ZUELLIG PHARMA CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

Republic of the Philippines COURT OF TAX APPEALS Quezon City SECOND DIVISION ZUELLIG PHARMA CTA Case No. 8801 CORPORATION, Members: Petitioner, CASTANEDA, JR., Chairperson, CASANOVA, and -versus- MANAHAN, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE, SEP 05 2017 L Respondent. r7 'f: f/\) ,.,. � x----------------------------------------------------------------------------------x DECISION CASANOVA, J.: This is a Petition for Review, filed on April 11, 2014 by petitioner Zuellig Pharma Corporation, praying for the refund of the amount of P477,269,935.23, allegedly representing its excess and unutilized creditable withholding taxes (CWT) for the calendar year (CY) ended December 31, 2011. Petitioner Zuellig Pharma Corporation is a corporation duly organized and existing under the laws of the Republic of the Philippines, with principal place of business at Km. 14 West Service Road, South Superhighway corner Edison Avenue, Barangay Sun Valley, Paranaque City. 1 It is a registered taxpayer with the Bureau of Internal Revenue (BIR), Large Taxpayer Service, with Taxpayer Identification No. (TIN) 000-172-443-000. 2 On the other hand, respondent is the duly appointed Commissioner of Internal Revenue (CIR), vested with authority to carry~ 1 Par. 1, Joint Stipulation of Facts and Issues (JSFI), Docket (Vol. I), p. 289. 2 Par. 4, JSFI, Docket (Vol. I), p. 290; Exhibit "P-2".

DECISION CTA CASE NO. 8801 out all the functions, duties, and responsibilities of said office, including inter alia, the power to decide, approve, and grant claims for refund of or issuance of TCC for overpaid or erroneously paid or collected internal revenue taxes, including excess and unutilized CWT, with office at the 5th Floor, BIR National Office Building, Agham Road, Diliman, Quezon City. 3 Petitioner is primarily engaged in the business of manufacturing, preparing, compounding, processing, packaging, buying and selling at wholesale and retail, importing and exporting, and otherwise dealing in all kinds of drugs, chemicals, patent, proprietary and other medicines, biological products, oils, dyestuffs, perfumeries, toilet and fancy articles, fancy goods, cosmetics, druggists, sundries, soaps, veterinary products and generally dealing in goods, wares, merchandise and personal property of every kind.4 On April 16, 2012, petitioner filed its Annual Income Tax Return (ITR)5 for CY 2011 with the BIR, through the Electronic Filing and Payment System (eFPS). Petitioner then manually filed on April 30, 2012, its Annual ITR6 for CY 2011 with the BIR, Large Taxpayers Assistance Division I together with a copy of its audited financial statements7 for the year ended December 31, 2011. On June 13, 2013, petitioner filed with the BIR through eFPS its Amended Annual ITR8 for CY 2011 using the new BIR Form No. 1702. In both its manually and electronically-filed Annual ITRs9 for CY 2011 petitioner indicated its option to claim for refund of its excess and unutilized CWT for CY 2011. On April 13, 2012, petitioner filed with respondent a letter10 signifying its intent to claim for refund of its excess and unutilized CWT for CY 2011. 4 3 Par. 2, JSFI, Docket (Vol. I), p. 289. 4 Par. 3, JSFI, Docket (Vol. I), p. 290; Exhibit "P-1". 5 Exhibit "P-3". 6 Exhibit "P-4". 7 Exhibit "P-5". 8 Exhibit "P-6". 9 Exhibits "P-3", "P-4", and "P-6". 10 Exhibit "P-10".

DECISION CTA CASE NO. 8801 Thereafter, on February 28, 2014, petitioner submitted a letter11 dated February 12, 2014 to the BIR, Large Taxpayers Services, supplementing its claim for refund and expounding on the legal and factual bases thereof. On April 1, 2014, petitioner filed with the BIR, Large Taxpayers Services, an Application for Tax Credits/Refunds (BIR Form No. 1914)12, praying for the refund of its excess and unutilized CWT for CY 2011 in the amount of P477,269,935.23. To date, respondent has neither approved nor denied petitioner's administrative claim for refund of its excess and unutilized CWT for CY 2012. Hence, the instant Petition for Review filed on April 11, 2014. Within the extended time granted by the Court13, respondent filed his Answer14 on June 6, 2014, interposing the following Special and Affirmative Defenses: "SPECIAL AND AFFIRMATIVE DEFENSES On the basis of the foregoing allegations and in further support of the Specific Denials herein set forth, respondent respectfully alleges as her affirmative defenses that: 4. Taxes collected are presumed to be in accordance with laws and regulations. 5. Petitioner's alleged claim for refund is subject to administrative routinary investigation/examination by the Bureau of Internal Revenue. A claim for refund is not ipso facto granted because respondent CIR still has to investigate and ascertain the validity of the claim. 6. Taxes are essential to government's very existence; (CIR v. Solidbank Corporation, G.R. No~ 11 Exhibit "P-11 ". 12 Exhibit "P-12". 13 Order dated May 6, 2014, Docket (Vol. I), p. 98. 14 Docket (Vol. I), pp. 99-106.

