Benchmark Marketing Corp. vs. Commissioner of Internal Revenue

DECISION

DEL ROSARIO, P.J.:

This is a Petition for Review filed by petitioner Benchmark Marketing Corp. on January 31 , 2020, praying for the reversal of the Decision dated September 4, 2019 (assailed Decision) and the Amended Decision dated January 2, 2020 (assailed Amended Decision) promulgated by the Court's Special Second Division (Court in Division) in the case entitled Benchmark Marketing Corp. vs. Commissioner of Internal Revenue, docketed as CTA Case No. 9296, and for the issuance of a judgment declaring as null and void the sustained portions of the deficiency tax assessments, inclusive of penalties, issued against petitioner for taxable year (TY) ending December 31 , 2011 .

THE PARTIES

Petitioner Benchmark Marketing Corp. (BMC) is a domestic corporation duly organized and existing under the laws of th;tl

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

Philippines with business address at Dona Natividad Bldg. 10 Quezon Avenue, Quezon City. The principal purpose for which it was created is to engage in, conduct and carry on the business of, buying, selling, distributing, marketing at wholesale and retail fermented liquor, bottled water and other beverages. 1 Respondent Commissioner of Internal Revenue (CIR) is the chief of the Bureau of Internal Revenue (BIR) vested with power to decide disputed tax assessments 2

FACTS

The undisputed facts, as narrated in the assailed Decision, are reproduced below:

"On April 8, 2013, petitioner received Letter of Authority (LOA) No. LOA-116-2013-00000011 with SN: eLA2011 00007112 and Checklist of Audit Requirements for the examination of petitioner's books of accounts and other accounting records for all internal revenue taxes for the year 2011.

On September 28, 2013, petitioner received a Second and Final Notice from BIR dated September 24, 2013. On June 20, 2014, petitioner executed a 'Waiver of the Defense of Prescription under the Statute of Limitations of the NIRC' (Waiver) in relation to the 2011 Tax Audit which was accepted by the BIRon June 24, 2014 extending the audit period until December 31, 2014.

On September 24, 2014, petitioner received a Final Reminder and Audit Notice from BIR dated September 23, 2014. On November 13, 2014, petitioner executed another Waiver which was accepted by the BIR on November 21, 2014 extending the audit period until June 30, 2015.

On March 27, 2015, petitioner executed another Waiver which was accepted by the BIRon April27, 2015 extending the audit period until December 31, 2015.

On June 10, 2015, a Preliminary Assessment Notice (PAN) dated June 9, 2015 together with the Details of Discrepancies were received by petitioner from the BIR.

On July 22, 2015, the Formal Letter of Demand (FLO), Details of Discrepancies, and Assessment Notices (FAN) were received by petitioner from the BIR assessing [it for] deficiency income tax, VAT, and EWT. The FLO shows the following computations: 1 Paragraph 1, Facts of the assailed Decision, CTA EB Rollo, pp. 63-64. 2 Sections 3 and 4, National Internal Revenue Code (NIRC) of 1997, as amended. ~

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

XXX

On August 20, 2015, petitioner filed its administrative protest [against the FLO/FAN] disputing the deficiency income tax, VAT and EWT assessed against it.

Due to the BIR's alleged inaction on its protest, petitioner filed the instant Petition for Review on March 17, 2016 praying that the assessment notices for deficiency income tax, VAT, and EWT for the year ending December 31, 2011 in the aggregate amount of Php127,130,709.77 be declared null and void."3 On September 4, 2019, the Court in Division partially granted the Petition for Review. It cancelled and withdrew the assessments issued by respondent against petitioner covering deficiency VAT, EWT and compromise penalties for taxable year (TY) 2011, while it upheld in part the assessment issued against petitioner for deficiency income tax forTY 2011. It sustained the following items of income tax assessment, namely: (i) unallowable sales returns & allowances amounting to P16,281 ,370.23; (ii) unsupported freight-in, fuel & other transport expenses in the amount of P29, 181 ,966.24; (iii) unsupported Advertising & Other Outside Services amounting to P22,089, 137.55; (iv) undeclared sales to government amounting to P176,387.43; (v) the disallowed expenses due to non-withholding amounting to P41 ,230,990.26; and, (vi) undeclared sales per reconciliation of the Summary List of Sales (SLS) and Summary Alphalist of Withholding Tax (SAWT) amounting to P1 ,428, 182.54. The dispositive portion of the Court in Division's Decision reads:

"WHEREFORE, the instant Petition for Review is PARTIALLY GRANTED. The assessments issued by respondent against petitioner covering deficiency VAT, EWT and compromise penalties forTY 2011 are CANCELLED AND WITHHDRAWN.

However, the assessment issued against petitioner for deficiency income tax forTY 2011 is UPHELD IN PART. Accordingly, petitioner is ORDERED TO PAY respondent the aggregate amount

of ONE HUNDRED NINE MILLION EIGHT HUNDRED TWENTY-

SEVEN

THOUSAND

EIGHTY-FIVE

PESOS

AND

82/100 (Php109,827,085.82), inclusive of the 25% surcharge, 20% deficiency interest and 20% delinquency interest imposed under Sections 248(A)(3), 249(8) and (C) of the NIRC of 1997, as amended, respectively, computed until December 31, 2017, as follows:

Basic Deficiency Income Tax

1"33, 113,267.56

25% Surcharqe

8,278,316.89 20% Deficiency Interest from April17, 2012 to Julv 21,791,251.69

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

31, 2015 (1"33, 113,267.56 X 20% X 1,201 days/365 days) Total Amount Due, July 31, 2015 1'"63,182,836.14 Add: 20% Deficiency Interest from August 1, 2015 16,039,522.48 to December 31, 2017 (1'"33, 113,267.56 x 20% x 884 days/365 days) 20% Delinquency Interest from August 1, 30,604,727.20 2015 to December 31, 2017 (1"63, 182,836.14 x 20% x 884 days/365 days) Total Amount Due as of December 31, 2017 1"1 09,827,085.82 In addition, petitioner is liable to pay delinquency interest at the rate of 12% on the total unpaid amount of Php63, 182,836.13, as of July 31, 2015, as determined above, computed from January 1, 2018 until full payment thereof pursuant to Section 249(C) of the NIRC of 1997, as amended by Republic Act No. 10963, also known as Tax Reform for Acceleration and Inclusion (TRAIN) and implemented by RR No. 21-2018.

WHEREFORE, the instant Petition for Review is PARTIALLY GRANTED. The assessments issued by respondent against petitioner covering deficiency VAT, f!/l

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

EWT and compromise penalties for TY 2011 are CANCELLED AND WITHHDRAWN.

However, the assessment issued against petitioner for deficiency income tax for TY 2011 is

UPHELD

IN

PART.

Accordingly, petitioner is ORDERED TO PAY respondent the aggregate amount

of ONE HUNDRED NINE MILLION ONE HUNDRED

FIFTY-FOUR THOUSAND THREE HUNDRED SIXTY-

NINE

PESOS

AND

56/100 (P109,154,369.56), inclusive of the 25% surcharge, 20% deficiency interest and 20% delinquency interest imposed under Sections 248(A)(3), 249(8) and (C) of the NIRC of 1997, as amended, respectively, computed until December 31, 2017, as follows:

Basic Deficiency Income Tax

1"32,910,441.15

Surcharqe (25%)

8,227,610.29 20% Deficiency Interest from April 17, 2012 to July 21,657,775.24 31,2015 (1"32,910,441.15 X 20% X 1,201 days/365 days) Total Amount Due, July 31, 2015 1"62, 795,826.68 Add: 20% Deficiency Interest from August 1, 2015 to 15,941,276.70 December 31, 2017 (1"32,910,441.15 x 20% x 884 days/365 days) 20% Delinquency Interest from August 1, 2015 30,417,266.18 to December 31,2017 (1"62,795,826.68 x 20% x 884 days/365 days) Total Amount Due as of December 31, 2017 P1 09,154,369.56 -------------- In addition, petitioner is liable to pay delinquency interest at the rate of 12% on the total unpaid amount ofP62,795,826.68, as of July 31, 2015, as determined above, computed from January 1, 2018 until full payment thereof pursuant to Section 249(C) of the NIRC of 1997, as amended by Republic Act No. 10963, also known as Tax Reform for Acceleration and Inclusion (TRAIN) and implemented by RR No. 21- 2018.

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

On January 31, 2020, petitioner filed the present Petition for Review. 6 In the Resolution dated June 5, 2020, respondent was ordered to file a comment, not a motion to dismiss, on the Petition for Review. 7 Respondent filed his Motion to Admit Attached Comment on July 1, 2020. 8 The Court granted the said motion and admitted the attached CommenUOpposition Re: Petitioner's Petition for Review in the Resolution dated September 1, 2020_9 In the same Resolution, the case was referred to the Philippine Mediation Center-Court of Tax Appeals (PMC-CTA) for mediation.

PMC Form 9 or the Request for Extension [of mediation] filed on November 19, 2020, 10 was granted in the Resolution dated January 15, 2021. The parties were given a final extension of thirty (30) days from November 26, 2020 or until December 26, 2020 within which to reach an amicable settlement. 11 Petitioner filed on March 15, 2021 a Manifestation on the Status of the Compromise Agreement informing the Court that it had submitted its offer of compromise settlement to respondent and that it had been informed that the offer is still for further negotiation. 12 In the Resolution dated June 2, 2021, the Court suspended the proceedings for an additional sixty (60) days from May 15, 2021 when the quarantine classification of the National Capital Region (NCR) was downgraded

to General

Community

Quarantine

(GCQ) with

heightened restrictions or until July 14, 2021. The parties were directed to submit a Report on the progress of their judicial compromise within five (5) days from July 14, 2021. 13 On July 19, 2021, petitioner filed a Manifestation on the Status of the Compromise Agreement informing the Court that it had submitted its Revised Compromise Offer to respondent and that it was hopeful that the revised compromise offer would be given favorable consideration for the expedient resolution of the case. Petitioner s CTA EB Rollo, pp. 5-110.

7 CTA EB Rollo, pp. 112-113.

8 CTA EB Rollo, pp. 114-123.

9 CTA EB Rollo, pp. 125-126.

1o CTA EB Rollo, p. 127.

