DONATO C. CRUZ TRADING v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SECOND DIVISION DONATO C. CRUZ TRADING CTA CASE NO. 9721 CORP., Petitioner, -versus- Members: CASTANEDA, JR., Chairperson, and BACORRO-VILLENA, fl. - ~ - Promulgated�. MAR ---------- 0 NER 0 F 1 9 2021 - - - x CINOTMERMNISASLI REVENUREe, spondent. -- - X-- - - - - - - - - - - ---------------- /-'N t" � DECISION BACORRO-VILLENA, L.: At bar is a Petition for Review1 filed by Donato C. Cruz Trading Corp. (petitioner/DCTC) pursuant to Rule 8, Section 3(a)2 of the Revised Rules of the Court of Tax Appeals (RRCTA). It seeks the .. reversal and nullification of respondent Commissioner of Internr Filed on 23 November 2017, Division Docket, pp. I0-66. SEC. 3. Who may appeal; p eriod to file petition. - (a) A party adversely affected by a decision, ruling or the inaction of the Commissioner of Internal Revenue on disputed assessments or claims for refund of internal revenue taxes, or by a decision or ruling of the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry, the Secretary of Agriculture, or a Regional Trial Court in the exercise of its original jurisdiction may appeal to the Court by petition for review filed within thirty days after receipt of a copy of such decision or ruling, or expiration of the period fixed by law for the Commissioner of Internal Revenue to act on the disputed assessments. In case of inaction of the Commissioner oflnternal [R]evenue on claims for refund of internal revenue taxes erroneously or illegally collected, the taxpayer must file a petition for review within the two-year period prescribed by law from payment or collection of the taxes.

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION x----------------------------------x Revenue's (respondent/CIR's) Final Decision on Disputed Assessment (FDDA) dated 26 November 20123, holding petitioner liable for expanded withholding tax (EWT) and value-added tax (VAT) deficiencies in the aggregate amount ofPs,518,918.97� Petitioner is a domestic corporation, duly organized and existing under and by virtue of the laws of the Republic of the Philippines. It has its principal office at 158-C, Philsugen Road, Singcang, Bacolod City, Negros Occidental. On the other hand, respondent is the duly appointed Commissioner of the Bureau of Internal Revenue (BIR) vested with the authority to carry out the functions and duties of said office, among which, is to decide and grant claims of tax refund and execute and implement tax laws, rules and regulations. FACTS OF THE CASE On 07 September 2007, respondent issued Letter of Authority (LOA) No. 000748134 against petitioner, authorizing the examination of petitioner's books and records for tax deficiencies for taxable year (TY) 2oo6. On 19 February 2oo8, Officer in-Charge, Regional Director Rodita B. Galanto5 (OIC-RD Galanto), revalidated the said LOA citing petitioner's failure to submit complete documents needed for the audit investigation. On 22 September 2020, respondent issued a Preliminary Assessment Notice6 (PAN) with Details of Discrepancy showing petitioner's liability for deficiency EWT and VAT, and penalties in the total amount of P5,425,284�46�/ Division Docket, p. 37; BIR Records, p. 600. 4 Exhibit "R-1", BIR Records, p. 153. Division Docket, p. 53; BIR Records, p. 240. 6 Id., pp. 54-56; BIR Records, pp. 285-287.

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION x----------------------------------x Thereafter, on 20 January 20097, petitioner received a Formal Letter of Demand8 (FLO) and Final Assessment Notices9 (FANs). Subsequently, it also received a First and Second Notice to pay deficiency taxes dated o8 September 201d0 and 22 October 2o1d\ respectively. On 23 January 2009, petitioner filed its protest against the FLD and FANs.12 Later, on 21 May 20091 3 the BIR issued revised FANs , computing anew petitioner's liabilities at Ps,518,918.97� Petitioner then filed another protest on 07 June 2009.14 Nevertheless, on 13 December 2012, it received a Final Decision on Disputed Assessment (FDDA) dated 26 November 2o12.15 It then filed a request for reconsideration16 with respondent who, on 24 October 2017, issued his Final Decision dated 04 October 201j7, denying petitioner's request. PROCEEDINGS BEFORE THE COURT On 23 November 2017, petitioner filed the present petition in its bid to reverse respondent's assessment. On 04 January 2018, the Court issued summons18 on respondent who filed his Answer9 thereto on os April2o1o. Thereafter on 22 May 2018, the Court issued the Notice of Pre- trial Conference20 ordering the parties to submit their respective pre- trial briefs (PTBs). In compliance therewith, respondent filed his PTB21 on 01 June 2018 while petitioner filed its own PTB" on 04 June 201y Petition for Review, id., p. 13. 9 BIR Records, pp. 288-290. Id., pp. 291-294. 10 Petition for Review, Division Docket, p. 58; BIR Records, p. 317. 11 ld., p. 59; BIR Records, p. 320. 12 Id., p. 13; BIR Records, pp. 746-764. 13 Id.; BIR Records, pp. 311-316. 14 Id.; BIR Records, p. 376. 15 Supra at note 3. 16 Petition for Review, Division Docket, p. 14. 17 Id., pp. 38-51. 18 Division Docket, p. 75. 19 Id., pp. 192-204. 20 Id., pp. 216-217. 21 Id., pp. 218-222. 22 Id., pp. 223-228.

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION Page4 of 28 x----------------------------------x On 07 June 2018, the Court ordered the parties to submit �their Joint Stipulation of Facts and Issues (JSFI) within fifteen (15) days from receipt of such order.23 The parties then filed their JSFI on 22 June 2018. 24 Upon the termination of the pre-trial conference, trial proceeded where petitioner presented its sole witness, Ruby Tania C. Cruz (Cruz) who testified by way of her judicial affidavit.25 On the witness stand, aside from identifying petitioner's exhibits, Cruz testified to her roles as petitioner's authorized representative. She further attested to the lack of authority of a certain Liezel Bullahan (Bullahan), petitioner's accounting clerk, to receive notices from the BIR. Particularly, the notice of petitioner's designation (Notice of Designation) as a top 1o,ooo corporation26 which made it liable to withheld EWT. On 16 July 2018, petitioner filed its Formal Offer of Evidence27 (FOE). In a Resolution dated 03 October 201828, the Court resolved to admit petitioner's Exhibits "P-1", "P-8" and "P-8-a"29 while Exhibits "P-2" to "P-7''30 were denied admission for petitioner's failure to present the original or certified true copies thereoy 23 See Order dated 07 June 2018, id., p. 233. 24 Id., pp. 235-238. 25 Exhibit "P-8", id., pp. 113-119 (also marked as Exhibit "P-1 "). 26 Exhibit "R-7", BIR Records, p. 156. 27 Division Docket, pp. 252-255. 28 Id., pp. 265-266. 29 Exhibit Title "P-1" Secretary's Certificate dated 23 November 2017. "P-8" Ruby Tania C. Cruz's Judicial Affidavit. "P-8-a" Signature of Ruby Tania C. Cruz in her Judicial Affidavit. 30 Exhibit Title "P-2" Letter of Authority No. 00074813 dated 7 September 2007. "P-3" Preliminary Assessment Notice (PAN) dated 22 September 2008. "P-4" Formal Letter of Demand (FLD) dated 17 December 2008. "P-5" Final Assessment Notice dated 17 December 2017. "P-6" Revised Formal Letter ofDemand dated 18 May 2009. "P-7" Revised Final Assessment Notice dated 18 May 2009.