DECISION CTA CASE NO. 8801 148191, November 25, 2003) hence, the dictum that taxes are the lifeblood of the government." For this reason, the right of taxation cannot easily be surrendered; statutes granting tax exemptions are considered as a derogation of the sovereign authority. (CIR v. Fortune Tobacco Corporation, G.R. Nos. 167274-75, July 21, 2008) Since tax refunds are regarded as tax exemptions therefore, these are to be construed strictissimi juris against the person or entity claiming the exemption. (Philippine Phospate Fertilizer Corporation vs. Commissioner of Internal Revenue G.R 141973, June 28, 2005) 7. In an action for refund, the burden of proof is on the taxpayer who claims the exemption and he must justify his claim by the clearest grant under the Constitutional or statutory law and cannot be permitted by vague implications (BPI Leasing Corporation vs. Honorable Court of Appeals, G.R 127624, November 18, 2003) The taxpayer is charged with the heavy burden of proving that he has complied with and satisfied all the statutory and administrative requirements to be entitled to the tax refund. (Commissioner of Internal Revenue vs. Eastern Telecommunications Philippines, Inc. G.R. 163835 July 7, 2010) 8. Petitioner must prove that it filed the corresponding administrative and judicial claim for refund within the two-year prescriptive period pursuant to Sections 204 and 229 of the National Internal Revenue Code of 1997, as amended. 9. The amount of Php477,269,935.23 being claimed by petitioner as alleged excess and unutilized Creditable Withholding Taxes for the calendar year ended December 31, 2011 is not properly documented. 10. In the foregoing case, it should be noted that nowhere in the petition did petitioner aver that it..,...

DECISION CTA CASE NO. 8801 complied with the required submission of supporting documents to justify its claim for refund. 11. In relation thereto, petitioner must prove compliance with the prescribed checklist of requirements to be submitted involving claims for creditable withholding tax pursuant to Revenue Memorandum Order (RMO) No. 53-98 (Checklist of Documents to be Submitted by a Taxpayer upon Audit of his Tax Liabilities as well as of the Mandatory Reporting Requirements to be Prepared by a Revenue Officer, all of which comprise a Complete Tax Docket), otherwise there would be no sufficient compliance with the filing of an administrative claim for refund, the administrative claim thereof being merely pro-forma. 12. RMO No. 53-98 was issued to identify the documents required from a taxpayer during audit of the application for refund. For Income Tax/Withholding Tax, the specific documents that need to be submitted are as follows: INCOME TAX/ WITHHOLDING TAX A) Requirements from Taxpayer 1) Certified Financial Statements, including comparative Profit and Loss Statement with Statement of Cost of Goods Manufactured and Sold, if applicable. 2) Proof of claimed tax credit if applicable. 3) Proof of the claimed 'Interest Expense', if applicable. 4) Proof of claimed Bad Debts/ worthlessness of credits, if applicable. 5) Reconciliation of 'Book Income' and 'Taxable Income'. 6) Certificate of Registration issued by the appropriate regulatory agency, together with~

DECISION CTA CASE NO. 8801 the conditions attached to such registration, if applicable. 7) Proof of Exemption under special laws, if applicable. 8) Certification of the appropriate regulatory agency as to taxpayer's entitlement to tax incentives, if applicable. 9) Xerox copy of used Tax Credit Certificate with annotation of issued TDM at the back, if applicable. 10) Proof of payment of deficiency tax, if any/applicable. a) current year I period b) previous year I period 11) Reports submitted to applicable regulatory agency that reflects the financial condition and result of operation of the taxpayer e.g., Annual Statement prepared by insurance companies submitted to the Insurance Commission etc., if applicable. 13. Further, Revenue Regulations (R.R.) 2-2006 (Mandatory Attachments of the Summary Alphalist of Withholding Agents of Income Payments Subjected to Tax Withheld at Source (SAWT) to Tax Returns With Claimed Tax Credits due to Creditable Tax Withheld At Source and of the Monthly Alpha list of Payees (MAP) Whose Income Received Have Been Subjected to Withholding Tax to the Withholding Tax Remittance Return Filed by the Withholding Agent/Payor of Income Payments) provides: Section 2. MANDATORY SUBMISSION OF SUMMARY ALPHALIST OF WITHHOLDING AGENTS OF INCOME PAYMENTS SUBJECTED TO CREDITABLE WITHHOLDING TAXES (SAWT) BY THE PAYEE/INCOME RECIPIENT AND OF MONTHLY ALPHALIST OF PAYEES~