11 CTA EB Rollo, pp. 129-130.

12 CTA EB Rollo, pp. 132-133.

13 CTA EB Rollo, pp. 146-147.

e1

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296) prayed that an extension of one (1) month, or until August 19, 2021, be granted for the parties to reach a compromise. 14 In the Resolution dated October 27, 2021, the Court declared that with the developments in quarantine classification, petitioner's prayer for extension until August 19, 2021 is moot. The Court suspended the proceedings for an additional non-extendible period of sixty (60) days from October 1, 2021, or until November 30, 2021 in order to afford the parties ample opportunity to settle the case amicably. The parties were directed to submit a Joint Report on the progress of their judicial compromise within five (5) days from November30, 2021. 15 In the Resolution dated March 2, 2022, the Court reiterated the order requiring the parties to submit their Joint Report on the status of their judicial compromise within five (5) days from notice. 16 Respondent filed on April 6, 2022 a Manifestation and Compliance With Apologies (Re: Resolution dated 02 March 2022) informing the Court that petitioner's offer of compromise submitted on December 2, 2021 was denied by respondent, and that petitioner submitted an improved offer of compromise which is pending before respondent's office for approvaiY In the Resolution dated June 7, 2022, the Court noted the aforesaid respondent's Manifestation and Compliance With Apologies. Since the Petition for Review has been pending for more than two (2) years already, and taking into account the denial by respondent of petitioner's original offer of compromise, the Court reinstated the proceedings in this case and submitted the Petition for Review for decision. 18 Meanwhile, PMC-CTA Form 5 (Mediator's Report), filed on July 28, 2022, stating the unsuccessful mediation of this case, was noted in the Resolution dated August 22, 2022.

14 CTA EB Rollo, pp. 148-150.

15 CTA EB Rollo, pp. 162-164.

1s CTA EB Rollo, pp. 170-171.

17 CTA EB Rollo, pp. 174-177.

1a CTA EB Rollo, pp. 179-181.(11

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

PETITIONER'S ARGUMENTS

Petitioner agrees with the Court in Division in rejecting part of the findings of the respondent, but raises on appeal the items of income tax assessment sustained by the Court in Division. Petitioner argues the following with respect to the sustained items of assessment:

1. Unallowable Sales Returns & Allowances - 1'"16,281 ,370.23 Although the amount verified by the ICPA was only to the extent of 1'"39,258,500.52, it does not necessarily mean that the unverified portion of [the contra-sales account] amounting to 1'"16,281,370.23, as found by the Court in Division, may already be disallowed as deduction. Respondent failed to provide the legal basis for the disallowance of "sales discounts" as the FLO merely cites Revenue Audit Memorandum Order (RAMO) No. 01-1999, without stating which portion thereof provides a requirement for the production of the "Debit/Credit Memo and Certificate of Deductibility". Anent the disallowance of the difference between the Sales Return and Discounts accounted by the ICPA and the Sales Return and Discounts recorded by petitioner for the months of February and April 2011 in the aggregate amount of 1'"2,489,328.35, while the amounts accounted by the I CPA for these months were higher than that recorded in the ledger, this, however, did not remove the fact that these Sales Return and Discounts are from 2011. It is a normal occurrence in bookkeeping for posting of transactions to be made in other periods (i.e., earlier or subsequent months). Afterall, for the other months of 2011, except for February and April, the I CPA was able to validate less Sales Returns and Discounts than what were recorded in the ledger. In this situation, the 1'"2,489,328.35 excess validated Returns and Discounts could very well be from these other months.

2. Unsupported Freight-In, Fuel & Transportation Expenses - P29, 181,966.24 The question is whether the suppliers for the alleged difference of P29, 181 ,966.24 were listed in petitioner's Summary List of Purchases (SLP).

The concern of the respondent in his FLO does not call for the production of the source documents. The complete listing of suppliers in the SLP relating to freight-in, fuel & transportation expenses was completely addressed by the ICPA. Petitioner's freight-in, fuel & transportation expenses were found in the SLP, contrary to the asseveration of the respondent. Out of P59,559,522.08, the ICPA was able to verify the amount of 1'"58,563,790.52. While it would seem that there is a difference of P995,731.79, this was only because the ICPA cannot match the particular supplier to the particular expenditure item the supplier should be categorized. The deficiency income tax assessment on ~ Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296) alleged unsupported freight-in, fuel and transportation expense are without factual or legal basis.

3. Unsupported

Advertising

&

Other

Outside

Services

P22,089, 137.55 Petitioner insists that the allegation on unsupported advertising & other outside services has no factual basis. It avers that it presented its SLP for the 1 •t, 2"d, 3'd and 41h Quarters for the year 2011, Audited Financial Statements (FS), Monthly and Quarterly VAT Returns to prove that the income payments made to various entities which represent Advertising and Other Outside Services has been properly reported to the BIR. Petitioner presented its line-by-line reconciliation to explain the alleged unsupported amounts. The Court in Division missed the fact that apart from the summary for certain expense items, the same were likewise supported by source documents which were submitted to the Court through a USB. With respect to the purchases from

Asia

Brewery

(P4,676,301.75) and lnterbev Philippines (P939,937.48) which were charged to advertising (total of P5,616,239.23), while these purchases would have formed part of the Cost of Sales, the total was removed from the Cost of Sales and reclassified instead as advertising expenses, which is more appropriate considering the nature of these expenses. The matter of classifying legitimate costs and expenses in the books of accounts, either as Cost of Sales or expenses, is a discretion left on the management, and in any way, [the amount] would have been deducted from the taxable income.

4. Sales to Government (not included in the SLS)- P176,387.43 Petitioner claims that its sales to the Provincial Government of Camarines Sur were reported in the Summary List of Sales (SLS) for 2011 under the name, Camarines Sur Water Sports Complex (CLC). The ICPA was able to verify the fact of sales to the Province of Camarines Sur through the Certificate of Withholding Tax at Source (BIR Form 2306) by the petitioner, and that the same were included in petitioner's SLS under the registered name "CWC". Petitioner also moves for the Court to take judicial notice that the CWC is located within the Provincial Capitol Complex of Camarines Sur, supporting its contention that CWC listed in its SLS actually pertains to the Provincial Government of Camarines Sur. Thus, petitioner concludes that the deficiency income tax assessment on the sales to government for allegedly not having been included in the SLS should be cancelled for want of factual or legal bases.

5. Excess of Standard input over actual input (to be closed to expense)- (P10,475.73) As this assessed item relates to [the alleged sales to government not included in the SLS], petitioner reiterates that all its sales to the Provincial Government of Camarines Sur were duly supported in its SLS under the name Camarines Sur Water Sports Complex (CLC). Thus, it is petitioner's position that the assessed item is without factual basis.~

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

6. Disallowed Expense due to non-withholding- 1'"41 ,230,990.26 Petitioner disagrees with the findings of the respondent. It claims that it properly subjected the income payments covered by the withholding tax system. Respondent's assumption that all income payments are subject to withholding tax is incorrect as the ICPA confirmed that not all expenses it claimed are subject to withholding tax. The alleged income payments to suppliers not subjected to Expanded Withholding Tax (EWT) are either (i) casual purchases or from a person who is not considered a regular supplier, (ii) petty cash disbursements incurred by salesmen and sales off1ces such as, but not limited to meals, representation and entertainment, gasoline, out- of-town fieldwork expenses and supplies or (iii) expenses that were paid in cash such as, but not limited to prepaid cellphone loads, registered mails transmitted to customers and the like. In addition, the ICPA found that based on the supporting documents, purchases from Sincere Management Staff and Golden Touch Advertising, were found to be subject to EWT.

The deficiency income tax and corresponding

EWT

assessment were derived by respondent as a result of a mere comparison of petitioner's EWT forms and petitioner's purchases per Financial Statements/Income Tax Return/Trial Balance (FS/ITR/TB). As observed by the ICPA, respondent did not present supplier invoice details to explain the observed difference which may be due only to timing differences.

Assuming that certain expenses were not subjected to withholding taxes, respondent cannot simply disallow the expenses claimed as deduction from gross income for failure of the taxpayer to subject them to withholding taxes. If there is a deficiency in the payment of the withholding tax, respondent should, at the very least, assess it for deficiency in withholding taxes and not disallow the expenses altogether as this is deprivation of property without due process of law which no less than the Constitution proscribes. The prevailing rule during the taxable year under audit is Revenue Regulations No. 14-2002 which states that [a deduction will also be allowed where no withholding of tax was made] when the withholding agent erroneously underwithheld the tax but pays the difference between the correct amount and the amount of tax withheld, including the interest, incident to such error, and surcharges, if applicable, at the time of the audit/investigation or reinvestigation/reconsideration.

7. Gross Profit on Undeclared sales per reconciliation of SLS & SAWT- 1'"1 ,428,182.54 The assessment is downright speculative. The fact that the total income payment received as appearing in the SAWT is higher than the income payment received based on the SLS does not necessarily imply unrecorded sales. For it may happen that the SAWT total is higher due to timing difference, or due to variance in accounting system adopted by the payor and the payee of income. l\11 Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296) Revenue Regulations No. 2-98 recognizes the variance in the time of recording, where it is possible that withholding would be made either at the time of accrual or payment, whichever comes first.

8. Imposition of Surcharge or Interests has no factual and legal bases Considering that the imposition of interests and surcharge are in the nature of accessory penalties to the alleged deficiency basic taxes due and unpaid, the same should be cancelled upon the nullification of the assessment issues that were assailed in the Petition for Review.

RESPONDENT'S ARGUMENTS

In his Comment/Opposition Re: Petitioner's Petition for Review filed on July 1, 2020, 19 respondent raises the following:

1. The arguments propounded by petitioner are without merit;

2. The Court in Division is correct in ruling that petitioner is liable for deficiency income tax assessment;

3. Assessments are presumed correct and made in good faith. The burden of proof is on the taxpayer contesting the validity or correctness of an assessment to prove not only that the Commissioner of Internal Revenue is wrong but the taxpayer is right. Dereliction on the part of the petitioner to satisfactorily overcome the presumption of regularity and correctness of the assessment will justify the judicial upholding of the assessment.

4. As noted by the Court in Division, sales returns and discounts require proper substantiation for it to be allowed as deduction from gross sales to arrive at gross income. The sales returns and discounts, being unsupported, were correctly disallowed by the Court;

5. The Freight, Fuel and Transportation Expense was correctly disallowed for being unsupported; and,

6. Since petitioner failed to present sufficient evidence to disprove respondent's findings, the disallowance was properly upheld by the Court.

ISSUE

Whether or not petitioner is liable for the assessed deficiency Income Tax for taxable year 2011 in the aggregate amount of ft1 09, 154,369.56, inclusive of interest and penalties.20

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

THE COURT EN BANC'S RULING

CTA En Bane has jurisdiction over the case The present case is a Petition for Review of the assailed Decision and assailed Amended Decision rendered by the Court in Division relative to the disputed deficiency taxes issued by the Bureau of Internal Revenue (BIR) against petitioner forTY ending December 31,2011.