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION Page 5 of28 x----------------------------------x On 22 October 2018, petitioner moved for a partial reconsideration31 of the above Resolution stating that the originals of said documents are in the custody of respondent. In the meantime, respondent proceeded with his presentation of evidence. For his part, respondent presented the sole testimony of Revenue Officer (RO) Angelee D. Andaya (Andaya) who, likewise, testified by way of her judicial affidavit.32 She identified respondent's evidence and testified on her participation in the audit investigation conducted against petitioner. After respondent rested his case but prior to the filing of his FOE33, he informed the Court via an Omnibus Motion34, that some of the evidence he sought to offer could not be authenticated as they were no longer available (having been disposed of after exceeding the BIR's ten-year retention policy). In said motion, respondent thus prayed that he be allowed to present the testimony of RO Edna T. Posecion (Posecion) to prove service of said documents on petitioner. In a Resolution dated 13 August 2019, the Court granted respondent's Omnibus Motion.35 During a hearing on 28 October 2019, RO Posecion took the witness stand and testified by way of her judicial affidavit36, wherein she declared that the Notice of Designation was duly served on petitioner. When respondent finally filed his FOE37, the Court admitted all of his exhibits in a Resolution dated 28 November 2019.38 Still later, on 07 February 202039, petitioner manifested that it is merely adopting the allegations in its Petition for Review in lieu of its ._ memorandum. On the other hand, respondent filed his Memorandu.t 31 Id., pp. 271-273. 32 Exhibit "R-16", id., pp. 283-287. 33 Filed on 04 November 2019, id., pp. 395-400. 34 Id., pp. 362-364. 35 Id., pp. 383-386. 36 Exhibit "R-17", id., pp. 371-373. 37 Supra at note 33. 38 Division Docket, pp. 403-404. 39 Id., pp. 415-416.

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION Page 6 of28 x----------------------------------x on os March 2020.40 On 02 June 2020, the Court submitted the case for decision. 41 ISSUE The main issue for the Court's resolution is whether petitioner is liable to pay its assessed deficiency EWT for TY 2006. ARGUMENTS Petitioner challenges the validity of the LOA on account that it did not bear the BIR's dry seal. It also contends that it did not receive the Notice of their Designation (as a top 1o,ooo corporation thereby making it responsible for the withholding and remittance of EWT. Petitioner further maintains that even assuming the receipt of such notice, it would still not be liable for EWT on its income payments to its agricultural suppliers of goods forTY 2oo6. It anchors its contention on Section 342 of Revenue Regulations (RR) No. 3-200443 which it claimed to have suspended the 1% withholding tax on income payments to suppliers of agricultural products under Section 2.57.2(S)44 of RR 2-9845, as amended by RR Nos. 17-200346, 30-200347..(:1 and 1-2004.48 fA 40 Id., pp. 419-430. 41 Id., p. 431. 42 SEC. 3. SUSPENSION. - In view of the foregoing, the implementation of the above-quoted Section 2.57.2 (S) of Revenue Regulations Nos. 2-98, as amended, is hereby suspended until further notice. 43 Suspending the implementation of withholding tax on income payments made to suppliers of agricultural products under Section 2.57.2(S) of Revenue Regulations 2-98, as amended by RR 17- 2003, further amended by RR 30-2003 and 1-2004. 44 (S) Income payments made to suppliers of agricultural products. - Income payments made to agricultural suppliers such as those, but not limited to, payments made by hotels, restaurants, resorts, caterers, food processors, canneries, supermarkets, livestock, poultry, fish and marine products dealers, hardwares, factories, furniture shops and all other establishments, except for income payments to marginal income earners which, as defmed in Revenue Regulations 11-2000 dated December 12, 2000, refer to individuals not otherwise deriving compensation as an employee under an employee-employer relationship, but who are self-employed and deriving gross sales/receipts not exceeding PlOO,OOO.OO during any 12-month period.- One percent (1%). The term "agricultural suppliers" refers to suppliers/sellers of agricultural, forest and marine food and non-food products, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials therefore. "Livestock" shall include cows, bulls and calves, pigs, sheep, goats and other animals similar thereto. "Poultry" shall include fowls, ducks, geese, turkey and others similar thereto. "Marine products" shall