DECISION CfA CASE NO. 8801 (MAP) SUBJECTED TO WITHHOLDING TAX BY THE WITHHOLDING AGENT INCOME PAYOR AS ATTACHMENT TO THEIR FILED RETURNS. A. XXX .�� XXX ... XXX B. Persons required to submit Summary Alphalist of Withholding Agents of Income Payments subjected to Withholding-Taxes (SAWT) 1. All persons claiming refund or applying their creditable tax withheld at source against the tax due with not more than ten (10) withholding agents-payor of income payment per return period are strictly required to submit SAWT in hard copy as attachment to the required tax return; 2. All persons claiming for refund or applying their creditable tax withheld at source against the tax due with more than ten (10) withholding agents-payor of income payment per return period are strictly required to submit SAWT electronically in 3.5 inch floppy diskette following the format to be prescribed by the BIR; XXX ... XXX ... XXX 14. In its claim for refund for the calendar year 2011, petitioner clearly failed to submit the pertinent documents required pursuant to RMO No. 53-98 and R.R. 2-2006. 15. Likewise, petitioner must prove that it has fully complied with the requisites to sustain a claim for refund or tax credit of excess and unutilized creditable Withholding Tax as ruled by the Supreme Court in Citibank N.A. vs. Court of Appeals, et al. quoted herewith, to wit: a.) That the claim for refund was filed within the two year prescriptive period as provided~

DECISION CTA CASE NO. 8801 under Section 204(c) in relation to Section 229 of the NIRC of 1997; b.) That the fact of withholding is established by a copy of a statement duly issued by the payor (withholding agent) to the payee, showing the amount paid and the amount of tax withheld therefrom. c.) That the income upon which the taxes were withheld was included in the return of the recipient. 16. Petitioner must also prove that it did not carry-over the excess creditable withholding taxes against the Quarterly and Annual Income Tax Returns in the succeeding taxable years as provided under Section 76 of the 1997 Tax Code. 17. In the alternative, if petitioner opted to choose a tax refund instead of tax credit certificates or to be carried over as tax credit next year/quarter for the alleged excess and unutilized Creditable Withholding Taxes, such option should be indicated in its Annual Income Tax Return by shading the circle of its choice provided for in Part II, Line 37 of the said return. 18. Unfortunately for the petitioner, it never made a choice in its Annual Income Tax Return filed for the calendar year 2011. Upon scrutiny of the aforesaid document, all the options were left blank. Petitioner did not shade the option to be refunded in Line 37 of the said return. Hence, it never signified that it chose to be refunded. 19. For ease of reference, Section 76 of the NIRC, as amended is quoted herewith as follows: SEC. 76. Final Adjustment Return.- Every corporation liable to tax under Section 27 shall file a final adjustment return covering the taxable income for the preceding calendar or fiscal year. If the sum of the quarterly tax payments made during the said taxable year is not equal to the total tax,

DECISION CTA CASE NO. 8801 due on the entire taxable income of that year, the corporation shall either: (A) Pay the balance of tax still due; or (B) Carry-over the excess credits; or (C) Be credited or refunded with the excess amount paid, as the case may be. In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income taxes paid, the excess amount shown on its final adjustment return may be carried over and credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable years. Once the option to carry-over and apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years has been made, such option shall be considered irrevocable for that taxable period and no application for cash refund or issuance of a tax credit certificate shall be allowed therefore. 20. Following the premise above-mentioned, petitioner has the burden of proving that the right to such tax refund indubitably exists and well-founded doubt is fatal to the claim." A pre-trial conference was scheduled on July 17, 2014. 15 Subsequently, the Respondent's Pre-Trial Brief16 was filed on July 3, 2014 while the Petitioner's Pre-Trial Brief17 was filed on September 8, 2014. Thereafter, the parties filed their Joint Stipulation of Facts and Issues18 on September 29, 2014, which was approved and adopted by the Court in the Pre-Trial Order dated October 8, 201419.&-- 15 Notice of Pre-Trial Conference, Docket (Vol. I), p. 108. 16 Docket (Vol. I), pp. 109-113. 17 Docket (Vol. I), pp. 265-276. 18 Docket (Vol. 1), pp. 289-296. 19 Docket (Vol. I), pp. 299-303.

