

Fairdeal 5-Jun-08 4304 401.75 48.21 Industries, Inc.

Fairdeal 5-Jun-08 4303 716.08 Industries, Inc.

Systems, Inc. ICPA Products (Phil.), ICPA Inc.

ICPA

ICPA

Coca-Cola 11-Apr-08 BBi0092426-1 8,092.83 971.14 P-22-NB- Philippines, Inc.

Coca-Cola 5-Jen-08 BBI0100801-5 6,703.58 804.43 P-22-NC- Philip pines, Inc.

Coca-Cola 2-Jun-08 BBI0108256-4 1,365.75 P-22-ND- Philippines, Inc.

Corp. ICPA Corp. ICPA Philippine Long 29-May-08 PKQOR000094904 1,409.00 169.08 P-22-NG-

Distance ICPA

Telephone Co.

Grocer’s Corner 3-May-08 88156 4,720.50 566.46 P-22-NH-

ICPA

HRI Marketing 8-Apr-08 4025 1,007.17 120.86 P-22-NM-

ICPA

HRI Marketing 6-May-08 4213 975.00 117.00 P-22-NN-

ICPA

HRI Marketing 7-Jun-08 4403 1,628.58 195.43 P-22-NO-

ICPA

Asia Food 2-Apr-08 389.08 46.69 P-22-NP-

Canning ICPA

3-Jun-08 5,852.67 702.32 P-22-NQ-

ICPA

Manufacturing

Supreme Energy

Distribution, Inc.

17-Apr-08 AAI0180390-5 3,803.57 P-22-NR- Philippines, Inc.

Coca-Cola 13-Jun-08 AAI0227823-0 2,625.00 315.00 P-22-NS-

Bottlers ICPA

Philippines, Inc. _ Coca-Cola 27-May-08 AAIN218374-5 750.00 90.00 P-22-NT-

Bottlers ICPA

Philippines, Inc.

Coca-Cola 10-May-08 AAI0209905-7 669.67 80.36 P-22-NU- Philippines, Inc.

Coca-Cola 28-May-08 AAI0218889-2 111.58 133.39 P-22-NV- Philippines, Inc.

Bottlers

Philippines, Inc.

Coca-Cola 23-Apr-08 AAI0200811-6 3,787.50

Bottlers

Philippines, Inc.

Coca-Cola 18-Apr-08 AAIO198022-4 535.75 P-22-NY-

Bottlers a ICPA

Philippines, Inc.

Coca-Cola 11-Apr-08 AAi0193407-2 4,852.67 222.32 P-22-NZ-

Bottlers ICPA

Philippines, Inc.

Coca-Cola 40-Apr-08 AAIN192662-3 4,794.67 575.36 P-22-OA-

Bottiers ICPA

Philippines, Inc.

Coca-Cola §-Jun-08 AAI0223236-9 741.09 88.93 P-22-OB-

Bottlers ICPA

Philippines, Inc.

Coca-Cola 1-Apr-08 AAI0187461-7 355.71 | P-22-O0C-

Bottlers ICPA

Philippines, Inc.

Zest-O Corp. 11-Apr-08 6,498.50 P-22-OM-

ICPA

2-May-08 797098 4,203.50 | 80442 | P-22-ON-

ICPA

Zest-O Corp.

Zest-O Corp. 2-Jun-08 3,817.00 458.04 | P-22-00-

ICPA

Philippine Long 5-Jun-08 PKQORO000096400 2,246.08 269.53 P-22-0Q-

Distance ICPA

Telephone Co.

Care 1st Corp.

14-May-08 23773 2,699.33 P-22-OT-

ICPA

24-May-08 511032128 3,463.42

ICPA

Anson Emporium 5-Jun-08 0436882M 35,491.08 4,258.93 | P-22-OW- Corp. ICPA Grovery Corp. 16-Apr-08 1,285.75 P-22-OY-

ICPA

Zest-O Corp. 820342 3,817.00 458.04 | P-22-PD-

ICPA

Maynilad Water 31-Mar-08 266484 187 13,003.17 1,560.38 P-22-PE- Services, Inc. ICPA San Miguel Corp.

288945070

Maynilad Water

Services, Inc.

24-Apr-08

21,435.50 2,572.26 | P-22-PF.1-

ICPA to P-

22-PF.2-

ICPA

30-May-08 289584680 41,470.08 1,376.41 | P-22-PG.1-

ICPA to P-

22-PG.2-

ICPA

International 2-May-08 17210 7,640.67 880.88 P-22-PH-

Elevator & ICPA

Equipment, Inc.

Polyfoam-RGC 2-Apr-08 200660 127,575.00 15,309.00 P-22-PK-

International

Corp.