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION x----------------------------------x Petitioner also argues that Revenue Memorandum Circular (RMC) No. 44-200749 issued in July 2007, which clarifies that payments made to agricultural suppliers by a top 1o,ooo corporation (such as petitioner), was not covered by the suspension under RR 3-2004 and thus, cannot be applied retroactively in TY 2oo6. Furthermore, petitioner claims that RMC 44-2007 is not merely an interpretative rule, thus reinforcing its claim that it cannot be retroactively applied to its alleged tax deficiencies for TY 2oo6. It particularly relies on this Court's Third Division's ruling in Kerry Food f Ingredients Cebu, Inc. v. CIR50 (Kerry), which found RMC 44-2007 as not interpretative in nature. include fish and crustaceans, such as but not limited to, eels, trout, lobsters, shrimps, prawns, oysters, mussels and clams, shells and other aquatic products. Meat, fruits, fish, vegetables and other agricultural and marine food products, even if they have undergone the simple processes of preparation or preservation for the market, such as freezing, drying, salting, smoking or stripping, including those using advanced technological means of packaging, such as shrink wrapping in plastics, vacuum packing, tetra-pak and other similar packaging method, shall still be covered by this subsection. Polished and/or husked rice, com grits, locally produced raw cane sugar and ordinary, salt shall be considered as agricultural food products. 45 Implementing Republic Act (RA) No. 8424, "An Act Amending the National Internal Revenue Code, as Amended" Relative to the Withholding on Income Subject to the Expanded Withholding Tax and Final Withholding Tax, Withholding of Income Tax on Compensation, Withholding of Creditable Value-Added Tax and Other Percentage Taxes. 46 Amending Further Pertinent Provisions of Revenue Regulations No. 2-98, as Amended, Providing for Additional Transactions Subject to Creditable Withholding Tax; Re-Establishing the Policy that the Capital Gains Tax on the Sale, Exchange or Other Disposition of Real Property Classified as Capital Assets Shall be Collected as a Final Withholding Tax, Thereby Further Amending Revenue Regulations Nos. 8-98 and 13-99, as Amended by Revenue Regulations No. 14-2000; and for Other Purposes. 47 Amending Further Pertinent Provisions of Revenue Regulations No. 2-98, as Last Amended by Revenue Regulations No. 17-2003, and Revenue Regulations No. 8-98, as Amended, Providing for the Imposition of Final Withholding Tax on the Sale, Exchange or Other Disposition of Real Property Classified as Capital Assets by Non-resident Aliens, Increasing the Withholding Tax Rates on Certain Income Payments, Inclusion of Certain Income Payments, Sanctions to be Imposed on Payees Who Refuse the Withholding of Tax on Their Income/Receipts, and for Other Purposes. 48 Amending Further Sec. 2.57.2(S) of Revenue Regulations No. 2-98, as Last Amended By Revenue Regulations No. 30-2003, Exempting Marginal Income Earners From Creditable Withholding Tax on Payments Made By Hotels, Restaurants, Resorts, Caterers, Food Processors, Canneries, Supermarkets, Livestock, Poultry, Fish and Marine Product Dealers, Hardwares, Factories, Furniture Shops, and All Other Establishments. 49 Clarifying the Taxability of Agricultural Suppliers for Withholding Tax Purposes In Respect to Sales Made to Top 10,000 Corporations And to the Government In Relation to Revenue Regulations No. 3-2004 Which Suspended the Implementation of Withholding Tax on Income Payments Made to Suppliers of Agricultural Products under Section 2.57.2(S) of Revenue 50 Regulations (RR) No. 2-98, as Amended. CTA Case No. 8593, 09 February 2016.

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION x----------------------------------x Respondent, on the other hand, maintains the validity of the assessment and that the subject notice was duly sent by the BIR to petitioner. Respondent also contends that the suspension of the implementation of Section 2.57.2(S) of RR 2-98, as amended, under RR 3-2004 does not carry with it the suspension of petitioner's obligation to withhold as a top 1o,ooo (now 2o,ooo, pursuant to RR 14- 200851) corporation. Respondent also avers that RMC 44-2007 is a mere interpretative regulation that is meant to clarify or explain an existing regulation. RULING OF THE COURT After a careful study of the records of the case and the parties' contrasting arguments, the Court finds no merit in the petition.52 THE LEITER OF AUTHORITY (LOA) IS VALID. In Commissioner of Internal Revenue v. Lancaster Philippines, Inc. 53, the Supreme Court, citing Revenue Audit Memorandum Order (RAMO) No. 2-9554, defines a LOA as follows/ 51 Amending Further Section 2.57.2(M) of Revenue Regulations No. 2-98, as Amended, Increasing the Coverage of Withholding Tax Agents Required to Withhold 1% from Regular Suppliers of Goods and 2% from Regular Suppliers of Services from the Top 10,000 Private Corporations to Top 20,000 Private Corporations. 52 ---- r-~------ ��-- ------- ----- ----- --- ---- ----- �� ---c r---------- -----� Date Action Petitioner received the revised FLD with 21 May2009 Assessment Notices dated 17 December 2008 _{revised as of 18 May 2009). Petitioner filed a protest letter addressed to the 07 June 2009 Regional Director of Revenue Region No. 12 for a request for reconsideration. 13 December 2012 Petitioner received the FDDA issued by Regional Director Perfecto Aranas. 09 January 2013 Petitioner filed a Request for Reconsideration of the FDDA before the CIR. 24 October 20 17 Petitioner received the Final Decision of the CIR I dated 04 October 2017. Petitioner timely filed an appeal with this Court on 23 November 2017, within thirty (30) days 53 from receipt of the CIRs adverse decision. 54 Updated Handbook on Audit Procedures and Techniques.

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION Page 9 of28 x----------------------------------x The LOA gives notice to the taxpayer that it is under investigation for possible deficiency tax assessment; at the same time it authorizes or empowers a designated revenue officer to examine, verify, and scrutinize a taxpayer's books and records, in relation to internal revenue tax liabilities for a particular period. Additionally, RAMO 1-oo55 provides: 2. Serving ofLetter ofAuthority 2.3 A Letter of Authority must be served or presented to the taxpayer within 30 days from its date of issue; otherwise, it becomes null and void unless revalidated. The taxpayer has all the right to refuse its service if presented beyond the 30-day period depending on the policy set by top management. Revalidation is done by issuing a new Letter of Authority or by just simply stamping the words "Revalidated on " on the face of the copy of the Letter of Authority issued.56 As can be gleaned from the foregoing, the following are the requisites of a valid LOA: 1) It must be issued by the proper approving official; 2) It must contain the name/s of the designated revenue officer/s, who is/are authorized to examine and scrutinize the taxpayer's books and records; 3) It must cover a particular period, e.g., one (1) taxable year; and, 4) It must be served to the taxpayer within thirty (30) days from ... its date of issue~ 55 Updated Handbook on Audit Procedures and Techniques Volume I (Revision- Year 2000). 56 Emphasis supplied.

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION Page 10 of28 x----------------------------------x In the instant case, a perusal of the LOA would show that it is compliant with all of the foregoing requisites. First, the LOA was issued and signed by the RD, who is duly authorized to issue LOAs under Section 1057 of the NIRC of 1997, as amended. Second, the LOA specifically named the ROs authorized to examine petitioner's books of accounts and other accounting records. Third, the LOA specified the period covered by the authority of the ROs to examine, that is, from 01 January 2006 to 31 December 2oo6. Lastly, the LOA was served on 10 September 2007, which is three (3) days from the LOA's date of issuance, i.e., on 07 September 2007. Even in the absence of the BIR's dry seal, LOA No. 00074813 remains a valid authority issued to the ROs to examine the books of accounts and other accounting records of petitioner. Nowhere in RAM0 1-oo and in existing jurisprudence is there any mention of a requirement that the LOA must bear a dry seal to be valid. In insisting that the lack of the BIR's dry seal would invalidate the LOA, petitioner quotes the following portion of the LOA: ... This Letter of Authority becomes void if it contains erasures, or if not served to the taxpayer within 30 days from the date hereof, or if dry seal of BIR office is not present. Although the LOA indeed reflects the above declaration, it could not be doubted that the RD himself had signed it (and it was revalidated in accordance with RAMO 1-oo58 by the OIC-RD). The LOA's validity is thus beyond questioy 57 Sec. 10. Revenue Regional Director. - Under rules and regulations, policies and standards formulated by the Commissioner, with the approval of the Secretary of Finance, the Revenue Regional director shall, within the region and district offices under his jurisdiction, among others: (c) Issue Letters of authority for the examination of taxpayers within the region[.] 58 Supra at note 55.