DECISION CTA CASE NO. 8801 Upon motion 20 of petitioner, the Court commissioned Ms. Katherine 0. Constantino as the Independent Certified Public Accountant (ICPA). In support of its claim for refund, petitioner presented the following witnesses: Mr. Joel R. Ducut 21 , petitioner's Assistant Corporate Controller; and Ms. Katherine 0. Constantino 22 , the Independent Certified Public Accountant (ICPA). Petitioner filed its Formal Offer of Evidence23 on May 13, 2015, which was resolved by the Court in the Resolution dated September 15, 201524 � On October 5, 2015, petitioner filed a Motion for Reconsideration with Motion to Admit25, which was partially granted by the Court in the Resolution26 dated April 14, 2016. Thereafter, respondent presented his lone witness, Revenue Officer Ma. Theresa L. Espino27 � Respondent filed his Formal Offer of Documentary Evidence28 on June 24, 2016. In the Resolution29 dated June 28, 2016, the Court admitted all of respondent's evidence. On July 11, 2016, respondent filed a Manifestation30 stating that in lieu of filing a Memorandum, he is adopting his Answer dated June 5, 2014 as his Memorandum.~ 20 Docket (Vol. I), pp. 304-307. 21 Exhibit "P-17'', Sworn Statement of Mr. Joel R. Ducut to Questions Propounded by Atty. Gelina Rose E. Recio, and Supplemental Sworn Statement of Mr. Joel R. Ducut to Questions Propounded by Atty. Gelina Rose E. Recio, Docket (Vol. I), pp. 252-262 and 371-473, respectively; Minutes of the Hearing dated October 20, 2014 and April 13, 2015, respectively, Docket (Vol. I), p. 321 and 657. 22 Exhibit "P-6", Sworn Statement of Ms. Katherine 0. Constantino to Questions Propounded by Atty. Gelina Rose E. Recio, Docket (Vol. I), pp. 351-366; Minutes of the Hearing dated March 18, 2015, Docket (Vol. I), p. 367. 23 Docket (Vol. II), pp. 662-680. 24 Docket (Vol. II), pp. 830-879. 25 Docket (Vol. II), pp. 882-893. 26 Docket (Vol. II), pp. 1018-1048. 27 Exhibit "R-9", Judicial Affidavit of Revenue Officer Ma. Theresa L. Espino, Docket (Vol. II), pp. 819-824; Minutes of the Hearing dated May 11, 2016, docket val. II, p. 1050. 28 Docket (Vol. II), p. 1053-1060. 29 Docket (Vol. II), pp. 1070-1071. 30 Docket (Vol. II), pp. 1072-1075.

DECISION CTA CASE NO. 8801 Petitioner, on the other hand, filed its Memorandum31 on August 30, 2016. The case was then considered submitted for decision in the Resolution32 dated September 6, 2016. The parties stipulated that the main issue33 to be resolved in this case is: "'WHETHER OR NOT PETITIONER IS ENTITLED TO ITS CLAIM FOR REFUND OF ALLEGED EXCESS AND UNUTILIZED CWT FOR CY 2011 IN THE AMOUNT OF P477,269,935.23.' The issue may be broken down in the following sub- issues: 1. Whether or not petitioner's alleged excess and unutilized CWT for CY 2011 in the amount of P477,269,935.23 are duly substantiated by documentary evidence. 2. Whether or not the income from which the CWT's being claimed for refund were withheld was reported as part of the revenues declared in petitioner's Annual ITR. 3. Whether or not petitioner exercised the option to carry over its alleged excess and unutilized CWT for CY 2011 to the succeeding taxable periods. 4. Whether or not petitioner filed its administrative and judicial claims for refund of alleged excess and unutilized CWT for CY 2011 within the two-year prescription period provided under Sections 204(C) and 229, National Internal Revenue Code of 1997 (the 'Tax Code').'& 31 Docket (Vol. II), pp. 1085-1111. 32 Docket (Vol. II), p. 1112. 33 Issues, JSFI, Docket (Vol. I), p. 290.

DECISION CTA CASE NO. 8801 Based on relevant jurisprudence and BIR Revenue Regulations,34 in order for a taxpayer to be entitled to a refund of or an issuance of tax credit certificate for its unutilized excess cwr, the following three (3) basic requisites must be sufficiently established: 1. the claim for refund must be filed within the two-year prescriptive period as provided under Sections 204(C) and 229 of the National Internal Revenue Code (NIRC) of 1997, as amended; 2. The fact of withholding must be established by a copy of a statement duly issued by the payor (withholding agent) to the payee, showing the amount paid and the amount of tax withheld therefrom; and 3. The income upon which the taxes were withheld must be declared as part of the gross income of the recipient. As to the first requisite, Sections 204(C) and 229 of the NIRC of 1997, as amended, provide as follows: "SEC. 204. Authority of the Commissioner to Compromise/ Abate and Refund or Credit Taxes. - The Commissioner may - XXX XXX XXX (C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2).- 34 Citibank N.A. vs. Court of Appeals, et al., G.R. No. 107434, October 10, 1997; ACCRA Investments Corporation vs. The Honorable Court ofAppeals, et al., G.R. No. 96322, December 20, 1991; United International Pictures AB vs. Commissioner of Internal Revenue, G.R. No. 168331, October 11, 2012; 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; Section 2.58, Revenue Regulations No. 2-98, as amended.