The Court En Bane is vested with authority to review the said assailed Decision and assailed Amended Decision of the Court in Division pursuant to Section 1821 of Republic Act (R.A.) No. 1125,22 as amended by R.A. No. 9282, 23 in relation to Section 2(a)(1 ), Rule 4 of the Revised Rules of the Court of Tax Appeals (RRCTA), as amended.24 Moreover, the present Petition for Review was filed on January 31, 2020, which is within the extended period pursuant to Court En Bane's Minute Resolution dated January 17, 2020.25 Clearly, the Court En Bane can properly take cognizance over the present Petition for Review.

CTA

En Bane sustains the findings of the Court in Division In the assailed Decision, petitioner was ordered to pay a Basic Deficiency Income Tax of P33, 113,267.56. As aforesaid, in the 21 SEC. 18. Appeal to the Court of Tax Appeals En Bane. -No civil proceeding involving matter arising under the National Internal Revenue Code, the Tariff and Customs Code or the Local Government Code shall be maintained, except as herein provided, until and unless an appeal has been previously filed with the CTA and disposed of in accordance with the provisions of this Act. A party adversely affected by a resolution of a Division of the CTA on a motion for reconsiderat'1on or new trial, may file a petition for review with the CTA en bane. 22 An Act Creating the Court of Tax Appeals. 23 An Act Expanding the Jurisdiction of the Court of Tax Appeals (CTA), Elevating Its Rank to the Level of a Collegiate Court With Special Jurisdiction and Enlarging Its Membership, Amending for the Purpose Certain Sections of Republic Act No. 1125, as Amended, Otherwise Known as the Law Creating the Court of Tax Appeals, and for Other Purposes. 24 Sec. 2. Cases within the jurisdiction of the Court en bane. - The Court en bane shall exercise exclusive appellate jurisdiction to review by appeal the following:

(a) Decisions or resolutions on motions for reconsideration or new trial of the Court in Divisions in the exercise of its exclusive appellate jurisdiction over:

(1) Cases arising from administrative agencies- Bureau of Internal Revenue, Bureau of Customs, Department of Finance, Department of Trade and Industry, Department of Agriculture[.] 2s CTA EB Rollo, p. 4. (i)

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296) assailed Amended Decision, the Basic Deficiency Income Tax was reduced to P32,91 0,441.15 in the light of the findings of the Court in Division anent the substantiated Advertising and Promotions Expenses amounting to P676,088.02. Thus, petitioner was ordered to pay respondent the aggregate amount of P1 09, 154,369.56, inclusive of the Basic Deficiency Income Tax of P32,91 0,441.15, 25% surcharge, 20% deficiency interest and 20% delinquency interest imposed under Sections 248(A)(3), 249(B) and (C) of the NIRC of 1997, as amended, respectively, computed until December 31,2017. The adjusted Basic Deficiency Income Tax of P32,910,441.15 is computed below:

Reference

Basis for the Assessment in the FLO

Amount

IT-3

Unallowable Sales Returns & Allowances

16,281,370.23 Unsupported Freight-in, Fuel & Transportation

IT-4

expenses 29,181,966.24

Unsupported Advertising & Other Outside

Services (,.22,089, 137.55/ess the amount of f>676,088.02 which was reconsidered in the

IT-5

assailed Amended Decision) 21,413,049.53

IT-6

Sales to Gov't (not included in the SLS) 176,387.43 Excess of std input over actual input (to be

IT-7

closed to expense) (10,475.73) Disallowed expenses due to nonwithholding

IT-8

(Sec. 34K, NIRC) 41,230,990.26 GP on undeclared sales per recon of SLS,

IT-9

SAWT [& TPI Data]

1 ,428,182.54

Total Adjustments Per Audit

109,701,470.50 Taxable Income per return 4,236,787.70 Taxable I nco me per Audit 113,938,258.20

Income Tax Rate

30%

Income Tax Due Per Audit

34,181,477.46

Allowable Credits

1,271,036.31

Basic Deficiency Income Tax

32,910,441.15 The aforesaid items of income tax assessment in the assailed Decision, as adjusted in the assailed Amended Decision, are sought to be reconsidered in the present Petition for Review. After a careful review of the arguments raised by petitioner, the Court finds that the same were already sufficiently threshed out and passed upon by the Court in Division in the assailed Decision and Amended Decision. {fJ

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

The Court, however, opts to address the issues raised by petitioner to settle once and for all the controversy.

IT-3

Unallowable

Sales

Returns and Allowances -

P16,281,370.23 To recall, respondent disallowed petitioner's sales discounts amounting to 1846,338,319.08 due to petitioner's alleged failure to present the required supporting documents.

The Details

of Discrepancies attached to the FLO stated that "[a]s part of the audit procedure for Sales account, the contra-sales account, Sales Returns, Discount & Allowances requires verification of supporting records such as Debit/Credit Memo and Certificate of Deductibility issued by the BIR, pursuant to RAMO No. 01-1999. The amount of contra-sales account reflected in the Trial Balance was not considered as a valid reduction of sales due to failure to present the required supporting documents."

In the assailed Decision, the Court in Division partially upheld the disallowance. The Court in Division found that notwithstanding the absence of Debit/Credit Memo or Certificate of Deductibility issued by the BIR, petitioner sufficiently proved a portion of its claimed sales returns, discounts and allowances through the presentation of its sales invoices forTY 2011.

In the present Petition, however, petitioner reiterates its contention that the FLO merely cites RAMO No. 01-1999 as legal basis for the subject item of assessment without actually stating which portion thereof requires the production of the documents "Debit/Credit Memo and Certificate of Deductibility" to allow the sales discounts to be deducted from the gross sales. Thus, petitioner argues that the FLO failed to provide the legal basis for the disallowance of the sales discount as a valid deduction from gross sales. Petitioner's contention is untenable.

Contrary to petitioner's allegations, records reveal that respondent provided factual and legal bases for the subject item of assessment as shown in the Details of Discrepancies26 attached to the FLO. Since the assessment contains factual and legal bases, there is no violation of petitioner's right to due process. In fact, petitioner was '"Exhibit "P-37-a", BIR Records, Folder 2, pp. 1599-1604."'

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296) able to effectively refute the assessment and explain its side thereon by arguing in its protest to the FLD/FAN that it had proper documentation of the sales discounts in the form of sales invoices which it submitted to respondent. 27 The Court in Division was correct in holding that the presentation of sales invoices is sufficient to prove the sales discounts and allowances.

It must be emphasized that the term "gross income" derived from business is invariably stated in Title II (Tax on Income) of the NIRC of 1997, as amended. 28 The term 'gross income' derived from business shall be equivalent to gross sales less sales returns, discounts and allowances and cost of goods sold.29 The Chapter pertaining to Tax on Income does not elaborate on the concept about "sales returns, discounts and allowances".

Nonetheless, Section 106(0), a provision on VAT under Title IV of the of the NIRC of 1997, as amended, gives light on the concept of sales returns, discounts and allowances, viz.: "SEC. 106. Value-added Tax on Sale of Goods or Properties.

-XXX

(D) Sales Returns, Allowances and Sales Discounts. - The value of goods or properties sold and subsequently returned or for which allowances were granted by a VAT-registered person may be deducted from the gross sales or receipts for the quarter in which a refund is made or a credit memorandum or refund is issued. Sales discount granted and indicated in the invoice at the time of sale and the grant of which does not depend upon the happening of a future event may be excluded from the gross sales within the same quarter it was given."

Although the afore-quoted provision is stated under Title IV of the NIRC of 1997, as amended, the same is equally applicable for income tax purposes in determining their deductibility or exclusion from gross sales. It is a rule in statutory construction that every part of the statute must be considered together with the other parts, and kept subservient to the general intent of the whole enactment. The law must not be read in truncated parts, its provisions must be read in relation to the whole law. The particular words, clauses and phrases should not be studied as detached and isolated expression, but the whole and 27 Protest to the FAN, Exhibit "P-38", CTA Docket, Vol. Ill, pp. 1498-1517. 28 See for instance Sections 27, 28, 31, 32 of the NIRC of 1997, as amended. 29 Section 27, NIRC of 1997, as amended.

l11

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296) every part of the statute must be considered in fixing the meaning of any of its parts and in order to produce a harmonious whole. 30 In relation to Section 106(D) of the NIRC of 1997, as amended, Section 4.106.9 of Revenue Regulations (RR) No. 16-2005 provides that a sales discount be indicated in the invoice at the time of sale for it to be excluded from the gross sales, to wit: "SEC. 4.106-9.- Allowable Deductions from Gross Selling Price. - In computing the taxable base during the month or quarter, the following shall be allowed as deductions from gross selling price:

(a) Discounts determined and granted at the time of sale, which are expressly indicated in the invoice, the amount thereof forming part of the gross sales duly recorded in the books of accounts.

Sales discount indicated in the invoice at the time of sale, the grant of which is not dependent upon the happening of a future event, may be excluded from the gross sales within the same month/quarter it was given.

(b) Sales returns and allowances for which a proper credit or refund was made during the month or quarter to the buyer for sales previously recorded as taxable sales." (Boldfacing supplied) Upon evaluation of the Summary of Sales and the corresponding sales invoices, 31 the Court in Division concluded that the disallowed contra-sales account "Sales Returns, Discount, & Allowances" actually consisted of "trade discounts," "deals," and "pick-up allowances" which are all in the nature of sales discount. Considering that these were given to the customers at the time of sale and properly indicated in the sales invoice, then the sales invoices are sufficient to prove such discounts.

Scrutiny

of the

ICPA's

monthly schedules of sales returns/discounts and allowances, together with the corresponding invoices, shows that petitioner's substantiated sales returns and discounts from its five sales offices amounted to P36,451 ,830.46 (inclusive of VAT) or P32,546,277.20 (exclusive of VAT)a2 Ultimately, the Court in Division upheld the disallowance of sales discount amounting to P16,281 ,370.23, representing the difference between the sales discount of P46,338,319.08 per petitioner's schedules and 3° Commissioner of Internal Revenue vs. Pilipinas Shell Petroleum Corporation, G.R. No. 192398, September 29, 2014.

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296) sales discount per !CPA's schedule, as recomputed by the Court in Division, amounting to P30,056,948.85. 33 Petitioner further questions the disallowance of the difference between the sales returns and discounts accounted by the ICPA and the sales returns and discounts recorded by petitioner for the months of February and April 2011 in the aggregate amount of P2,489,328.95. Petitioner argues that while the amounts accounted by the ICPA for the said months were higher than that recorded in the ledger, such finding did not remove the fact that these returns and discounts are from 2011. Moreover, petitioner posits that it is a normal occurrence in bookkeeping for posting transactions to be made either in earlier or later periods. Finally, petitioner believes that the amount of P2,489,328.95 could be from the other months where the ICPA validated less returns and discounts than those recorded in petitioner's ledgers.