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION x----------------------------------x Assuming for the sake of argument that the BIR's dry seal is salient in the LOA's validity, the Court finds that the BIR's seal conspicuously printed and placed beside the RD's signature is sufficient (to insure that the same was issued with the RD's authority). PETITIONER WAS VALIDLY NOTIFIED THAT IT IS ONE OF THE TOP 10,ooo CORPORATIONS FOR EXPANDED WITHHOLDING TAX (EWT) PURPOSES. Petitioner argues that Section 2.57.2(M) of RR 2-98, as amended, may not be imposed upon it for the reason that it was not properly notified of its designation as a top 1o,ooo (now top 2o,ooo) corporation. According to petitioner, the service of the subject notice upon Bullahan is invalid. We disagree. Section 2.57.2(M) of RR 2-98, as amended by RR 17-200359 provides, to wit: Sec. 2.57.2. Income payments subject to creditable withholding tax and rates prescribed thereon. - Except as herein otherwise provided, there shall be withheld a creditable income tax at the rates herein specified for each class of payee from the following items of income payments to persons residing in the Philippines: (M) Income payments made by the top ten thousand (10,ooo) private corporations to their local/resident supplier of goods and local/resident supplier of services other than those covered by other rates of withholding tax. - Income payments made by any of the top ten thousand (10,ooo) private corporations, as determined by the Commissioner, to their local/resident supplier of goods and local/resident supplier of services, including non- resident alien engaged in trade or business in the Philippine;~ 59 Supra at note 46.

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION x----------------------------------x Supplier of goods- One percent (1%) Supplier of services- Two percent (2%) Top ten thousand (w,ooo) private corporations shall include a corporate taxpayer who has been determined and notified by the Bureau of Internal Revenue (BIR) as having satisfied any of the following criteria: A corporation shall not be considered a withholding agent for purposes of this Section, unless such corporation has been determined and duly notified, in writing, by the Commissioner that it has been selected as one of the top ten thousand (10,ooo) private corporations.60 Based on the afore-quoted provision, it is indispensable that due notice be given to the corporate taxpayer as satisfactory proof that it belongs to the top 1o,ooo private corporations to warrant its requirement ofwithholding from its income payments. In contesting its supposed designation as among the top 1o,ooo corporations, petitioner insisted that Bullahan was without authority to receive the Notice of Designation pursuant to Section u, Rule 14 of the 1997 Rules of Court (ROC), to wit: Rule 14. Summons. Sec. n. Service upon domestic private juridical entity. - When the defendant is a corporation, partnership or association organized under the laws of the Philippines with a juridical personality, service may be made on the president, managing partner, general manager, corporate secretary, treasurer, or in-house counsel. We find petitioner's reliance thereon misplaced. First, the .. foregoing rule only applies to service of summons by the court? 60 Emphasis supplied.

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION Page 13 of28 x----------------------------------x Second, petitioner denies the receipt not of a summons but of a mere notice of its designation as one of the top 1o,ooo corporations. Moreover, it is noteworthy that not once did petitioner allege in its protest or in its appeal with this Court that Bullahan did not inform its management of the said notice. Petitioner merely disputes Bullahan's authority to receive such notices from the BIR, as attested to by Cruz in her testimony6\ to wit: 24. Q: You mentioned that the basis of the BIR's findings is the Petitioner's alleged failure to withhold as one of the top 1o,ooo corporations. Why didn't Petitioner withhold taxes for certain payments as one of the top 10,ooo corporations? A: Before 2oo6, Petitioner was not aware that it is included as one of the top to,ooo corporations. Therefore, the company could not have known that it is required to withhold taxes on certain payments as one of the top 10,ooo corporations. Moreover, Petitioner's alleged failure to withhold taxes pertain to payments made to supplier of agricultural products which are considered exempted from withholding taxes thereon pursuant to Sec. 3 of RR No. 3-2004. 26. Q: You mentioned that Petitioner was not aware of its inclusion as one of the top 10,ooo corporations. What made you say this? A: Because the company's authorized representatives never actually received the notice of designation as withholding agent issued by the BIR. Specifically, the Notice of Designation as Withholding Agent dated 17 February 2004 was only received by a certain Liezel C. Bullahan, who, despite being an employee of the company, is not authorized to receive such important notices. Thus, the company was never validly informed of its constitution as such. 27. Q: Who is Liezel C. Bullahan? ~-: She used to work for the company as an accounting cler~ 61 Exhibit "P-1 ",Division Docket, pp. 117-118. 62 Emphasis supplied.

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION x----------------------------------x Despite the issues raised regarding Bullahan's authority, Section 3 (m), (q) and (v) Rule 131 of the ROC, provide: Sec. 3� Disputable presumptions. - The following presumptions are satisfactory if uncontradicted, but may be contradicted and overcome by other evidence: (m) That official duty has been regularly performed; (q) That the ordinary course of business has been followed; (v) That a letter duly directed and mailed was received in the regular course of the mail[.] Based on the foregoing, it may be presumed that a letter duly sent by the BIR to the taxpayer is received by the latter in the ordinary course of mail. The records show that the subject notice was personally sent to petitioner at its registered address in Brgy. Singcang, Bacolod City and, as admitted by petitioner's own witness, one of its employees received the same. Conversely put, petitioner's argument that it was not aware of the notice sent by the BIR in 2006 is self-serving. Likewise, for its failure to proffer contrary evidence, the presumptions of regularity in the BIR's performance of duty and that the Notice of Designation was received in the ordinary course of mail stand. PETITIONER IS OBLIGED TO WITHHOLD AS A DULY NOTIFIED TOP 1o,ooo PRIVATE CORPORATION. Section 57(B) of the NIRC of1997, as amended, provides: 'I;. ~~c. 57� Withholding ofTax at Source. - ;