DECISION CfA CASE NO. 8801 years after the payment of the tax or penalty: Provided, however, That a return filed showing an overpayment shall be considered as a written claim for credit or refund." "SEC. 229. Recovery of Tax Erroneously or Illegally Collected. - No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid." In applying the foregoing provisions, the Supreme Court in the case of ACCRA Investments Corporation vs. Court ofAppeals, eta/./35 held that the two-year prescriptive period for claiming a refund of overpaid income tax/CWT commences to run on the date of filing of the Final Adjustment Return. It is only when the Final Adjustment Return covering the whole year is filed that the taxpayer would know whether a tax is still due or a refund can be claimed based on the adjusted and audited figures. 36 This ruling was reiterated in the case of Commissioner ofInternal Revenue vs. Primetime Property}7 where the Supreme Court held that the two-year prescriptive period is reckoned from the filing of the final adjusted return. The present claim pertains to taxable CY 2011 for which petitioner filed its original Annual Income Tax Return {AITR) through the SIR's Electronic Filing and Payment System (EFPS) on April 16, (j/1...- 35 G.R. No. 96322, December 20, 1991, 204 SCRA 957. 36 Commissioner ofInternal Revenue vs. TMX Sales Inc., eta/., G.R. No. 83736, January 15, 1992. 37 G.R. No. 162155, August 28, 2007.

DECISION CTA CASE NO. 8801 201238� Counting from this date, petitioner had until April 16, 2014 within which to file a claim for refund of its 2011 excess CWT both in the administrative and judicial levels. Petitioner's letter-claim for refund39 filed with the respondent on April 13, 2012, supplemental letter-claim for refund40 and Application for Tax Credits/Refunds41 filed with the BIR's Large Taxpayers Service on February 28, 2014 and April 1, 2014, respectively, as well as its subsequent appeal via a Petition for Review filed before this Court on April 11, 2014 fell within the two-year prescriptive period under Sections 204(C) and 229 of the NIRC of 1997, as amended. With regard to the second and third requisites, Section 2.58.3 (B) of Revenue Regulations (RR) No. 02-98, as amended, states: "Sec. 2.58.3. Claim for tax credit or refund. - XXX XXX XXX (B) Claims for tax credit or refund of any creditable income tax which was deducted and withheld on income payments shall be given due course only when it is shown that the income payment has been declared as part of the gross income and the fact of withholding is established by a copy of the withholding tax statement duly issued by the payor to the payee showing the amount paid and the amount of tax withheld therefrom." (Emphasis supplied) To prove the fact of withholding of the claimed CWT of P477,269,935.23, petitioner presented its Schedule 42 of Creditable Withholding Tax and the related Certificates 43 of Creditable Tax Withheld at Source for CY 2011. Upon examination of these documents, the Court-commissioned Independent CPA firm, Constantino Guadalquiver & Co., through its Partner, Ms. Katherine 0. Constantino, summarized its findings as follows: 4~ 38 Exhibit "P-3". 39 Exhibit "P-10". 40 Exhibit "P-11". 41 Exhibit "P-12". 42 Exhibit "P-23-a". 43 Exhibits "P-39" to "P-5043" and "P-354706" to "P-366467". 44 Exhibit "P-19", p. 7.

DECISION CTA CASE NO. 8801 Findings Annex Income Payment Tax Withheld CWT duly supported by original Certificate of Reference Creditable Tax Withheld at Source (BIR Form (Exh. "P- 2307) CWT duly supported by original Certificate of 19") Creditable Tax Withheld at Source (BIR Form 2307) with incorrect Petitioner's TIN indicated Annex 1-a p 43,249 700,267.27 p 441 220,333.92 therein CWT duly supported by original Certificate of Annex 1-b 847 817 242.41 9 822,185.21 Creditable Tax Withheld at Source (BIR Form 2307) with unclear date Annex 1-c 2 752 283.81 24 449.26 CWT supported by photocopies certificate Annex 1-d with correct name, TIN and date 743 610 625.61 7 545 434.24 18 657 143.95 CWT certificates not yet provided P44,843,880,419.10 P477,269,546.58 Total The Court noted that the amount of P477,269,546.58 is lower by cwr P388.65 when compared with petitioner's claimed of P477,269,935.23. Thus, the said discrepancy of P388.65 shall be disallowed from petitioner's claim for being unsupported. Moreover, the cwr in the amounts of P9,822,185.21, P24,449.26, P7,545,434.24 and P18,657,143.95 aggregating to P36,049,212.66 shall be disallowed. While the amount of P9,822,185.21 was duly supported by original Certificate of Creditable Tax Withheld at Source (BIR Form 2307), it has incorrect petitioner's TIN, and the date indicated in BIR Form 2307 was unclear. On the other hand, the amount P7,545,434.24 was only supported by photocopies of certificates with correct name, TIN and date. Finally, the amount P18,657,143.95 is disallowed because the same was not supported with Cwr Certificates. In addition, petitioner's claim should be reduced by the following cwr in the total amount of P786,401.46 for also not being properly substantiated with BIR Forms No. 2307: Exhibit Customer Name Income CWT Payment CWTsupported by SIR Forms No. 2307 but not in the name ofthe petitioner Argent Business Consultants and Stores Specialist, P-254 Inc. p 1400.00 p 14.00 P-365 Argent Business Consultants and Stores Specialist, 26 977.60 269.78 Inc.