The Court finds petitioner's contentions without merit. Petitioner failed to substantiate its allegation that the P2,489,328.95 excess validated sales discounts pertain to the months other than February and April 2011. Allegations are not evidence, and without evidence, bare allegations do not prove facts. 34 Section 4.106-9 of RR No. 16-2005 mandates that sales discount indicated in the invoice at the time of sale, the grant of which is not dependent upon the happening of a future event, may be excluded from the gross sales within the same month/quarter it was given. In other words, it is required that the sales discounts given in a specific taxable period should be excluded from the gross sales reported in the very same taxable period. The ICPA determined that for the months of February and April 2011, there are sales discounts amounting to P1 ,521,969.12 and P967,359.23, respectively, that were not excluded from gross sales in the same months. In February 2011, petitioner only reported sales discounts amounting to P810,993.42 contrary to the finding of the ICPA that in the same month, petitioner granted sales discounts amounting to P2,332,962.54. Similarly, in April 2011, petitioner only reported sales discounts amounting to P1,724,517.90 while the ICPA 33 Substantiated sales discount, net of VAT amounting to 1"32,546,277.20 less over-accounted sales discount amounting to 1"2,489,328.95 which did not form part of the 1"46,338,319.08 sales discounts claimed by petitioner.

34 Sabellina vs. Buray et al., G.R. No. 187727, September 2, 2015. ~

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296) found that in the same month, petitioner actually granted sales discounts amounting to P2,691 ,877.13.

Petitioner attempts to explain by arguing that the sales discounts in the aggregate amount of P2,489,328.95 were granted in months other than February and April 2011 so that it was proper for petitioner not to exclude them from gross sales reported in February and April 2011.

Contrary to such claims, the ICPA noted that the sales discounts pertain to the months of February and April 2011. The ICPA evaluated the sales invoices dated within the said months and accounted these sales discounts as indicated in the said invoices. It is, therefore, inappropriate to claim that these sales discounts are from other months.

In fine, it is proper to sustain the disallowance of the unsubstantiated sales discounts amounting to P16,281 ,370.23. /T-4 Unsupported Freight-in,

Fuel

&

Transportation

Expenses- P29, 181,966.24 To recall, respondent assessed petitioner for the unsupported freight-in, fuel and transportation expenses amounting to P29, 181,966.24, computed as follows:

Per FS/ITRITB

Freight-In

'" 47,329,257.00

Transportation

2,369,147.21

Fuel & Oil

9,861,117.87

I"

59,559,522.08

Less: Freight Contractors & Fuel Suppliers per SLP:

LFH Ventures Mdsg Corp.

11,702,250.28 Pilipinas Shell Petroleum Corp.

4,970,167.56

Petron Corp

4,749,098.05 Rapid Movers & Forwarders Co Inc.

2,687,483.02

Quincela Shipping Lines

2,539,108.30 Hizon Transport Services & Trdg Inc.

1,774,705.07

MRTC Trucking Services Corp

743,925.07

Our Beverly Village Trucking Corp

709,860.05

CMT Hauling Services

259,411.75

Regina Shipping Lines Inc

63,169.59

Powerzone Petroleum Products Corp

43,628.04

Philippine Airlines Inc

28,658.03

LBC Express-Sellnc

28,316.81

JRS Business Corp

25,002.84 ~

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

Montenegro Shipping Lines Inc

17,133.89

TCL Merchandise Brokerage Inc

16,986.83

Air Philippines Corp

6,751.78

Santa Clara Shipping Corp

5,107.13

Penafrancia Shipping Corp

3,587.26

DHL Worldwide Express

3,204.49

Unsupported

~ 30,377,555.84 29,181 ,966.24 Petitioner argues that this item of assessment should be cancelled inasmuch as first, the ICPA was able to name the contractors and suppliers for freight-in, transportation and fuel expenses amounting to ~54,292,071.57 as shown in the "Reconciliation of Freight, Fuel & Transpo Expenses"; 35 and, second, petitioner has submitted the receipts and invoices36 for the non-VAT expenses amounting to ~4,271, 718.95. Out of the total freight-in, transportation and fuel expenses

per FS/ITR

amounting to ~59,559,522.08, petitioner claims that the ICPA has verified expenses amounting to ~58,563,790.52. Hence, petitioner effectively claims that only the difference of ~995, 731.79 should remain in this item of assessment considering that the ICPA cannot trace this amount. In essence, petitioner reiterates its contention that the subject item of assessment does not call for the production of source documents pertaining to the unsupported freight-in, fuel and transportation expenses, but merely for the completion of the list of suppliers in the SLP.

Petitioner's contention lacks merit.

As shown in respondent's computation of this item of assessment, the amount of ~29,181,966.24 pertains to the "unsupported" freight-in, transportation and fuel expenses." By using the word "unsupported", respondent's clear intention is to require petitioner to provide the breakdown of the total expenses as well as the source documents thereof.

Without the supporting source documents, the Court cannot simply accept the reconciliation prepared by the ICPA. It bears stressing that the Court is not bound by the findings of the I CPA as so provided in Section 3, Rule 13 of the Revised Rules of the Court of Tax Appeals (RRTCA), as amended, viz:

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

"SEC. 3. Findings of independent CPA.- The submission by the independent CPA of pre-marked documentary exhibits shall be subject to verification and comparison with the original documents, the availability of which shall be the primary responsibility of the party possessing such documents and, secondarily, by the independent CPA. The findings and conclusions of the independent CPA may be challenged by the parties and shall not be conclusive upon the Court, which may, in whole or in part, adopt such findings and conclusion subject to verification." (Boldfacing supplied) The ICPA's findings are not conclusive as the same are subject to verification as to their accuracy, veracity and merit. The Court may either adopt or reject the ICPA Report, wholly or partially, depending on the outcome of its own independent verification. Thus, absent the source documents supporting the items indicated in the reconciliation prepared by the ICPA, the Court is constrained to reject the findings of the ICPA thereby disallowing freight-in, transportation and fuel expenses amounting to P29, 181,966.24.

/T-5 Unsupported Advertising and Other Outside Services -

P21,413,049.53 In the assailed Decision, the Court in Division upheld respondent's disallowance of advertising expenses amounting to P22,089, 137.55 due to petitioner's failure to submit supporting documents.

In the assailed Amended Decision, however, the Court in Division verified the source documents for the Non-VATable Outside Services and Advertising & Promotions Expenses and determined that expenses amounting to a total of P676,088.02 were found to be properly substantiated by sales invoices and official receipts. Thus, deducting this amount from the original disallowance of P22,089, 137.55, the remaining disallowed expenses is P21 ,413,049.53.

To recall, the original disallowance of P22,089, 137.55 was computed by respondent as follows:O')

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

Per FSffB:

Security Services

1,142,961.38 Outside services 11,609,840.55

Advertising & Promotions

10,479,297.00 23,232,098.93

Less: Service & Advertising Provider per SLP:

ligon Security Investigation & Gen Services Inc 375,000.00

Paraseal Security Agency

312,187.50

New Bicol Veterans Security Agency Inc

268,273.88

Mezza Security Agency Inc

137,500.00

Hot Rod Detective & Protective Agency Inc

50,000.00 1 '142,961.38 Unsupported/un-necessary advertising expenses 22,089,137.55 Petitioner presented a reconciliation 37 between the total advertising and outside services per Financial Statements/Trial Balance and total advertising and outside services per SLP. Examination of the reconciliation revealed the following breakdown and a discrepancy amounting to P2,330,572.67, computed as follows:

Reconciliation Items

Amount

VA Table

(a} Security Services per SLP

1 '142,961.38

(b) Advertising and Promotions per SLP 1,209,905.09

(c) Asia Brewery Inc. purchase charged to Advertising 4,676,301. 75

(d) lnterbev Philippines, Inc. purchase charged to Advertising 939,937.48

(e) Outside Services 1 ,841 ,604.50 Non-VAT able

(a) Outside Services 11,090,816.06

Total

20,901,526.26

Advertising & Other Outside Services per FS/TB

23,232,098.93

Unsupported Advertising & Other Outside Services per

I CPA

2,330,572.67 "Paragraph 49, Petition for Review, CTA EB Docket, p. 24.11 Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

VA Table

(a) Security Services per SLP (P1, 142,961.38) (b)

Advertising

Promotions

per (P1,209,905.09); and and

SLP

(e)

Outside

Services

(P1,841,604.50) To support the security services, advertising and promotions, and outside services, petitioner submitted the "Schedule of Security Services per SLP",38 "Schedule of Vatable- Advertising & Promotion per SLP", 39 and "Schedule of Vatable- Outside Services per SLP",40 respectively. Undeniably, these documents are mere schedules prepared by petitioner and without the supporting source documents, the Court cannot determine whether these expenses were indeed incurred.

(c)

Asia

purchase

Advertising

and

Brewery

Inc.

charged to (P4,676,301. 75);

(d) lnterbev Philippines Inc. purchase charged to Advertising (P939,937.48) Petitioner claims that portions of its purchases from and payments to Asia Brewery Inc. and lnterbev Philippines, Inc. pertain to freebies or products given to its customers for promotion purposes. To support its claim, petitioner offered a "Reconciliation of Taxes Withheld vs.

Audited

Financial

Statement,"41 showing that inventories purchased from Asia Brewery Inc. and lnterbev Philippines, Inc. with a total value of P5,616,239.23 were reclassified from cost of sales to operating expenses.

As shown in the Reconciliation below, petitioner deducted "Purchases charged to Advertising (Complimentaries)" with an amount of P5,616,239.23 from the purchases during the taxable year to arrive at the net purchases, and such deduction effectively reduced the cost of sales by the same amount. The deducted purchases, which according to petitioner were given to its customers as freebies, were 3a Exhibit "P-96-a".

39 Exhibit "P-96-c".

4o Exhibit "P-96-b".

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296) claimed as ordinary deduction, particularly under the advertising expense account. Shown below is the pertinent portion of the Reconciliation showing the above-explained reclassification:

SALES

100% 394,636,706.321

COST OF SALES

Beg. Inventories 30,405,210.42 I

Purchases

339,677,518.77

Purchase Returns

(506,085.90)

Vatable Purchase Discounts

(6,448,684.98)

Non-vatable Purchase Discounts

(44, 199,888.00) Purchases charged to Advertising

(Complimentaries)

(5,616,239.23) 282,906,620.66

Freight

47,329,257.23

Net Purchases

330,235,877.89

TGAFS [Total Goods Available For Sale]

360,641,088.31

Net Purchases

(28,035,788.43)

Cost of Sales

84% 332,605,299.88

GROSS PROFIT

16% 62,031,40644 ·-

OPERATING EXPENSES

Salaries and Wages

14,837,145.60

Fringe Benefits

250,191.93

Rental

292,989.28

Professional Fees

37,900.00

Security Services

1 '142,961.38

Other Outside Services

11,609,840.55

Advertising

10,479,297.17

Complimentaries

5,616,239.23

Promotions

4,863,057.94

Repairs and Maintenance

2,900,720.04

Research and Development

295,335.52

Office Supplies

287,084.81 SSS, GSIS, Philhealth, HDMF & etc.