Philippine Long

Distance

Telephone Co.

Supreme Energy 12-May-08 8096 5,852.67 702.32 | P-22-PU.1- Distribution, Inc. ICPA to P- 22-PU.2-

ICPA

ICPA

7-Mar-08 om 8,330.33 999.64 | P-22-PY-

ICPA

ICPA

7-Mar-08 87011 1,100.92 132.11 | P-22-QA-

ICPA

8-Jun-08 88590 5,937.08 712.45 | P-22-QB-

ICPA

ICPA

3-Jun-08 88761 4,787.50 574.50 | P-22-QD-

ICPA

| Sun08 | (88762 | 221075 | 210. 75) 205.29 P-22-QE-

ICPA

Mansion a _ 674.08 a 89 | P-22-QF.1-

Electrical Supply ICPA to P-

22-QF .2-

ICPA

RJC Security and 11-Jul-08 14574 7,589.00 910.68 | P-22-QG-

Investigation ICPA

Agen

28- | 26-May-08 -08 | 38829 1 | 1,980:17 17 234.02 | P-22-QH- Works, Inc. ICPA Advance 30- a -08 _ nd ,053.58 126.43 | P-22-QP.1- Computer Forms, ICPA to P- Inc. 22-QP.2-

ICPA

Electrical Supp! ICPA Supreme Energy -May- 7856 193. 983.25 -22- Distribution, lnc.

CNTC 9-Apr-08

Enterprises

CNTC 6-May-08 1274 12,589.25 1,510.71 P-22-Sl-

Enterprises ICPA

CNTC 6-Jun-08 1309 16,383.92 1,966.07 | P-22-SJ- Enterp rises ICPA

ICPA

ICPA

87523 8,000.42 960.05 | P-22-SM-

ICPA

3-May-08 88160 8,928.58 1,071.43 | P-22-SN-

ICPA

Grocers Commer 3-Jun-08 88754 5,179.50 P-22-SO-

ICPA

3-Jun-08 88755 13,358.92 1,603.07 | _P-22-SP-

Maynilad Water

Services, Inc.

21-Apr-08 PKQORO00086680 2,691.50 322.98 1251 15,089.25 1,810.71

ICPA

ICPA

ICPA

fou

ICPA

ICPA

A3j 977,048.30 | P117,329.13 88756

Grocers Comer

3,798.25 455.79

Grocer’s Corner

Grocer’s Corner

Grocer’s Comer

Grocer's Corner

Subtotal

Failure to Provide the Correct Name of the VAT Payer Coca-Cola Bottlers 8-May-08 BBI0101404-7 ® 271.71 | P-22-0G- Philippines, Inc. ICPA Coca-Cola Bottlers 41-Jun-08 BBIO111025-8 5,433.92 652.07 | P-22-OP- Philippines, Inc. ICPA

Ld

Subtotal iad 7,698.17 | ® 923.78 Evidence Presented is Not a VAT Invoice/Official Receipt

Distance Telephone ICPA

Co.

Philippine Long 17-May- 18532523 4,250.00 510.00 P-22-HW-

Distance Telephone 08 ICPA

Co.

Philippine Long 17-May- 18532508 4,250.00 P-22-HX-

Distance Telephone 08 ICPA

Co.

Philippine Long 47-May- 18615571 1,484.08 178.09 P-22-HY-

Distance Telephone 08 ICPA

18365135 1,484.08 18941081 1,484.08

Philippine Long 17-Apr-08

Distance Telephone

Co.

Philippine Long 17-Jun-08 178.09 P-22-IA- Co.

Philippine Long 17-Jun-08 19002828 4,250.00 510.00 P-22-IC-

Distance Telephone ICPA

Co.

Philippine Long 17-Apr-08 18270809 4,250.00 510.00 P-22-lJ-

Distance Telephone ICPA

Co.

Distance Telephone 08 ICPA

Co.

Co.

178.09 P-22-HZ-

ICPA

Distance Telephone

Philippine Long 17-Jun-08 19002835 4,250.00 P-22-J2Z-

Distance Telephone

Co.

P-22-0D.1-

ICPA to P-

22-O0D.2-

ICPA

Bayan

Telecommunications

Bayan P-22-0E.1-

Telecommunications ICPA to P-

22-0E.2- _ — 10-Jun-08 83081540 668.75 80.25

ICPA

13-May- 982938 668.75 80.25 | P-22-OF.1-

08 ICPA to P-

22-OF.2-

{CPA

17-Jun-08 19002838 4,250.00 P-22-OH-

ICPA

18059363 4,250.00 510.00 P-22-Ol-

Bayan

Telecommunications

Philippine Long

Distance Telephone

Co.