DECISION CTA CASE NO. 8801 CWTsupported by SIR Forms No. 2307 but without signature ofthe payor/payor's authorizedrepresentative P-3643 Majesty Pharmacy, Inc. 3 422,350.23 34 223.52 85,773.75 857.74 P-358746 Drugman Drug House 216 321.92 2 163.22 P-358771 Druqman Drug House 113 811.56 1 016.17 713,954.80 7 139.55 P-362567 New Sacred Heart Pharmacy - Dumaguete Branch 1 009,389.69 9 012.38 P-363929 Rufino Brodeth & Co., Inc./Luz Pharmacy 1 646 455.02 14 700.48 CWTsupported by SIR Forms No. 2307 but with different 3 415 526.61 30 495.78 petitioner's TIN indicated therein 2 411 579.22 21 531.96 1 268 977.16 11 330.13 P-358233 Da_gupan Doctors Villaflor Memorial Hospital, Inc. 23,564 047.00 235 640.47 P-358234 Dagupan Doctors Villaflor Memorial Hospital Inc. 767 290.00 7 672.90 316 718.00 3 167.18 P-358235 Dagupan Doctors Villaflor Memorial Hospital Inc. 199 794.00 1/997.94 P-358237 Dagupan Doctors Villaflor Memorial Hospital Inc. 404 462.71 4 044.63 654 743.82 6,547.44 P-358244 Dagupan Doctors Villaflor Memorial Hospital Inc. 1 094 030.23 10 940.30 P-361298 LTS Supermarkets, Inc. 16 327.00 163.27 CWTsupported by SIR Forms No. 2307 but dated outside 17 430.00 174.30 the period ofclaim 2 164,518.00 21 645.18 P-359666 First Lane Supertraders Co., Inc. 1 810,106.00 18 101.06 P-359667 First Lane Supertraders Co. Inc. P-359668 First Lane Supertraders Co. Inc. CWTsupported by SIR Forms No. 2307 but without petitioner's TIN indicated therein P-363038 Philhealthcare Inc. P-363039 Philhealthcare, Inc. P-363040 Philhealthcare, Inc. P-365467 Tai-Pan Dev't. Inc. Gaisano Ca_Qital San Carlos P-365468 Tai-Pan Dev't. Inc. Gaisano Capital San Carlos Supporting SIR Forms No. 2307 which do notpertain to the claimed CWT P-361523 Mactan Doctors Hospital Inc. P-361524 Mactan Doctors Hospital Inc. CWTsupported by SIR Forms No. 2307 which were claimed twice bypetitioner P-1696; P-1697 Capitol Medical Center Inc. 14 681,104.00 146 811.04 21 244,791.35 P-1490; 189 685.66 790 203.00 P-4191 Professional Services Inc. (The Medical City) 7 055.38 P-356821; P786,401.46 P-356822 Cebu Fedco Marketing Corp. Total Additional Disallowed CWT As to the third requisite, records disclose that the claimed CWT pertain to petitioner's sales of goods and services for the CY 2011. In ascertaining that the total amounts of sale of goods and services which were booked by petitioner in its sales register and general ledger (GL) for the CY 2011 tally with the sale of goods and services declared as taxable income per petitioner's AITR for the same year, the ICPA prepared the following reconciliations:~

DECISION CfA CASE NO. 8801 On the Sale of Goods: "We compared the net sales per sales register generated by the Petitioner's SIR-registered system (to be presented as Exhibit P- 31, Folder 12 to 77, Box 7 to 14), with the general ledger balances of total revenue for the year 2011 (previously presented as Exhibit P-25, Folder 5, Box 1), with the net sales reported in the audited financial statements for the year 2011 (previously presented as Exhibit P-5) and with the net sales amount of the amended annual income tax return for the CY 2011 (previously presented as Exhibit P-6). A detailed tabular presentation is presented in Annex 3. Summarized details follows: Particulars Amount of sales Per sales register Per qeneral ledqer of all sales p 57,915,958,134.46 Per audited financial statements 58,031 790,982.54 Per amended annual income tax return 57,985,824,408.00 58,012 576,794.00 Comparison disclosed the following differences: a. Sales reqister and qeneral ledger Differences b. General ledger and audited financial statements (P 115 832,848.08) c. Audited financial statements and amended 45,966 574.54 annual income tax return d. Sales register and annual income tax return (26,752,386.00) 96,618,659.54 a. Reconciliation of Sales Register and General Ledger amount The discrepancy of P115,832,848.16 pertains to the following amounts which were not included in the sales register because these do not relate to the sale of goods: Account Code Account Name General Ledger Accrued Tax T/P Balance 40101 Financial Discounts 41202 Services T/P (P217,250,159.30) 42001 Services 1/C (83,778,665.26) 42002 399,261,189.10 182,780.00 P98,415,144.54 Add adjustment for timing differences: Undelivered sales for CY 2010 reported 25,128,948.63 as sales in GL 2011 11,162,033.18 (Exhibit 34, Folder 80, Box 1) Trade Returns for 2010 recorded in 2011 (18,471,733.37)~ (Exhibit 37, Folder 80, Box 1) Trade Returns of 2011 not yet recorded in GL (Exhibit35, Folder80, Box 1)