983,745.05 ~

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

Insurance

Representation and Entertainment

Transportation and Travel

Fuel and Oil

Communication, Light and Power

Taxes and Licenses

Losses

Depreciation

Charitable Contribution

Miscellaneous

NET TAXABLE INCOME

405.00 236,191.93 2,369,147.21 9,861 '117.87 1,569,521.99 381,250.29 171,797.49 81,139.13 - 6,836.50 57,794,618.74 4,236, 787.7042 According to petitioner, while those purchases would have formed part of the cost of sales, the amount of P5,616,239.23 was deducted from cost of sales and reclassified instead as advertising expense. To petitioner, it is more appropriate to claim these purchases as advertising expenses considering that they were not sold but given away as freebies to its customers. Essentially, petitioner contends that the matter of classifying legitimate costs and expenses in the books of accounts (i.e., either as cost of sales or ordinary expenses) is a discretion left to management and in any case, these expenses would have certainly reduced its taxable income. While the Court agrees that the matter of classifying legitimate costs and expenses is left to the discretion of management, it is incumbent upon the taxpayer to prove that the classification was proper by submitting the supporting documentary requirements. 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: "Section 34. Deductions from Gross Income. - xxx (A) Expenses. -

(1) Ordinary and Necessary Trade, Business or Professional Expenses.-

XXX

XXX

XXX

42 Per Reconciliation, the net taxable income is (1"6,242,509.47) but upon re-computation the correct net taxable income is 1"4,236, 787.70 which tallies with the taxable income per return. ~

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

(b) Substantiation Requirements. - No deduction from gross income shall be allowed under Subsection (A) hereof unless the taxpayer shall substantiate with sufficient evidence, such as official receipts or other adequate records: (i) the amount of the expense being deducted, and (ii) the direct connection or relation of the expense being deducted to the development, management, operation and/or conduct of the trade, business or profession of the taxpayer."

In this case, petitioner failed to submit evidence supporting the amount of expenses charged to the advertising expenses account and the receipt of the freebies by petitioner's customers. By showing the Reconciliation and the invoices supporting the purchases, petitioner simply pointed out that these expenses were part of the purchases made by it during the taxable year, reclassified them as advertising expenses, and nothing more. Lamentably, it is not sufficient to prove that these supposed freebies were originally part of the purchases; it must be shown that these inventories were first withdrawn from the inventories for sale, and second, they were actually given as freebies to the customers. Mere reclassification of accounts, i.e., from cost of sales to advertising expense, does not even prove that there was actual withdrawal of the goods, much less a free distribution thereof to customers.

Non-VAT able (a)

Outside

(f/111 ,090,816.06)

Services

With respect to the non-VATable outside services, petitioner claims that the Court in Division failed to consider that apart from the summary of the following expense items, they are likewise supported by source documents:

Non-VATable Outside Services

Amount

Exhibit

Commission-OP

201,737.81 P-96-d and series

Janitorial & Security

12,000.00 P-96-e and series

Salesmen Expenses

5,456,878.89 P-96-f and series

Non-VATable Advertising & Promotions

Promotions- Sponsorship

5,420,199.36 P-96-g and series

Total

11,090,816.06 - -- -- - - - - - -- -- - ------ The Court evaluated the claim of petitioner that the foregoing expense items are supported by source documents. After a thorough cfl

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296) examination, the Court found that the submitted documents43 are mostly paying vouchers, petty cash vouchers, statements of operating expenses, and expense reports which are all petitioner's internal documents. Thus, the Court in Division correctly ruled that these documents are self-serving evidence which do not carry much evidentiary value.

It is also worth pointing out that the petty cash vouchers for the janitorial and security expenses, all dated 201 0, were incurred and paid in 2010, as shown below:

Petty Cash

Date of

Exhibit No.

Payee

Voucher (PCV)

PCV Date

Stamp Paid

No.

i P-96-e-1-3

Alex Balin

2010-03-142

23-Mar-10

31-Mar-10

P-96-e-1-3

Herald Manzares

2010-03-151

25-Mar-10

31-Mar-10

P-96-e-2-3

Alex Balin

2010-04-158

27-Apr-1 0

30-Apr-1 0

P-96-e-3-4

Herald Manzares

2010-07-034

23-Jul-1 0

24-Jul-10

P-96-e-3-4

Alex Balin

2010-07-033

20-Jul-10

24-Jul-10

P-96-e-4-3

Alex Balin

2010-08-048

18-Aug-10

23-Aug-10

As aforestated, the Court found that although some of the documents presented are invoices and official receipts, they were nevertheless dated 2009 and 2010, and thus, outside the assessed taxable period. Shown below are the expenses claimed as deductions in 2011 but whose supporting invoices and official receipts were dated in prior years:

Exhibit No.

Payee

OR/Invoice No.

Date

i

I

Masbate New Life Marketing & Merchandising

P-96-g-1-4

Corporation

Unreadable

20·Mar-10

P-96-g-2-13

D'Golden Touch Advertising

1556

2-Mar-10

P-96-g-2-17

New Ong to Expressmart

290020

12-Mar-10

P-96-g-2-18

Nag a Lucky Star Trading

44807

3-Mar-10

P-96-g-2-19

Robertson Department Store and Supermart

989333

4-Mar-10

P-96-g-2-20

OK Bator Store

450

4-Mar-10

P-96-9-2-21

Philippine Fisheries Development Authority

3872

4-Mar-10

P-96-g-2-22

Lola's Music Bar

4134

4-Mar-10

P-96-g-2-23

Robertson Mall

300641

5-Feb-10

P-96-g-2-30

Philippine Fisheries Development Authority

3902

5-Mar-10

P-96-g-2-31

Boning's Trading

701046

6-Mar-10

43 Exhibits "P-96","P-96-a" to "P-96-c", "P-96-d" and series, "P-96-e" and series, "P-96-f' and series, "P-96-g" and series.

~

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

; P-96-g-2-35 Abonalla Sari-Sari Store 231 6-Mar-10 P-96-g-2-41 Philippine Fisheries Development Authority 3926 6-Mar-10 P-96-g-2-45 DK Botor Store 602 6-Mar-10 P-96-g-2-47 Kim's Mobile Disco 2692 10-Mar-10 P-96-g-2-50 DK Botor Store 604 8-Mar-10 P-96-g-2-55 New Ong To Expressmart 29001 9-Mar-10 P-96-g-2-58 lriga Ice Plant & Cold Storage, inc. 13844 9-Mar-10 P-96-g-2-60 New Ong To Expressmart 290017 10-Mar-10 P-96-g-2-62 Boning's Trading 70157 10-Mar-10 P-96-g-2-63 Robertson Department Store and Supermart 10-Mar-10 P-96-g-2-64 Naga Jam Trading 1 10-Mar-10 P-96-g-2-70 lriga Ice Plant & Cold Storage, Inc. 10-Mar-10 P-96-g-2-74 lriga Ice Plant & Cold Storage, inc. 11-Mar-10 P-96-g-2-79 Iriga ice Plant & Cold Storage, Inc. 12-Mar-10 P-96-g-2-80 Iriga Standard Bazar 7368 12-Mar-10 P-96-g-2-81 Joyce S. Ong Marketing 13-Mar-10 P-96-g-2-82 Joyce S. Ong Marketing 13-Mar-10 P-96-g-2-83 lriga Ice Plant & Cold Storage, inc. 13-Mar-10 P-96-g-2-84 J.B.S.S Merchandising 13-Mar-10 P-96-g-2-86 Kim's Mobile Disco 13-Mar-10 P-96-g-2-87 Fortuna Department Store 27785 P-96-g-2-96 Mudbugs Sports _ & Café 8318

11-Mar-10

13-Mar-10

P-96-g-2-97 Lucky Nine Convenience Store 3351

13-Mar-10

P-96-g-2-99 Kim's Mobile Disco 2694

16-Mar-10

P-96-g-2-101 DK Botor Store 488

17-Mar-10

P-96-g-2-102 Luzonwide Commercial Center 140078 P-96-g-2-104 Benmat Handicraft Store 3776 P-96-g-2-105 Robertson Department Store and Supermart 989599

17-Mar-10

16-Mar-10

17-Mar-10

P-96-g-2-106 Robertson Department Store and Supermart 989598 P-96-g-2-107 Robertson Department Store and Supermart 989899 P-96-g-2-108 J. San Pascual Native 18677

12-Mar-10

18-Mar-10

19-Mar-10

P-96-g-2-108 New TH Trading 251361 P-96-g-2-109 San Vicente de Ferrer Grains Center

16-Mar-10

19-Mar-10

17-Mar-10

P-96-g-2-110 San Vicente de Ferrer Grains Center 17-Mar-10 P-96-g-2-112 C.O0.B. Hardware 18-Mar-10 P-96-g-2-112 New Bernales Hardware 18-Mar-10 P-96-g-2-113 DK Botor Store 18-Mar-10 P-96-g-2-114 Kim's Mobile Disco 2695 18-Mar-10 P-96-g-2-117 V.C. Trading 28571

19-Mar-10

P-96-g-2-117 V.C, Trading 28570 P-96-g-2-121 Naga City 9186603

19-Mar-10

19-Mar-10

é)

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

P-96-g-2-122

Naga City

3272905 P-96-g-2-124

C-Free Purifed Drinking Water

11312 P-96-g-2-125

M Abellado Fresh Fish Retailer

364 P-96-g-2-127

Xymon Jan Eatery

1165 P-96-g-2-128

Aldecs Mobile Disco Sound System

2130 P-96-g-2-129

Kim's Mobile Disco

2698 P-96-g-2-130

HPJ General Merchandise

3607 P-96-g-2-137

Philippine Fisheries Development Authority

4198 P-96-g-2-141

Philippine Fisheries Development Authority

4218

Related Investment & Development

P-96-g-2-144 Company, Inc.

23979

I

Related Investment & Development

P-96-g-2-149 Company, Inc.

23984

Related Investment & Development

P-96-g-2-152 Company, Inc.