Philippine Long

47-Mar-08

Distance Telephone

Co.

Manila Water Co., Inc. RSBWS03010018 27,538.58 P-22-OJ-

08 ICPA

Manila Water Co., inc. 28-Apr-08 | BACO201112366570 25,986.00 3,118.32 P-22-OK-

ICPA

Manila Water Co., Inc. 13-Aug-08 | KNP040167012978 29,751.58 3,570.19 P-22-OL-

ICPA

Philippine Long 2004368193 P-22-PQ.1-

Distance Telephone 08 ICPA to P-

Co. 22-PQ.2-

ICPA

Philippine Long 2004402056 2,727.25 P-22-PR.1-

Distance Telephone ICPA to P-

Co. 22-PR.2-

ICPA

Subtotal 131,970.90 | P15,836.51 Evidence is Out of Covered Period (2° Quarter, 2008) &-Aug-08 31832 14,139.50 ® 1,696.75 14-Jul-08 31817 10,500.86 31809 20,854.67 31816 6,587.42 489 4,589.25 18-Jul-08 492 9,642.83 P-22-OS- 1,157.14 ICPA 147.54 ICPA Laundry, inc. 1,215.87 ICPA P-22-NI.1-

ICPA to P-

22-NI.2-

ICPA

P-22-NJ.1-

ICPA to P-

22-NJ.2-

ICPA

P-22-NK.1-

ICPA to P-

22-NK.2-

ICPA

P-22-NL.1-

ICPA to

P.22-NL.2-

ICPA

Kalinisan Steam

Laundry, Inc.

Kalinisan Steam

Laundry, Inc.

Kalinisan Steam 3-Jul-08

Laundry, Inc.

Kalinisan Steam 14-Jul-08

Laundry, Inc. 790.49

Emco Printing Center 18-Jul-08

Emco Printing Center

Digi-ads, inc.

§50.71 Kalinisan Steam 1-Aug-08 31828 9,278.17 P-22-PA- Laundry, Inc. 1,113.38 ICPA Maynilad Water 24-Jul-08 07-00010988 74,656.92 P-22-P|.1- Services, Inc. ICPA to P- 24-Jul-08 07-00010987 74,656.92 8,958.83 22-PI-.3-

ICPA

P-22-PJ.1-

ICPA to P-

22-PJ.3-

Maynilad Water

Services, Inc. 8,958.83

ICPA

Kaizen Works & 4-Jul-08 P-22-PL-

Innovations, Inc. 85.71 ICPA Kaizen Works & 4-Jul-08 41,804.25 P-22-PM- Innovations, Inc. §,016.51 ICPA

Fe De

Innovations, Inc. 149.09 ICPA 246.46 ICPA Laundry, Inc. 3,461.40 ICPA BPR Enterprise 22-Feb-08 1476 3,169.67 P-22-PV.1-

ICPA to P-

22-PV.2-

ICPA

PW.1- 380.36 380.36

Kalinisan Steam

Laundrv, Inc.

Kalinisan Steam

Laundry, Inc.

Manila Electric Co.

Kalinisan Steam

Laundrv, Inc.

Destiny Cable, Inc.

Subtotal

Total Disallowance

~

1-Jul-08

31806

8-Jul-08

31815

10-Jul-08

57027

11-Jul-08

31814

1-Aug-08

462842 - ICPA toP~ 22~PW.2~

I CPA

118,416.08

P-22-QI-

14,209.93

I CPA

118,703.75

P-22-QL-

14,244.45

I CPA

314,380.08

P-22-QS-

37,725.61

I CPA

95,268.83

P-22-SZ-

11,432.26

I CPA

13,035.75 P-22-TA.1- 1,564.29 ICPA toP- 22-TA.2-

I CPA

P977,071.62 1"117,248.63 1"251,338.05 Based on the foregoing, petitioner may be assessed for VAT deficiency on unsupported and disallowed input VAT in the amount of P339,024.38, as follows:

Particular

Amount

Input VAT per Return

p 1,002,255.10

Less: Supported Input VAT

'" 914,568.77 oer ICPA

Less: Disallowed Input

(251 ,338.05) 663,230.72 VAT per examination

Input VAT Deficiency

'" 339,024.38 5.

Excess Input Tax Carried Over to the Next Period- P191,612.49 6.