DECISION CTA CASE NO. 8801 Undelivered sales of 2011 recorded in (401,544.82) 17,417,703.62 2012 (Exhibit36, Folder SO, Box 1) 115 832 848.16 b. The difference of P45,966,574.54 between the general ledger and audited financial statements pertains to clinical trial management service income, recorded in the general ledger under Account code 42001 Service T/P account, which was treated as an outright reduction to non-operating expenses under Account Code 48605, Other N-OP inc/exp with GL balance amounting to P47,639,031.33 (P45,966,574.54 clinical trial management and P1,672,456.79 pertaining to others). Entry details of P45,966,574.54 were provided by the Petitioner (to be presented as Exhibit P-26, Folder 6, Box 1). Accordingly, the difference between the sales reported in the sales register and the audited financial statements amounting to P69,866,273.60 was due to the following: Difference between sales register and general P115,832,848.16 ledger as shown in a. above Clinical trial management services income (45,966 574.54) treated as outright reduction P69,866,273.62 Total c. The difference of 26,752,386.00 between sales per income tax return and audited financial statements pertains to the excess municipal taxes accrual which was an additional to the taxable income in the annual income tax return per Petitioner- prepared reconciliation (to be presented as Exhibit P-27, Folder 7, Box 1). d. Accordingly, the difference of net sales per sales register with the sales per amended return of 96,618,659.60 was due to the following: Difference between sales register and general P115,832,848.16 ledger as shown in a. above Clinical trial management services income (45/966,574.54) treated as outright reduction as shown in b. above 26,752 386.00 , Excess Municipal taxes accrual stated above P96,618,659.60 Total On the Sale ofServices: "Reconciliation between general ledger and amended annual income tax return as follows: t2r

DECISION CTA CASE NO. 8801 SALES AMOUNT Account Description perGL per ITR Difference 40001 VAT SALES T/P 0.48 40101 ACCRUED TAX T/P (64,838 920 385.00) (64 838 920 385.48) 40201 VAT ON SALES T/P 26 752 385.87 FINANCIAL 217,250 159.30 190 497 773.43 (0.46) 41202 DISCOUNTS 42001 SERVICES T/P 6,905,544 547.00 6 905 544,547.46 42002 SERVICES I/C TOTAL 83 778 665.26 83 778 665.26 - (399 261189.10} (353 294 614.94) (45 966 574.16) (182 780.00) (182 780.00) (58,031,790,982.54) (58,012,576,794.27) - {19,214,188.27) Accordingly, the difference of total sales per general ledger with the sales per amended annual income tax return of 19,214,188.27 was due to the following: Clinical trial management services income treated (P45,966,574.54) as outright reduction (to be presented as Exhibit 26 752,386.00 P-26, Folder 6, Box 1) {P19,214,185.54)* Excess Municipal taxes accrual stated above (to be presented as Exhibit P-27, Folder 9, Box 1) Total *Difference of P2.73 (P19,214,188.27- P19,214,185.54) is due to rounding decimals. '' Certainly, the total taxable sales of goods and services per petitioner's sales register and GL were the same amounts reported by petitioner in its 2011 AITR. The income payments related to the claimed CWT were recorded in petitioner's sales register and GL. The ICPA was able to trace the income payments related to the claimed CWT to the sales register and GL, except for the following sales of goods in the amount of P969,074,728.83 and sales of services in the amount of P618,630,611.39, detailed as follows: SALE OF GOODS Per BIR Form 2307 !CPA's Customer Name Computation of Income Payment Tax Withheld Sales Amount per Difference (A) Sales Register (A-B) (B) 75 661.00 INCOME PAYMENT WITH NO CORRRESPONDING RECORD IN THE SALES REGISTER 18 670.00 152 678.57 Barili District Hospital 75 661.00 756.61 - 1 045 200.00 Benguet Provincial 18 670.00 166.70 - 1 618.00 Government Cebu Doctors Colleqe Inc. 152 678.57 1 526.79 - Cypress Manufacturing Limited 1 045 200.00 10 452.00 - Daanbantayan District Hospital 1 618.00 16.18 -