23989 P-96-g-2-155

Philippine Fisheries Development Authority

4250 P-96-g-2-167

Master Square Department Store

260524 P-96-g-2-168

Robertson Department Store and Supermart

990640 P-96-g-2-169

Beth Trading

2210 P-96-g-2-172

CBCM Rela Estate Lessor

167 P-96-g-2-173

Master Square Supermart

Unreadable

P-96-g-2-174

Master Square Department Store

259843 P-96-g-2-176

San Jose Ice Plant

15276 P-96-g-2-177

Bulwagan Bicolano

1927 P-96-g-2-178

Kim's Mobile Disco

1276 P-96-g-2-179

Robertson Department Store and Supermart

991163 P-96-g-2-180

Master Square Department Store

263755 P-96-g-2-180

Mher-nang Store

29 P-96-g-2-181

Power Plus Store

Unreadable

P-96-g-2-182

San Vicente de Ferrer Grains Center

9437 P-96-g-2-186

Naga City

9186705 P-96-g-2-188

Pro-Lites Electronics Sales & Services

673 P-96-g-2-194

Philippine Fisheries Development Authority

4301 P-96-g-2-195

Philippine Fisheries Development Authority

4318 P-96-g-2-202

Philippine Fisheries Development Authority

4343 P-96-g-2-202

Philippine Fisheries Development Authority

4342 P-96-g-2-206

Philippine Fisheries Development Authority

4363 P-96-g-2-209

Philippine Fisheries Development Authority

4383 P-96-g-2-212 Philippine Fisheries Development Author'1ty 4411 P-96-g-2-239

Top Hongkong Trading and Shoe Place

592459 P-96-g-2-239

Top Hongkong Trading and Shoe Place

594346 P-96-g-2-241

Refaircon Commercial Services

199 P-96-g-2-262

RM Quintela Enterprises

62531 P-96-g-2-264 Brgy. Parang 8577923

L

19-Mar-10

19-Mar-10

20-Mar-10

20-Mar-10

20-Mar-10

20-Mar-1 0

20-Mar-10

12-Mar-10

18-Mar-10

19-Mar-20

19-Mar-10

20-Mar-10

19-Mar-10

22-Mar-10

22-Mar-10

23-Mar-10

26-Mar-10

26-Mar-10

26-Mar-10

27-Mar-10

28-Mar-10

27-Mar-10

26-Mar-10

26-Mar-10

26-Mar-10

27-Mar-10

27-Mar-10

27-Mar-10

27-Mar-10

22-Mar-10

23-Mar-10

24-Mar-10

24-Mar-10

25-Mar-10

26-Mar-10

27-Mar-10

8-Feb-10

10-Mar-10

15-Mar-10

19-Mar-1 0

15-Mar-10

---· ~

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

P-96-g-2-265 Malayan Store 15172 20-Mar-10 P-96-g-2-266 Top Hongkong Trading and Shoe Place 594914 15-Mar-10 : P-96-g-2-266 Top Hongkong Trading and Shoe Place 595237 18-Mar-10 P-96-g-2-267 Mega Mini Mart 4634 20-Mar-10 P-96-g-2-296 D&T General Merchandise 122770 27-Mar-10 | teers Mega Mini Mart 4554 me 7-Mar-10 P-96-g-2-298 Al Vino Roast, Grill & Fry 16183 27-Mar-10 P-96-g-2-301 Top Hongkong Trading and Shoe Place 596375 27-Mar-10 P-96-g-3-2 Sincere Staff Management Services 2255 6-Apr-10 7 P-96-g-4-3 D' Golden Touch Advertising 1576 29-Mar-10 P-96-g-4-5 Refaircon Commercial Services 376 12-Apr-10 P-96-g-4-7 Kim's Mobile Disco 2715 24-Apr-10 P-96-g-4-9 Kim's Mobile Disco 2706 10-Apr-10 P-96-g-4-9 Kim's Mobile Disco 2709 17-Apr-10 P-96-g-4-11 Philippine Fisheries Development Authority 4807 17-Apr-10 P-96-g-4-30 Bacerdo Sound System 77 10-Apr-10 P-96-g-4-32 Cepeda Advertising 1885 28-Apr-10 P-96-g-4-35 Philippine Fisheries Development Authority 4977 24-Apr-10 | P-96-g-4-36 Philippine Fisheries Development Authority 4649 10-Apr-10 P-96-g-5-2 Prime Oriental Marketing Enterprise 9744 25-Feb-10

Masbate New Life Marketing & Merchandising 7

P-96-g-5-3 Corporation 542981 15-May-10 P-96-g-6-2 D' Golden Touch Advertising 1387 21-Jun-10 P-96-g-6-7 Libertad Consumers Corporation 282 10-Jul-10 P-96-g-6-10 Mudbugs Sports _ & Café 9899 12-Jul-10 P-96-g-6-12 D’ Golden Touch Advertising 1669 30-Jun-10 P-96-g-6-14 D' Golden Touch Advertising 1671 17-Jul-10 P-96-g-6-14 D' Golden Touch Advertising 1670 17-Jul-10

Related Investment & Development

P-96-g-6-15 Company, Inc. 23899 8-Mar-10 P-96-g-7-15 Denver's Computer Shoppe, Inc. 4345 29-Dec-09 P-96-g-7-18 Rofe's Toy Balloons, Flower & Party Needs 1041 28-Dec-09 P-96-g-7-20 Rofe's Toy Balloons, Flower & Party Needs 103 7-Dec-09 P-96-g-7-22 Lucky Educational Supply, Inc. 26898 14-Nov-09 P-96-g-7-28 Nikko Studio & Developing Center 1858 2-Dec-09 P-96-g-7-29 Southern Bicol Development Corporation 4-Dec-09 P-96-g-7-50 Nikko Studio & Developing Center 31-Dec-09 P-96-g-7-52 Duka Enterprises 24-Nov-09 P-96-g-7-53 New Balogo Enterprises 13-Nov-09 P-96-g-7-82 M.E. Dy Trading 14-Dec-09 P-96-g-7-82 Belen Amurao 8362 14-Dec-09 P-96-g-7-85 Bicol Warehouse Sales Unreadable 21-Dec-09 P-96-g-7-97 Lucky Educational Supply, Inc. 112059 6-Dec-09 u}

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

P-96-g-7-97 Bicol Warehouse Sales 127626 6-Dec-09

Garries Party Accessories & Catering

P-96-g-7-124 Services 828 21-Dec-09 P-96-g-7-125 Bicol Warehouse Sales —[ 131316 19-Dec-09 P-96-g-7-125 Bicol Warehouse Sales 131923 21-Dec-09 P-96-g-7-147 Abenson __ | Unreadable 2009 P-96-g-7-158 Patrick's Party Flavors & Catering Services 3291 30-Dec-09 P-96-g-7-164 F.E. Lee Enterprises 71744 6-Dec-09 P-96-g-7-166 Bulan Kimson Enterprises 19492 6-Dec-09 P-96-g-7-167 P. Aldana Cellphones & General Merchandise 2333 13-Dec-09 P-96-g-7-175 Nikko Studio & Developing Center 1871 4-Dec-09 P-96-g-7-176 Bulan Kimson Enterprises 19622 13-Dec-09 P-96-g-7-176 Bulan Kimson Enterprises 19623 13-Dec-09 P-96-g-7-187 P. Aldana Cellphones & General Merchandise 2790 19-Dec-09 P-96-g-7-194 L CC Supermarket N/A = a P-96-g-7-198 F.E. Lee Enterprises 71657 22-Dec-09 P-96-g-7-201 P. Aldana Cellphones & Generai Merchandise 2792 19-Dec-09 | P-96-g-7-208 Jad's Marketing 28241 29-Dec-09 P-96-g-7-213 F.E. Lee Enterprises 71685 23-Dec-09 | P-96-g-7-216 P. Aldana Celiphones & General Merchandise 2791 19-Dec-09 P-96-g-8-13 Unreadable 19836 2-Feb-10 P-96-g-8-13 Unreadable 19835 2-Feb-10 P-96-g-8-13 FJM Construction Supply And Gen. Mdse. 963 3-Feb-10 P-96-g-8-13 Unreadable 19881 6-Feb-10 P-96-g-8-14 Belen Amurao Grocery 10037 3-Feb-10 P-96-g-8-14 Belen Amurao Grocery 10100 23-Feb-10 P-96-g-8-14 Belen Amurao Grocery Unreadable 10-Feb-10 P-96-g-8-15 M.E. Dy Trading 1144 10-Feb-10 | P-96-g-8-15 MLE. Dy Trading 1143 3-Feb-10 P-96-g-8-24 Belen Amurao Grocery 10040 4-Feb-10 P-96-g-9-2 D' Golden Touch Advertising 1783 29-Dec-10 P-96-g-9-33 Iriga Ice Plant & Cold Storage, Inc. Unreadable 22-Jan-20 P-96-g-10-2 Sincere Staff Management Services 1211 30-Jul-10 P-96-g-10-3 Master Square Supermart 167353 6-Feb-10 P-96-g-10-4 Master Square Supermart 172850 16-Aug-10 P-96-g-11-9 Unreadable 30296 25-Mar-10 P-96-g-11-19 Six In One Corporation Unreadable 19-Mar-10 P-96-g-11-38 Rolly General Merchandise 78965 6-Mar-10 P-96-g-11-39 Belen Amurao Grocery 10168 12-Mar-10. |

P-96-9-11-39 Belen Amurao Grocery 10137 5-Mar-10 |

P-96-g-11-40 Unreadable 1147 12-Mar-10

_| Some Party Accessories & Catering

P-96-g-11-41 Services 1362 15-Mar-10

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

P-96-g-11-42 Brushwork Advertising 342 6-Mar-10 P-96-g-11-48 Costa Fishing Supply 17754 19-Mar-10 P-96-g-11-49 LCC Liberty Commerciat Center, inc. 45021 19-Mar-10 P-96-g-11-52 Lucky Educational Supply, Inc. 121594 18-Mar-10 P-96-g-1 1-52 Lucky Educational Supply, Inc. 108849 15-Mar-10 P-96-g-11-52 JY Legazpi Mini Mart - Albay 1621 18-Mar-10

Carries Party Accessories & Catering

P-96-g-11-54 Services 1380 24-Mar-10

Carries Party Accessories & Catering

P-96-g-11-54 Services 1379 24-Mar-10 P-96-g-11-57 LCC Shopmore Commercial Corporation 859 6-Feb-10 P-96-g-11-59 Denver's Computer Shoppe, Inc. 5029 6-Feb-10 P-96-g-11-60 Sorsogon Hollywood Trading 99597 6-Feb-10 P-96-g-11-65 Jad's Marketing 28244 10-Feb-10 P-96-g-11-66 Sorsogon Hollywood Trading 100618 19-Feb-10 P-96-g-11-79 Jad's Marketing 28973 13-Mar-10 P-96-g-11-80 Denver's Computer Shoppe, Inc. 5744 13-Mar-10 P-96-g-11-81 Lasam Ice Plant 1216 13-Mar-10 P-96-g-12-4 Belen Amurao Grocery 10344 26-Apr-10 P-96-g-12-5 M.E. Dy Trading 1150 6-Apr-10 P-96-g-12-6 M.E. Dy Trading 1151 30-Apr-10 P-96-g-12-12 JY Legazpi Mini Mart - Albay 1530 16-Apr-10