Deferred Input Tax Carried Over to the Next Period- P383,547.29 Respondent deducted from allowable input tax the amount of P191 ,612.49 representing excess input tax carried over to the next period, and the amount of P383,547.29 representing deferred input tax carried over to the next period. Respondent failed to present any legal or factual bases in the Details of Discrepancy1 16 attached to the FDDA to justify the disallowance of the said amounts. The Court holds that it was improper for respondent to disallow the said excess input tax and deferred input tax because any tax benefit derived by petitioner from the carry-over of the said amounts redounds to the succeeding quarters of 2009. Since the tax benefit will be in the succeeding year, at most, petitioner may only be assessed in the said succeeding year. 11s Exhibit "P-10", Docket, pp. 398-399. ~

Therefore, the disallowance of the excess input tax carried over to the next period in the amount of P191,612.49 and the deferred input tax carried over to the next period in the amount of P383,547.29 is cancelled.

It must be noted that on February 20, 2012, petitioner paid P215,327.84 representing deficiency VAT as evidenced by Payment Form (BIR Form No. 0605). 117 The aforesaid payment shall be considered in computing petitioner's basic deficiency VAT liability. In fine, the basic deficiency VAT of petitioner for the first to fourth quarters of taxable year 2008 amounts to P2,716,708.72, computed as follows:

VA Table receipts per return P64,470,011.27

Add:

Adjustments

Receipts not subjected to VAT (Schedule 3) ,. 1,281,399.87 Unsupported exempt sales 24,604,871.76 Unaccounted exptlnses (Schedule 1) - 25,886,271.63 Adjusted VA Table sales ,.90,356,282.90

Output Tax (12%)

P1 0,842, 753.95

Less:

Tax Credits/Payments

Prior year's excess tax credits 75,019.57 Deferred input tax carried 568,137.86 forward from previous period Input tax claimed per returns P3,636,326.24 4,279,483.67 Less: Unsupported input tax 339,024.38

(Schedule 4)

Input tax carried forward - to succeeding period/qua'ler Deferred input tax carried - 339,024.38 ,. 3,940,459.29 over to succeeding period

Tax Due

,. 6,902,294.66

Less:

Payment per returns 3,970,258.10 Basic deficiency tax due p 2,932,036.56

Less:

Basic deficiency tax paid - 02/20/12 p 215,327.84 Basic deficiency tax still due p 2,716,708.72 111. Deficiency EWT for November and December 2008 As shown above, only income payments representing Purchase of Goods and Professional Fees have discrepancies between those reflected in petitioner's FSIITR and in its Alphalist. m Exhibit "P-7-B-ICPA" ~

The assessments for deficiency EWT for the months of January to October of taxable year 2008, however, have already prescribed. Thus, the Court shall determine petitioner's deficiency EWT liability for the months of November and December of taxable year 2008. Audit of petitioner's FS/ITR, together with its Trial Balances, 118 and its Alphalist shows deficiency EWT in the amount of P53,896.18 for the months of November and December of taxable year 2008, computed as follows:

Account

Per T/8

Per

Variance

Tax

Tax Due

Alphalist

Rate

Direct Materials

Direct Charges-Others

P11,902,632.00

Repairs and

14,909 00

Maintenance

Office Supplies

40,097.00

Subtotal

P11 ,957,638.00 P291 ,942.00 P11 ,665,696.00 0.01 P116,656.96

Professional Fees

p 163,166.00 p 36,666.00 p 126,500.00 0.15 p 1,216.65

Total EWT

1"135,631.96

Payment of EWT - 02/20/12

81,735.78

Total EWT Due

p 53,896.18 It must be noted that on February 20, 2012, petitioner paid 1-81,735.78 representing deficiency EWT as evidenced by Payment Form (BIR Form No. 0605). 119 The aforestated payment was taken into consideration in determining petitioner's basic deficiency EWT liability.

In sum, the assessment for deficiency EWT is sustained but in the modified amount of P53,896.18. IV. Compromise Penalty Respondent assessed petitioner with compromise penalty in the amount of P13,000.00 for failure to submit monthly Alphalist of Payees for the year 2008 in violation of Section 2 or RR No. 2-2006, and for failure to submit quarterly Schedule of Purchases for the second quarter of 2008 in violation of Section 4.114-3(2) of RR No. 16-2005, in relation to Section 255 of the NIRC of 1997. 11a BIR Records, pp. 367-379.

It must be stressed that a compromise penalty is imposed to avoid prosecution for violation of the provisions of the NIRC of 1997, as amended. It is well-settled that the Court has no jurisdiction to compel a taxpayer to pay the compromise penalty because it is a mutual 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. Absent a showing that petitioner consented to the compromise penalty, the imposition of compromise penalty contained in the assessment is deleted.