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION x----------------------------------x (B) Withholding ofCreditable Tax at Source.- The Secretary of Finance may, upon the recommendation of the Commissioner, require the withholding of a tax on the items of income payable to natural or juridical persons, residing in the Philippines, by payor-corporation/persons as provided for by law, at the rate of not less than one percent (1%) but not more than thirty-two percent (32%) thereof, which shall be credited against the income tax liability of the taxpayer for the taxable year.63 Anent the foregoing, the Secretary of Finance (SOF) issued RR 2- gB and further amended the same by issuing RR 17-2003. Section 2.57.2(M) and (S) of RR 2-98, as amended by RR 17-2003, provides: Sec. 2.57.2. Income payments subject to creditable withholding tax and rates prescribed thereon. - Except as herein otherwise provided, there shall be withheld a creditable income tax at the rates herein specified for each class of payee from the following items of income payments to persons residing in the Philippines: (M) Income payments made by the top ten thousand (1o,ooo) private corporations to their local/resident supplier of goods and local/resident supplier of services other than those covered by other rates of withholding tax. - Income payments made by any of the top ten thousand (w,ooo} private corporations, as determined by the Commissioner, to their local/resident supplier of goods and local/resident supplier of services, including non- resident alien engaged in trade or business in the Philippines. Supplier of goods- One percent (1%} Supplier of services- Two percent (2%) (S) Income payments made to suppliers of agricultural products. - Income payments made to regular agricultural suppliers such as those, but not limited to, payments made by hotels, ;::r restaurants, resorts, caterers, food processors, canneries, supermarket, livestock, poultry, fish and marine food products � dealers and all other establishments, except for income payments 63 Emphasis supplied.

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION x----------------------------------x casual agricultural suppliers where the annual gross purchases therefrom do not exceed P2o,ooo- One Percent (1%). The term 'regular agricultural suppliers' refers to suppliers with whom the taxpayer has transacted at least six (6) transactions, regardless of amount per transaction, either in the previous or current year. The term 'casual agricultural supplier' refers to suppliers who did not qualify as regular agricultural supplier as defined in the preceding statement. The term 'agricultural suppliers' refers to suppliers/sellers of agricultural and marine food products, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials therefor. 'Livestock' shall include cows, bulls and calves, pigs, sheep, goats and other animals similar thereto. 'Poultry' shall include fowls, ducks, geese, turkey and others similar thereto. 'Marine food products' shall include fish and crustaceans, such as but not limited to, eels, trout, lobsters, shrimps, prawns, oysters, mussels and clams.64 In relation thereto, the SOF suspended Section 2.57.2(S) of RR 2- 98 by issuing RR 3-2004, to wit: SEC. 3� SUSPENSION. - In view of the foregoing, the implementation of the above-quoted Section 2.57.2 (S) of Revenue Regulations No. 2-98, as amended, is hereby suspended until further notice.65 As it stands, RR 3-2004 rendered temporarily inoperative Section 2.57.2(S) of RR 2-98, as amended. In herein case, considering that petitioner is engaged in the business of selling fertilizer/feeds products66, prior to the effectivity of RR 3-2004, its payments to regular agricultural suppliers fall under Section 2.57.2(S) of RR 2-98, as amended, and are subject to 1% EWT. This is due to the fact that the payees are regular agricultural suppliers and such payees are specifically mentioned under Section 2.57.2(S) of RR 2-98 as amended, regardless of the payor's taxpayer type. In addition, Section 2.57.2(M~ 64 Emphasis in the original text. 65 Emphasis supplied. 66 BIR Records, p. 143.

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION Page 17 of28 x----------------------------------x of RR 2-98, as amended, mentions that the withholding tax rates for top Io,ooo corporations (i.e., I% for payments for goods and 2% for payments for services) shall apply only if there are no other tax rates provided in the Regulations which is not the case for payments made to regular agricultural suppliers. However, upon the effectivity of RR 3- 2004 (i.e., oi March 2004) which temporarily rendered inoperative the provision that specifically mentions regular agricultural suppliers as another category for EWT purposes, petitioner, duly notified as one of the top Io,ooo corporations, is thus obliged to subject its income payments to regular suppliers to I% or 2%, as applicable, under Section 2.57.2(M) ofRR 2-98, as amended. RMC 44-2007 IS AN INTERPRETATIVE REGUlATION. This Court is also unconvinced of petitioner's argument that RMC 44-2007 is not an interpretative regulation and the same cannot be applied retroactively. When an administrative rule is merely interpretative in nature, its applicability needs nothing further than its bare issuance for it gives no real consequence more than what the law itself already provides. On the other hand, when the administrative rule goes beyond merely providing for the means that can facilitate or render least cumbersome the implementation of the law but substantially increases the burden of those governed, it behooves the agency to accord at least to those directly affected a chance to be heard, and thereafter to be duly informed before that new issuance is given the force and effect of law. 67 Verily, in Republic ofthe Philippines, represented by the Bureau of Food and Drugs (now Food and Drug Administration) v. Drugmaker's Laboratories, Inc., et al. 68 the Supreme Court held , that Administrative Order (AO) No. 67, an administrative regulation ay issued by the Department of Health (DOH), and BFAD Circular Nos. I ~ and 8, issued by the Food and Drug Administration (FDA), were 67 Commissioner ofInternal Revenue v. Michel J. Lhuillier Pawnshop, Inc., 453 Phil. 1043 (2003). 68 728 Phil. 480 (2014); Citations omitted, emphasis in the original text, underscoring and emphasis supplied.

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION x----------------------------------x valid issuances of administrative agencies tasked to implement the law. It discussed the nature and function of interpretative rules, to wit: Administrative agencies may exercise quasi-legislative or rule- making powers only if there exists a law which delegates these powers to them. Accordingly, the rules so promulgated must be within the confines of the granting statute and must involve no discretion as to what the law shall be, but merely the authority to fix the details in the execution or enforcement of the policy set out in the law itself, so as to conform with the doctrine of separation of powers and, as an adjunct, the doctrine of non-delegability of legislative power. An administrative regulation may be classified as a legislative rule, an interpretative rule, or a contingent rule. Legislative rules are in the nature of subordinate legislation and designed to implement a primary legislation by providing the details thereof. They usually implement existing law, imposing general, extra- statutory obligations pursuant to authority properly delegated by Congress and effect a change in existing law or policy which affects individual rights and obligations. Meanwhile. interpretative rules are intended to interpret. clarify or explain existing statutory regulations under which the administrative body operates. Their purpose or objective is merely to construe the statute being administered and purport to do no more than interpret the statute. Simply. they try to say what the statute means and refer to no single person or party in particular but concern all those belonging to the same class which may be covered by the said rules. Finally, contingent rules are those issued by an administrative authority based on the existence of certain facts or things upon which the enforcement of the law depends. In general. an administrative regulation needs to comply with the requirements laid down by Executive Order No. 292. s. 1987. otherwise known as the "Administrative Code of 1987,'' on prior notice. hearing. and publication in order to be valid and binding. except when the same is merely an interpretative rule. This is because "[w]hen an administrative rule is merely interpretative in nature. its applicability needs nothing further than its bare issuance, for it gives no real consequence more than what the law itself has already prescribed. When, on the other hand, the administrative rule goes beyond merely providing for the means that can facilitate or render least cumbersome the implementation of the 1 law but substantially increases the burden of those governed, it behooves the agency to accord at least to those directly affected