Carries Party Accessories & Catering

P-96-g-12-13 Services 1394 17-Apr-10 P-96-g-12-19 JY Legazpi Mini Mart - Albay 1577 30-Apr-10 P-96-g-12-58 Best Initial Art & Design Center 977 26-Apr-10 P-96-g-12-62 Best Initial Art & Design Center 27-Apr-10 P-96-g-12-77 Balogo Shopville 9-Apr-10 P-96-g-12-95 Jad's Marketing 17-Apr-10 P-96-g-12-96 Jeanee's Supermart & Department Store, Inc. 17-Apr-10 P-96-g-12-107 Balogo Shopville 16-Apr-10 P-96-g-12-108 Denver's Computer Shoppe, Inc. 17-Apr-10 P-96-g-12-114 Balogo Shopville 5032 23-Apr-10 P-96-g-12-120 Balogo Shopville §035 30-Apr-10 P-96-g-13-6 Unreadable 21476 77-Jul-10 P-96-g-13-32 Jad's Marketing 27909 13-Jul-10 P-96-g-13-32 Jad's Marketing 27910 14-Jul-10 P-96-g- 13-32 Jad's Marketing 27911 15-Jul-10 P-96-g-15-11 Everlast Marketing 26411 4-May-10 P-96-g-15-11 Charisma Snack House & Catering Services 6430 8-May-10 P-96-g-15-28 JY Legazpi Mini Mart - Albay 1655 15-May-10 P-96-g-15-29 Charisma Snack House & Catering Services 6433 16-May-10 P-96-g-15-47 Polyware Trading 10100 22-May-10 P-96-g-15-47 Polyware Trading 11753

22-May-10

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

P-96-g-15-49 Charisma Snack House & Catering Services 3415 9-May-10 P-96-g-15-60 Charisma Snack House & Catering Services 6389 24-May-10 P-96-g-15-76 JY Legazpi Mini Mart - Albay 1677 29-May-10 P-96-g-15-76 Charisma Snack House & Catering Services 6390 29-May-10 P-96-g-15-95 Lasam Ice Plant 1053 8-May-10 P-96-g-15-96 Jad's Marketing 27856 1-May-10 P-96-g-15-98 Jeanee's Supermart & Department Store, Inc. 17499 30-Apr-10 P-96-g-15-98 Jeanee's Supermart & Department Store, Inc. 354808 30-Apr-10 P-96-g-15-103 Jessa Ice Plant 3202 8-May-10 P-96-g-15-110 Lasam Ice Plant 1052 14-May-10 P-96-g-15-114 Jad's Marketing 27861 14-May-10 P-96-g-15-113 DRI Enterprises 280 14-May-10 : P-96-g-15-121 Lasam Ice Plant 1051 7-May-10 P-96-g-15-136 Lasam Ice Plant 1054 15-May-10

Lasam Ice Plant 21-May-10

Lasam Ice Plant

P-96-g-15-152 1056 22-May-10 P-96-g-15-153 Denver's Computer Shoppe, Inc. 22-May-10 P-96-g-15-161 Jad’s Marketing 28-May-10 P-96-g-15-162 Bringuela Enterprises 28-May-10 P-96-g-15-176 Lasam ice Plant 29-May-10 P-96-g-16-2 Jacinto Enterprises 75993 1-Sep-10 P-96-g-16-3 Jacinto Enterprises 76085 17-Sep-10 P-96-g-16-4 Jacinto Enterprises 76100 20-Sep-10

Masbate New Life Marketing & Merchandising

P-96-g-22-2 Corporation §50228 11-Oct-10 P-96-g-22-3 Masbate Apollo General Merchandise 2110

2-Jun-10

16-Jun-10

P-96-g-23-2 1630

D' Golden Touch Advertising

P-96-g-23-4

Mercury Drug 3455

P-96-g-23-6 Master Square Department Store 264806

17-Jun-10

P-96-g-23-10 V.C. Trading 31125 23-Jun-10 P-96-9-23-15 TJ Paint Center & General Merchandise 170131 10-Jun-10 P-96-g-23-16 Gemmaglenn Supermart 2203 10-Jun-10 P-96-g-23-17 TJ Paint Center & General Merchandise 172780 10-Jun-10 P-96-g-23-18 Gemmagleen Supermart 2260

10-Jun-10

P-96-g-23-19 Regine Joy Store 20427

10-Jun-10

P-96-g-23-20 Regine Joy Store 20429

10-Jun-10

P-96-g-23-23 Lucky Nine Convenience Store 1995 12-Jun-10 P-96-g-23-24 Gemmagleen Supermart 2206 11-Jun-10 P-96-g-24-4 D' Golden Touch Advertising 1753 30-Aug-10 P-96-g-24-8 Libertad Consumers Corporation 354 6-Aug-10

Prince & Pearl Hardware & Construction

P-96-g-24-9 Supply 71707 7-Aug-10 v\

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

P-96-g-24-13 Empire Trade Center 351678 7-Aug-10 P-96-g-24-14 Greenstone General Merchandise 12868 7-Aug-10 P-96-g-24-15 Empire Trade Center 351712 10-Aug-10

P-96-9-24-16

Remstarr Trading 138247 10-Aug-10

P-96-g-24-18 Robertson Mall 210029 11-Aug-10 P-96-g-24-18

Robertson Mall 210035 12-Aug-10

P-96-g-24-19

Pya Store 3041 12-Aug-10

P-96-g-24-20 An-An Marketing 10544 12-Aug-10 P-96-g-24-21

Lucky 9 Convenience Store 1375 12-Aug-10

P-96-g-24-23 Mercury Drug 3663 12-Aug-10 P-96-g-24-25 Lau Trading 1618 12-Aug-10 P-96-g-24-26 Princeton Enterprises 88876 13-Aug-10 P-96-g-24-27 Erickson's Copy Center 13599 13-Aug-10 P-96-g-24-28 Pimentel Hardware 17311 13-Aug-10

Unreadable 2874 14-Aug-10

Related Investment & Development

Company, Inc.

P-96-9-24-63 20-Aug-10

P-96-g-24-64 Unreadable 16-Aug-10

P-96-9-24-64

Princeton Enterprises 21-Aug-10

Related Investment & Development

P-96-g-24-65 Company, Inc. 21-Aug-10

Philippine Fisheries Development Authority 22-Aug-10

P-96-g-24-65 Top People Hardware 20-Aug-10

Related Investment & Development

P-96-g-24-67 Company, Inc. 25222 22-Aug-10

Related Investment & Development

P-96-g-24-67 Company, Inc. 11155 21-Aug-10 P-96-g-24-68 Sir Karlos Restaurant 67 22-Aug-10 P-96-g-24-69 Yet'zboo Tattoo Shop 52 23-Aug-10 P-96-g-24-77 D' Golden Touch Advertising P-96-g-24-81 New Pili Lumber Dealer & Hardware 3-Aug-10 P-96-g-24-84 Bigg’s 11-Aug-10 P-96-g-24-85 Asog Garden and Catering Services 28-Aug-10 P-96-g-24-86 D' Golden Touch Advertising 10-Aug-10 P-96-g-24-87 Julia Outdoor Advertising 12-Aug-10 P-96-g-24-88 Paraprint 21-Aug-10 P-96-g-24-90

RP Canlas Enterprises 28-Aug-10

P-96-g-24-91 RP Canlas Enterprises

29-Aug-10

P-96-g-24-94

Robertson Mall 210218 26-Aug-10

P-96-g-24-94 Artido Ricemill Corp

184377 26-Aug-10

P-96-g-24-96 Philippine Fisheries Development Authority 8935 24-Aug-10 P-96-g-24-96 Philippine Fisheries Development Authority 8972 25-Aug-10 P-96-g-24-96 Philippine Fisheries Development Authority P-96-g-24-96 triga Ice Plant & Cold Storage, Inc. 14452 25-Aug-10 y)

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

P-96-g-24-97 Philippine Fisheries Development Authority 8995 26-Aug-10 P-96-g-24-97 Iriga Ice Plant & Cold Storage, Inc. 14458 27-Aug-10

Related Investment & Development

P-96-g-24-97 Company, Inc. 25247 28-Aug-10

Related Investment & Development

P-96-g-24-98 Company, Inc. 25241 28-Aug-10

Asog Garden & Catering Services 1520 28-Aug-10

P-96-g-24-102 Mudbugs Sports Bar & Café 12441 31-Aug-10 P-96-g-24-103 Boning's Trading 709635 23-Aug-10 P-96-g-24-103 Mequene Abe Commercia 27302 27-Aug-10 P-96-g-24-103 Mequene Abe Commercia 27303 27-Aug-10 P-96-g-24-103 Boning's Trading 709702 24-Aug-10 P-96-g-24-103 G-Ram's Goods & Gen Mdse 8501 28-Aug-10 P-96-g-24-105 Pro-Lites Electronics Sales & Services 148 28-Aug-10 P-96-g-24-147 Arsen's Textile & Upholstery Supply - Main 21479 3-Aug-10 P-96-g-24-148 Cepeda Advertising 3-Aug-10 P-96-g-24-149 Arsen's Textile & Upholstery Supply - Main 19245 8-Aug-10 P-96-g-24-150 Cepeda Advertising 1721 9-Aug-10 P-96-g-24-151 Cepeda Advertising 2094 24-Aug-10 P-96-g-25-6 Junlly's Bakeshop & Gen. Mdse. 25-Nov-10 P-96-g-25-13 27-Nov-10 P-96-g-25-30 Top Hongkong Trading and Shoe Place N/A 30-Nov-10 P-96-g-25-32 E.P. Manzana Sales Center 92721 23-Nov-10 P-96-g-25-35 E.P. Manzana Sales Center 92776 26-Nov-10 Iriga Ice Plant & Cold Storage, Inc.

P-96-g-25-37 D' Golden Touch Advertising 1-Nov-10 P-96-g-25-40 Mudbugs Sports Bar & Café 19-Nov-10 P-96-g-25-41 D' Golden Touch Advertising 27-Nov-10 P-96-g-25-44 Greenstone General Merchandise 17312 25-Nov-10 P-96-g-25-55 lriga Ice Ptant & Cold Storage, Inc. 14601 24-Nov-10 Iriga Ice Plant & Cold Storage, Inc. 14605 24-Nov-10

P-96-9-25-61

P-96-g-25-61 lriga Ice Plant & Coid Storage, Inc. 14606 25-Nov-10 P-96-g-25-68 Philippine Fisheries Development Authority P-96-g-27-4 Mardi’s Store 38274 5-Jul-10 P-96-g-27-5 M.E. Dy Trading 1157 4-Aug-10 P-96-g-27-6 Duka Enterprises 3729 5-Aug-10 P-96-g-25-75 Philippine Fisheries Development Authority triga Ice Plant & Cold Storage, Inc.