WHEREFORE, in light of the foregoing, Titanium Corporation's Petition for Review filed on January 11, 2017 is PARTIALLY GRANTED. The assessments for basic deficiency income tax, value- added tax and expanded withholding tax are AFFIRMED WITH MODIFICATIONS. Accordingly, petitioner is ORDERED TO PAY the

Bureau of Internal

Revenue the

amount of P6,420,538.60, P9,822,473.37 and ft218,573.77 representing deficiency income tax, value-added tax and expanded withholding tax, respectively, inclusive of the 25% surcharge, 20% deficiency interest, and 20% delinquency interest imposed thereon under Sections 248(A)(3), and 294(8) and (C) of the NIRC of 1997, as amended, respectively, computed until December 31, 2017, detailed below:

Income Tax

Less:

Balance

Payment on

Feb.20,2012

Basic Deficiency Tax

~ 1,837,504.30 25,689.03 1,811,815.27

Add: 25% Surcharge

459,376.08 459,376.08 Deficiency Interest from 04/16/09 to 02/20/12 (!"1,837,504.30 X 20% X 1041/365 davsl 1 ,048,132.59 14,639.23 1,033,493.36 Total Amount Due, February 20, 2012 3,345,012.96 Deficiency Interest from 02/21/12 to 01/09/17 (P1,811,815.27 X 20% X 1,785/365 days) 1,772,104.25 1,772,104.25 Total Amount Due, January 9, 2017 p 5,117,117.22 40,328.26 5,076,788.96

Deficiency Interest

From 01/10/17 to 12/31/17

p (P1 ,811,815.27 x 20% for 356/365 davs-l 353,428.07 353,428.07

Delinquency Interest

From 01/10/17 to 12/31/17

(P5,076, 788 96 X 20% X 356/365 days) 990,321.57 Total Amount Due, December 31, 2017 p 6,420,538.60 ~

Basic Deficiency Tax

Add: 25% Surcharge

Deficiency Interest from 01/26/09 to 02/20/12* (~2,932,036.56 X 20% X 1,121/365 days) Total Amount Due, February 20, 2012 Deficiency Interest from 02/21/12 to 01/09/17* (P2,716,708 72 X 20% X 1,785/365 days) Total Amount Due, January 9, 201 7*

Deficiency Interest

From 01/10/17 to 12/31/17

(~2.716,708.72 x 20% for 356/365 days)

Delinquency Interest

From 01/09/17 to 12/31/17

(P7, 775,729.30 X 20% X 356/365 days) Total Amount Due, December 31, 2017

Basic Deficiency Tax

Add: 25% Surcharge

Deficiency Interest from 01/16/09 to 02/20/12 (P135,631.96 X 20% x 1,131/365 days) Total Amount Due, February 20, 2012 Deficiency Interest from 02/21/12 to 01/09/17* (P53,896.18 X 20% X 1, 785/365 days) Total Amount Due, January 9, 2017

Deficiency Interest

From 01/10/17 to 12/31/17

(~53,896.18 x 20% for 356/365 days)

Delinquency Interest

From 01/10/17 to 12/31/17

(P174,099.08 X 20% X 356/365 days) Total Amount Due, December 31, 2017 p p ~ '" ~ ~ ~ p

Value-

Less:

Balance

Added Tax

Payment on

Feb.20,2012 2,932,036.56 215,327.84 2,716,708.72 733,009.14 733,009.14 1,800,993.42 132,146.40 1,668,847.02 5,466,039.12 2,657,164.42 2,657,164.42 8,123,203.54 347,474.24 7, 775,729.30 529,944.28 529,944.28 1,516,799.80 9,822,473.37

Expanded

Less:

Balance

Withholding

Payment on

Tax

Feb.20,2012 135,631.96 81,735.78 53,896.18 33,907.99 33,907.99 84,054.66 50,474.64 33,580.02 253,594.61 52,714.89 52,714.89 306,309.50 132,210.42 174,099.08 10,513.45 10,513.45 33,961.25 218,573.77 ~

In addition, petitioner is ORDERED TO PAY the Bureau of Internal Revenue the delinquency interest at the rate of twelve percent (12%) computed from January 1, 2018 until full payment thereof, pursuant to Section 249(C) of the 1997 NIRC, as amended by Republic Act No. 10963, also known as the Tax Reform for Acceleration and Inclusion (TRAIN) and as implemented by RR No. 21-2018, on the following amounts:

Tax

Income Tax

VAT

EWT

WE CONCUR:

' ,.

~ ,.

RINO

Amount

5,076,788.96 7, 775,729.30 174,099.08

Presiding Justice

~-;.~ CATHERINE T. MANAHAN

Associate Justice

CERTIF/CA TION

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

Presiding Justice