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION Page 19 of28 x----------------------------------x chance to be heard, and thereafter to be duly informed, before that new issuance is given the force and effect of law." Moreover, in Chevron Philippines, Inc. (Formerly Caltex Philippines, Inc.) v. Bases Conversion Development Authority and Clark Development Corporation69, the Supreme Court has declared that administrative issuances, such as RMC 44-2007, to have the force and effect of law and enjoy the presumption of validity and constitutionality, to wit: Administrative issuances have the force and effect of law. They benefit from the same presumption of validity and constitutionality enjoyed by statutes. These two precepts place a heavy burden upon any party assailing governmental regulations. Petitioner's plain allegations are simply not enough to overcome the presumption of validity and reasonableness of the subject imposition. A careful perusal of RMC 44-2007 issued on o6 July 2007 for the purpose of "Clarifying the Taxability of Agricultural Suppliers for Withholding Tax Purposes in Respect to Sales Made to Top 1o,ooo Corporations And to the Government in Relation to Revenue Regulations No. 3-2004 Which Suspended the Implementation of Withholding Tax on Income Payments Made to Suppliers ofAgricultural Products Under Section 2.57.2(S) of Revenue Regulations (RR) No. 2-98, as Amended" would show that the circular merely reiterates and clarifies the effect of RR 3-2004, i.e., the suspension of the implementation of Section 2.57.2(S) ofRR 2-98, as amended. RMC 44-2007 further reiterates that the liability of withholding agents falling under Section 2.57.2(M) of RR 2-98, as amended, or any other provision for that matter is not affected by RR 3-2004. Moreover, it bears emphasis that the preface of the subject circular specifically states that it was intended "to clarify the position of the Bureau on this issue", to wit: / 69 645 Phil. 84 (2010); Citations omitted and emphasis supplied.

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION x----------------------------------x BACKGROUND: In Year 2003, certain amendatory provisions were introduced by Revenue Regulations 17-2003 to Revenue Regulations No. 2-98, which impacted the taxability of agricultural suppliers for withholding tax purposes. These amendatory provisions are as follows: Consequently, in Year 2004, RR 3-2004 was issued suspending the implementation of the provision under Sec. 2.57.2(S) which is the general proviso relating to the imposition of withholding tax on income payments made to agricultural suppliers. Apparently, on the ground of such suspension made, agricultural suppliers desisted from being withheld tax even if their income payments are derived from payors who happen to be covered by Sec. 2.57.2 (M) and (N) respectively, citing the suspension made by RR3- 2004 as their ground for exemption. Thus, this Circular is being issued in order to clarify the position of the Bureau on this issue.70 Clearly, when an administrative agency renders an opinion by means of a circular or memorandum, it merely interprets a pre- existing law.71 RMC 44-2007, therefore, was issued merely to construe the existing provisions of the NIRC of 1997, as amended, in relation to the various types of withholding tax at source. The Circular was not issued or intended to impose additional tax burdens not otherwise found in the law nor in existing regulations. Although petitioner invokes this Court's Third Division's previous ruling in Kerry, it must be stated that the rulings of this Court either acting through one of its divisions or sitting en bane are never binding precedents. By the doctrine of stare decisis, only decisions of the Supreme Court are controlling. The Supreme Court in United Coconut Planters Bank v. Spouses Uy72 explains, thuy 70 Emphasis supplied. 71 See La Suerte Cigar and Cigarette Factory v. Court ofAppeals, eta/., 746 Phil. 433 (2014). 72 United Coconut Planters Bank v. Spouses Uy, 823 Phil. 284 (2018).

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION Page 21 of28 x----------------------------------x ...It is true regardless whether the decisions of the lower courts are logically or legally sound as only decisions issued by this Court become part of the legal system. At the most, decisions of lower courts only have a persuasive effect. Thus, respondents are correct in contesting the application of the doctrine of stare decisis when the CA relied on decisions it had issued. Given the Court's finding that the BIR's assessment of petitioner is valid, We shall then proceed to determine the extent of the latter's tax liability. INTEREST MUST BE IMPOSED ON UNDISPUTED ASSESSMENT ITEMS. Petitioner paid the total amount of P33,113�37, as evidenced by the Payment Form (BIR Form No. o6os)73 and the Metrobank Deposit Slip for Tax Payments74, for the basic deficiency EWTon the following assessed income payments: Income Payment EWTRate EWTDue I% 7,IU.62 Food & Beverage 7U,I62.37 I% 108.68 I% I46.98 Kitchen Fuel Io,867.60 I% 246. 56 I% I88.45 Kitchen Supplies I4,697�78 I% 332.60 I% Guest Supplies 24,656.38 2% '504.~9 IO% Housekeeping Supplies I8,844�50 2% 9.849�44 9,7I5.I7 Newspaper and Cable 33,259�84 I4,239�I3 Banquet Supplies/Expense 50.438�95 42,443�02 Light & Water 492,472-IO (9.329.65) 33,113�37 Professional Fees, Legal & Audit 97,I5I�71 Security Services 71I,9_S_6~ Basic Deficiency EWT Less: Payments per filed EWT returns Basic Deficiency EWT l However, petitioner did not pay the related interesy 73 BIR Records, p. 736. 74 Id., p. 737.

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION Page 22 of28 x----------------------------------x Section 249(A), (B), and (C)(3) of the NIRC of1997, as amended, state: Sec. 249. Interest. - (A) In General. - There shall be assessed and collected on any unpaid amount of tax, interest at the rate of twenty percent (2o%) per annum, or such higher rate as may be prescribed by the rules and regulations, from date prescribed for payment until the amount is fully paid. (B) Deficiency Interest. -Any deficiency in the tax due, as the term is defined in this Code, shall be subject to the interest prescribed in Subsection (A) hereof, which interest shall be assessed and collected from the date prescribed for its payment until the full payment thereof. (C) Delinquency Interest. -In case of failure to pay: (3) A deficiency tax, or any surcharge or interest thereon on the due date appearing in the notice and demand of the Commissioner, there shall be assessed and collected on the unpaid amount, interest at the rate prescribed in Subsection (A) hereof until the amount is fully paid, which interest shall form part of the tax.75 In Philippine Refining Company (now known as "Unilever Philippines [PRC], Inc.') v. Court ofAppeals, et al. 76, the Supreme Court held: As correctly pointed out by the Solicitor General, the deficiency tax assessment in this case, which was the subject of the demand letter of respondent Commissioner dated April n, 1989, should have been paid within thirty (30) days from receipt thereof. By reason of petitioner's default thereon, the delinquency penalties of 25% surcharge and interest of 20% accrued from April n, 1989. The fact that petitioner appealed the Tj{ assessment to the CTA and that the same was modified does not , relieve petitioner of the penalties incident to delinquency. 75 Emphasis supplied. 76 326 Phil. 680 (1996); Citations omitted and emphasis supplied.