Masbate New Life Marketing & Merchandising

P-96-g-28-2 Corporation 551250 4-Nov-10

Masbate New Union Bakery & Marketing

P-96-g-28-3 Corporation 228638 12-Nov-10 P-96-g-28-4 Pamatra Trading 2235 15-Nov-10 o)

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

P-96-g-30-36

Julia Outdoor Advertising

2698

Related Investment & Development

P-96-g-31-3 Company, Inc.

25714 P-96-g-31-7 I riga Ice Plant & Cold Storage, Inc.

14637 P-96-g-31-1 0

Philippine Fisheries Development Authority

11885 P-96-g-31-11 I riga tee Plant & Cold Storage, Inc.

14631 P-96-g-31-15

Philippine Fisheries Development Authority

11901 P-96-g-31-17

Philippine Fisheries Development Authority

11910 P-96-g-31-20

Philippine Fisheries Development Authority

11919 P-96-g-31-28 I riga Ice Plant & Cold Storage, Inc.

14657 P-96-g-31-30 lriga Ice Plant & Cold Storage, Inc.

14611 P-96-g-31-34 I riga Ice Plant & Cold Storage, Inc.

14659 P-96-g-31-35

Shotex Trade Center

163262 P-96-g-31-36 lriga Ice Plant & Cold Storage, Inc.

14680 P-96-g-31-67

Salgado Videoke

4714 P-96-g-31-82

Cepeda Advertising

2777 P-96-g-32-4

Sincere Staff Management Services

1249 P-96-g-32-7

Sincere Staff Management Services

1250 P-96-g-32-1 0

Master Square Supermart

175595 P-96-g-32-10

Master Square Supermart

175594 P-96-g-33-2

JY Tabaco Supermarket & Dept Store

1240 P-96-g-33-3

Boy & Lar Enterprise

22930 P-96-g-35-4

Unreadable

11290 P-96-g-35-5 M.E. Dy Trading 1167 P-96-g-36-6

JY Legazpi Mini Mart- Albay

2269 P-96-g-36-7

Legazpi Mini Mart

507 P-96-g-36-7

Joy Daraga Supermarket

1804

Masbate New Life Marketing & Merchandising

P-96-g-37-1

Corporation

552210 P-96-g-37-1 Lim Enterprises, Inc.

474443 P-96-g-37-4

Milagro's Auto Supply & Hardware

196832 P-96-g-37-5 M.E. Dy Trading 1166

Masbate New Life Marketing & Merchandising

P-96-g-37 -13

Corporation

552293

22-Feb-10

4-Dec-10

11-Dec-10

10-Dec-10

10-Dec-10

11-Dec-10

11-0ec-10

12-Dec-10

18-Dec-10

17-Dec-10

19-Dec-10

27-Dec-10

29-0ct-10

16-Dec-10

30-Dec-10

29-Dec-10

29-Dec-10

30-Dec-10

30-Dec-10

4-Nov-10

12-Nov-10

2-Dec-10

1-Dec-10

13-0ct-10 13-0ct-10 12-0ct-10

4-Dec-10

2-Dec-10

7-Dec-10

1-Dec-10

--

21-Dec-10

Well-settled is the rule that while a taxpayer has the right to claim all authorized deductions during the current year, a taxpayer cannot deduct such claim in the succeeding year. Section 76 of RR No. 02-40 is instructive, thus:

"SECTION 76. When charges are deductible. -Each year's return, so far as practicable, both as to gross income and deductions therefrom, should be complete in itself, and taxpayers are expected to make every reasonable effort to ascertain the facts necessary to make a correct return. The expenses, liabilities or deficit of one year cannot be used to reduce the income of a subsequent year. A taxpayer has the right to deduct all ~ Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296) authorized allowances and it follows that if he does not within any year deduct certain of his expenses, losses, interests, taxes, or other charges, he can not deduct them from the income of the next or any succeeding year."

In Commissioner of Internal Revenue vs. lsabela Cultural Corporation,44 the Supreme Court, citing Revenue Audit Memorandum Order No. 1-2000, highlighted the importance of claiming deductions in the year they are incurred, thus:

"The requisites for the deductibility of ordinary and necessary trade, business or professional expenses, like expenses paid for legal and auditing services, are: (a) the expense must be ordinary and necessary; (b) it must have been paid or incurred during the taxable year; (c) it must have been paid or incurred in carrying on the trade or business of the taxpayer and; (d) it must be supported by receipts, records or other pertinent papers. The requisite that it must have been paid or incurred during the taxable year is further qualified by Section 45 of the National Internal Revenue Code (NIRC) which states that: "[!]he deduction provided for in this Title shall be taken for the taxable year in which 'paid or accrued' or 'paid or incurred', dependent upon the method of accounting upon the basis of which the net income is computed ... "

Accounting methods for tax purposes comprise a set of rules for determining when and how to report income and deductions. In the instant case, the accounting method used by ICC is the accrual method. Revenue Audit Memorandum Order No. 1-2000, provides that under the accrual method of accounting, expenses not being claimed as deductions by a taxpayer in the current year when they are incurred cannot be claimed as deduction from income for the succeeding year. Thus, a taxpayer who is authorized to deduct certain expenses and other allowable deductions for the current year but failed to do so cannot deduct the same for the next year." (Boldfacing supplied)" Undoubtedly, petitioner used the accrual method of accounting for TY 2011 as implied in the declarations in its Audited Financial Statements,45 particularly under the "Summary of Significant Accounting Policies," to wit:

"Revenue Recognition Revenue comprises the fair value of the consideration received. The Company recognizes revenue when the amount can be reliably measured; it is probable that future economic benefits will flow to the entity and specific criteria have been met. Revenue from the sale of goods is recognized when the significant risk and rewards of ownership of the goods have passed to the buyer. "46 (Boldfacing supplied}

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

If the taxpayer accounts for its income on the accrual method, it should also adopt the accrual method of accounting for its expenses. A hybrid method, i.e., accrual method for income recognition and cash method for expense recognition, is not contemplated by Philippine tax laws, rules and regulations. Considering that petitioner employed the accrual method of accounting for its revenues, then it follows that the same method of accounting was employed for the accounting of its expenses. Petitioner should have claimed the expenses incurred in TYs 2009 and 2010 in the same years and not in TY 2011. Petitioner cannot deduct the expenses incurred in TYs 2009 and 2010 from its gross income earned in TY 2011.

Accordingly, it is proper to sustain the disallowance of Advertising and Other Outside Services amounting to P22,089, 137.55. /T-8 - Disallowed expenses due to non-withholding (Sec.

34K, NIRC) - 1'41,230,990.26 Petitioner reiterates its position that the expenses should not have been disallowed because it properly subjected all income payments covered by the withholding tax system as presented in its reconciliation. Further, petitioner explains that the income payments not subjected to expanded withholding tax are either (1) casual purchases or from a person who is not considered as a regular supplier; (2) petty cash disbursements incurred by salesmen and sales offices such as, but not limited to, meals, representation and entertainment, gasoline, out-of-town fieldwork expenses and supplies; or (3) expenses that were paid in cash such as, but not limited to, prepaid cellphone loads, registered mails transmitted to customers and the like.

To prove that it subjected to withholding tax all expenses it incurred, petitioner submitted a Reconciliation of Taxes Withheld vs. Audited Financial Statement for the Taxable Year Ended December 31, 2011. 47 Perusal of the said Reconciliation reveals the following pertinent figures:

Total purchases 388,083,135.02

Exempt

1,869,323.89

Compensation

14,837,145.60 Casual purchases, etc.

41,237,829.13 L...

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Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

Total income payments subject to EWT 330,138,836.40 Less: Subjected per alphabetical list 330,138,836.40 Income payment not subjected to EWT - Based on the foregoing, petitioner would like the Court to believe that certain expenses are actually casual purchases, cash disbursements incurred by salesmen and sales offices and expenses paid in cash, without offering a breakdown of any of these expenses and their accompanying source documents. The Court is constrained to reject the above reconciliation sans the supporting documents that would allow the Court to verify the existence of these expenses. Petitioner likewise argues that respondent cannot simply disallow the expenses claimed as deduction from gross income for failure of the taxpayer to subject them to withholding taxes. If there is a deficiency in the payment of the withholding tax, respondent should assess petitioner for deficiency withholding taxes and not disallow the expenses altogether. In particular, petitioner claims that the prevailing rule during the taxable year under audit is RR No. 14-2002. In effect, petitioner is of the belief that since the taxable year is 2011, then RR No. 14-2002 applies.

Petitioner failed to prove that it paid the withholding taxes at the time of the audit/investigation or reinvestigation/reconsideration. Thus, the Court finds it futile and irrelevant to discuss whether it is RR No. 14-2002 or RR No. 12-2013 that is applicable to petitioner's case. In fine, it is proper to sustain the disallowance of expenses amounting to P41 ,230,990.26 due to non-withholding of taxes. All told, the Court finds no reason to modify much more reverse the findings of the Court in Division. It is fundamental that the findings of fact by the CTA in Division are not to be disturbed without any showing of grave abuse of discretion considering that the members of the Division are in the best position to analyze the documents presented by the parties.48

WHEREFORE, premises considered, the present Petition for Review is DENIED for lack of merit. The assailed Amended Decision dated January 2, 2020 is AFFIRMED.

48 Republic of the Philippines, represented by the Commissioner of Internal Revenue vs. Team (Phils.) Energy Corporation (formerly Mirant (Phils.) Energy Corporation), G.R. No. 188016, January 14, 2015.

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Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

WE CONCUR:

ER~P.UY

Associate Justice

Presiding Justice

~- ~ .-p<...__ MA. BELEN M. RINGPIS-LIBAN

Associate Justice

CJ#('J.e-t' 7- /)tr. dfi - CATHERINE T. MANAHAN

Associate Justice

~ ' aACORR"O-VILLENA MARIA RtJW~.

v-;:,AN PEDRO .

~r.~n· ~IVY(J. ~Evi!S:~A~O

Associate Justice

~iAAIAJ LANll'S~'cui~AVID

Associate Justice

C~~~~~RES

Associate Justice )

Benchmark Marketing Corp. vs. Commissioner of Internal Revenue CTA EB No. 2212 (CTA Case No. 9296)

CERTIFICATION

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

Presiding Justice