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION Page 23 of28 x----------------------------------x reduced amount of P237.381.25 is but a part of the original assessment of P1,892,584.oo. Our attention has also been called to two of our previous rulings and these we set out here for the benefit of petitioner and whosoever may be minded to take the same stance it has adopted in this case. Tax laws imposing penalties for delinquencies, so we have long held, are intended to hasten tax payments by punishing evasions or neglect of duty in respect thereof. If penalties could be condoned for flimsy reasons, the law imposing penalties for delinquencies would be rendered nugatory, and the maintenance of the Government and its multifarious activities will be adversely affected. We have likewise explained that it is mandatory to collect penalty and interest at the stated rate in case of delinquency. The intention of the law is to discourage delay in the payment of taxes due the Government and, in this sense, the penalty and interest are not penal but compensatory for the concomitant use of the funds by the taxpayer beyond the date when he is supposed to have paid them to the Government. Unquestionably, petitioner chose to turn a deaf ear to these injunctions. From the afore-cited provisions, it is clear that both the 20% deficiency and delinquency interests are imposable when there is a failure to pay a deficiency tax within the time prescribed for its payment. In the instant case, petitioner paid the basic deficiency EWT on the undisputed income payments on 09 January 200977, which was way beyond the last day prescribed for the remittance of EWT on the 2oo6 income payments, i.e., on 15 January 2007.78 Since petitioner failed to pay the deficiency interest on the undisputed portions of the assessment, the imposition of the 20% delinquency interest is also proper. However, the 25% surcharge is unwarranted because the subject undisputed assessment items were paid within the period I prescribed in the notice of assessment (attached to the FLO), i.e., on 29 January 2009?9 " 77 BIR Records, pp. 736-737. 78 Section 2.58(A)(2), RR 2-98, as amended by RR 17-2003. 79 BIR Records, p. 512.

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION Page 24 of28 x----------------------------------x INTEREST AND SURCHARGE MUST BE IMPOSED ON LATE PAYMENTS. Respondent assessed petitioner interest and surcharge on the amounts declared in the Withholding Tax on Wages (WfW) Returns (BIR Form No. 1601-C), EWT Returns (BIR Form No. 1601-E), and VAT Declarations (BIR Form No. 2550-M) and Returns (BIR Form No. 2550- Q) that were belatedly paid, to wit: Month Due Date Date Paid Tax Paid Surcharge Interest Total Withholding Tax on Wages April11, 2oo6 2,822.84 July 11, 2006 2,709.15 March April1o, 2oo6 Septen1ber12,2oo6 11,266. 58 2,816.64 6.20 3�155�69 Decen1ber 21, 2oo6 10,812.82 2,703.20 3�293�70 June July 10, 2006 3,141.87 5�95 11,981.38 Aprilu, 2oo6 12,567�46 3,216.13 13.82 August Septen1ber1o,2oo6 July 11, 2006 12,864�52 11,877�84 77�57 170.86 Septen1ber 12, 2oo6 103�54 170-48 Noven1ber Decen1ber 10, 2oo6 Decen1ber 21, 2006 166.29 233�65 Subtotal March 21, 2006 741.28 May24, 2oo6 Expanded Withholding Tax June 21, 2006 3.389.66 July 28, 2oo6 1,462.53 March April1o, 2oo6 August 22, 2006 681.90 170.48 0.38 2,518.91 1 Septen1ber 25, 2006 680.44 3>405.13 June July 10, 2006 October3o, 2oo6 662.22 170.11 0.37 4>445�20 Noven1ber 21, 2oo6 912.58 2,389.27 August Septen1ber1o,2oo6 Decen1ber 22, 2oo6 165.56 0.73 2,)97�16 Janu<l!)'_ 29, 2007 2,186.30 Noven1ber Decen1ber1o,2oo6 228.1') 5�5� 4.641.25 2,215�70 Subtotal 734�30 6.98 29,051.11 41�773�77 Value-Added Tax February March 20, 2oo6 13,528.86 3�382.22 7�44 1>449�83 12.70 April May 20, 2oo6 5�799�30 2,513�38 10,053�52 J082.94 5�53 May June 20, 2oo6 13�531.75_ 4�425�73 22.19 17,702.93 2,363�37 June July 25, 2oo6 2,)_71.17 19�47 9�453�49 2,181.50 25�90 July August 20, 2oo6 _2,484.68 4,620.92 25�99 8,725�99 2,196.46 4.8o August Septen1ber 20, 2006 18>483.68 28,887�52 20.33 8,785.83 19.24 Septen1ber October 25, 2oo6 41�499�66 163�59 274�11 October Noven1ber 20, 2oo6 Noven1ber Decen1ber 20, 2oo6 Decen1ber January 25, 2007 Subtotal TOTAL Section 248(A)(4) of the NIRC of1997, as amended, states: Sec. 248. Civil Penalties. - (A) There shall be imposed, in addition to the tax required to be paid, a penalty equivalent to twenty-five percent (25%) of the ~~ount due, in the following case~

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION x----------------------------------x (4) Failure to pay the full or part of the amount of tax shown on any return required to be filed under the provisions of this Code or rules and regulations, or the full amount of tax due for which no return is required to be filed, on or before the date prescribed for its payment.8o As can be gleaned from the afore-quoted, the 25% surcharge penalty must be imposed should a taxpayer fail to pay the amount of tax due shown on any return in full or in part. Moreover, as pointed out earlier, deficiency interest must be imposed when there is a failure to pay a deficiency tax within the time prescribed for its payment. In the instant case, petitioner failed to pay the tax due reflected in its returns within the prescribed time provided under the law. As such, the imposition of surcharge and interest are both proper. For manual filers, such as petitioner, it should however be pointed out that the reckoning point in computing interest for the following returns must be moved to the next business day, as clarified by RMC 65-201681: Month I Due Date Day Adjusted Due Date Date Paid I Withholding Tax on Wages Sunday September11, 2006 l SeQtember 10, 2oo6 Sunday December 11, 2006 September12,2oo6 Augt!_st December 21, 2oo6 November I December1o,2oo6 Sunday_ Se.Q_tember 11, 2006 Sunday December 11, 2oo6 September12,2oo6 Expanded Withholding Tax Decemter 21, 2oo6 Saturday Mi!Y 22, 2oo6 August I September 10, 2006 Sunday August 21, 2oo6 May_ 24, 2oo6 August 22, 2006 November I December 10, 2oo6 Value-Added Tax April l May2o, 2oo6 July I August 20, 2oo6 Hence, the computation of surcharge and interest on late payments is revised as follow~~ 80 Emphasis supplied. 81 Clarification on Proper Due Dates for Filing of Returns and Payment of Taxes for the Purpose of Imposition of Penalties for Late Filing and/or Late Payment.

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION Page 26 of28 x----------------------------------x Month Due Date Date Paid Tax Paid . Surcharge Interest Total I Withholding Tax on Wages 2,822.84 2,709.1'5 March Aprilw, 2006 Apriln, 2oo6 11,266.58 2,816.64 6.20 3,148.76 10,812.82 2,703.20 J,286.62 June July 10, 2oo6 July 11, 2oo6 12,567�46 3.141.87 '5-9'5 11,967�37 12,864-52 J,216.13 6.89 August September 11, 2006 September12,2oo6 11,877-84 70�49 170.86 89�53 170-48 November December 11, 2006 December 21, 2oo6 165-92 233�15 Subtotal 740-41 Expanded Withholding Tax J,J8g.66 1.453-01 March Aprilw, 2oo6 April11, 2oo6 681.90 170-48 O.J8 2,518.91 680.44 3.405.13 June July 10, 2oo6 July 11, 2oo6 662.22 170.11 0.37 4.435-43 912.58 2,)89.27 August September n, 2006 September12,2oo6 165.56 0.36 2,)97�16 2,186.30 November December 11, 2oo6 December 21, 2oo6 228.15 5.00 4.641.25 2,215-70 Subtotal 734-30 6.11 29,031.82 41,739�60 Value-Added Tax (92�73) 41,646.87 February March 20, 2006 March 21, 2oo6 1J,528.86 3,]_82.22 7�44 1,449�83 3.18 April May22, 2oo6 May 24,2006 5�799�30 2,513�38 10,053-52 3.)82.94 5�53 May June 20, 2oo6 June 21, 2oo6 13,531�75 4.425�73 22.19 17,702.93 2,)63�37 June July 25, 2006 July 28, 2oo6 2,)71.17 9�70 9�453�49 2,181.50 2'5-90 July August 21, 2oo6 August 22, 2oo6 9�484.68 4,620.92 25�99 8,725�99 2,196-46 4.8o August September 20, 2oo6 September 25, 2oo6 18,483.68 28,887.5_2 20.33 8,785.83 41�499�66 19.24 September October 25, 2006 October 30, 2oo6 144�30 41�499�66 239�94 October November 20, 2oo6 November 21, 2006 (92�73) 147�21 November December 20, 2006 December 22, 2006 December January 25, 2007 January 29, 2007 Subtotal TOTAL Less: Payment made per BIR Form No. o6oslj' TOTAL WHEREFORE, the foregoing considered, petitioner Donato C. Cruz Trading Corp.'s Petition for Review filed on 23 November 2017 is hereby PARTIALLY GRANTED. The Bureau of Internal Revenue's assessment pursuant to Letter of Authority No. 00074813 shall be adjusted as a result. Accordingly, petitioner is ORDERED TO PAY respondent Commissioner of Internal Revenue the amounts of P20,936.310.18, P33,o82.23 and P8o,859�58, representing basic deficiency Expanded Withholding Tax and penalties for late payments of Withholding Tax on Wages and Value-Added Tax, respectively, inclusive of the 25% surcharge, 20% deficiency interest and 20% delinquency interest imposed thereon under Sections 248(A)(3), 249(B) and (C) of the NIRC of 1997, as amended, respectively, computed until31 December 2017, as determined below~~ 82 BIR Records, p. 736.

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION x----------------------------------x EWT W1W VAT TOTAL 3,263.373-09"3 �3,263.373�09 Basic Deficiency 11,877.84 Surcharge (25%) 815,843-27 11,877.84 815,843-27 ' Deficiency Interest (2o%) 1.332,171.48 until January 29, 2009 21,204-39 ! EWT- 1/16/o7 to 1/29/09 13,154-62 33,082.23 (P3,263.373�09 X 20% X 726 737-21 1.332,171-48 days/ 365 days) Adjustments 5>425,279�67 29,031.82 13,154-62 Plus: Interest on paid 29,031.82 41,646.87 s,825,791.s2 5>466,18g.33 undisputed assessment 9,685,238�99 s,82s, 791.52 items- 1/16/07 to 20,936,310.18 9,685,238�99 1/9/09 (P33,113.37 X 20% X 21,204-39 725 days/ 365 days) Interest and surcharge 51,827-76 51,827-76 on late payments 8o,859.58 21,050,251-99 Total Amount Due as of January 29, 2009 Deficiency Interest (2o%) from January 30, 2009 to December 31, 2017 EWT- 1/3o/o9 to 12/31/17 (P3,263.373�09 X 20% X 3,258 days/ 365 days) Delinquency Interest (2o%) from January 30, 2009 to December 31, 2017 EWT- 1/3o/o9 to 12/31/17 (PSA25,279�67 X 20% X 3�258 days/ 365 days) wrw- 1/30/09 to 12/31/17 (Pu,877.84 x 20% x 3,258 days/ 365 days) VAT- 1/3o/o9 to 12/31/17 (P29,031.82 X 20% X 3,258 days/ 365 days) Total Amount Due as of December 31, 2017 In addition, petitioner is ORDERED TO PAY delinquency interest at the rate of 12% computed from 01 January 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 83 Purchases of goods - Income Payment EWTRate Basic Deficiency VAT 24,290,909.03 1% EWT Purchases of goods - 302,046,400.32 242,909.09 Non VAT 1% TOTAL 3,020,464.00 3,263,373.09 f. /A

CTA CASE NO. 9721 Donato C. Cruz Trading Corp. v. CIR DECISION Page 28 of28 x----------------------------------x Acceleration and Inclusion (TRAIN) and as implemented by RR 21- 2o1884, on said deficiency taxes based on the following principal amounts: Expanded Withholding Tax P5,425,279�67 Penalties on Withholding Tax on Wages 11,877�84 Penalties on Value Added Tax 29,031.82 SO ORDERED. ...... nn.1rVILLENA I CONCUR: ~,z:; c. asr~~ ~9::. YuANITO C. CASTANEDA, JR. Associate Justice CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. :foQAMr;; e. ar~I'f . JUANITO C. CASTANEDA, JR. Acting Presiding Justice 84 Regulations Implementing Section 249 (Interest) of the National Internal Revenue Code (NIRC) of 1997, as amended under Section 75 of the Republic Act (RA) No. 10963 or the "Tax Reform for Acceleration and Inclusion ("TRAIN Law").