DECISION CTA CASE NO. 8801 DOH - Regional Health Office - 257 142.86 2 571.43 - 257,142.86 CAR 735 017.49 Dynasty Management & 75 382 233.93 735,017.49 - 49 894.69 Development Corp 30 775.44 Emilus Supermarket Systems 49 894.69 498.95 - 38 638 763.36 Inc. 431125.00 Everlink Distribution Group, 30 775.44 30 775.44 - 66 893.25 Inc. 73 275.00 Far East Noble House 38 638J63.36 383 286.13 - 294 308.02 FMC Renalcare Corp. Gaisano Dadaingas Inc. 431,125.00 4,311.25 - 780 535.89 4 044 159.00 66 893.25 668.94 - 89 285.71 Handyman Express Mart Inc. 73 275.00 732.75 - 40 030 611.29 Lion Commercial Corp. 294 308.02 2 943.08 - 245 319.64 Provincial Government Of 124 625.00 Cavite 780 535.89 7 369.44 - 161,832 775.65 Riviera Mercantile Sys. Inc. 4 044 159.00 40 441.59 - Sara Lee Philippines Inc. 89 285.71 1 785.71 - Shogun Management & 40 030 611.29 399 260.26 - Development Corp. Shopmore Commercial Corp. 245 319.64 2 453.18 - Waltermart Handyman, Inc. 124 625.00 1 246.25 - Subtotal 161,832 775.65 1,626. 280.17 - INCOME PAYMENT PER SALES REGISTER IS LESS THAN THE INCOME PAYMENT REFLECTED IN THE CWT CERTIFICATES AB Pharma Inc. 20,381 040.24 203 810.41 20 233 930.44 147 109.80 Ace Hardware Phil's Inc. 11 179 300.00 111 793.00 11 025 551.42 153 748.58 Ace Med Inc. 2 954 419.83 29 544.20 2 580 027.64 374 392.19 144,780 830.81 1447 808.32 144 670 718.92 110 111.89 Act General Merchandise & 168 664.43 691 370.57* 6,913.70 522 706.14 277 802.30 Drug, Inc. 5 854 536.00 58 545.36 5 576 733.70 Adela Serra Ty Memorial Medical Center Allah Valley Medical Specialists Center Inc. Antipolo City Hospital Inc. 1473 385.94 14 733.87 1 356 312.03 117 073.91 Asia Renal Care (Phils.) 1468 286.22 14 682.86 516 492.10 951 794.12 Asociacion Benevola De Cebu, 214 552 762.01 2 145 527.65 206 176 602.34 8 376 159.67 Inc. (Chong Hua Hospital) Benguet General Hospital 4 513 965.49* 45 148.57 4 252 494.34 261 471.15 Botica Real 34 709,394.08 336/657.61 10 312 376.74 24 397 017.34 Bureau Of Corrections 2 588 471.00 25 884.71 2 483 890.32 104 580.68 Cagayan De Oro Medical 17 852 832.00 178 528.32 16 969 829.26 883 002.74 Center Inc. Cagayan Valley Medical Center 10 912 837.60 232 944.64 9 053 476.24 1 859 361.36 Cebu Far Eastern Druq Inc. 2 163 237.24 19 341.77 1,884 554.97 278 682.27 Center For Health 229 906.03 2 052.73 86 284.32 143 621.71 Development Iv-B 356 523.16 11187 817.84 Christ The King Medical 11 544 341.00 115 443.41 Services Inc. City Government Of Pasig 45 690 051.00 456 900.51 18 256 901.26 27 433 149.74 City Government Of Bago 51 339.29 513.39 47 767.86 3 571.43 City Government Of Binan 1 571 429.00* 15 714.29 136 562.50 1434 866.50 City Government Of Makati 29 713 385.71 297 133.86 21 333 043.66 8 380 342.05 City Government Of 2,008 928.57 20 089.29 1169 709.18 839 219.39 Muntinlupa City Supermarket 51,544 719.99 515 447.18 so 543 219.22 1 001 500.77 Incorporated 123 829 568.00 1,238 295.68 Colinas Verdes Hospital 119 035 961.00 4 793 607.00 Managers Corp. 2 428 261.00 24 282.61 137 573.71 - 2 290 687.29 Commission On Audit

DECISION 160 039.20 1453.03 155 012.68 5 026.52 CTA CASE NO. 8801 Page 21 of 32 91 798 776.00 917 987.76 76 510 309.92 15 288 466.08 738 512.00 7 385.12 735 418.37 3 093.63 Commission On Elections Complete Solution Pharmacy 3 205 653.65 30 932.35 2 618 366.10 587 287.55 And Gen. Mer. 10 101 256.00 101 012.65 1 671 797.18 8 429,458.82 OJC Supermarket Inc. 30 485 949.18 304 859.50 30 352,181.41 133 767.77 Davao Adventist Hospital Inc. 15 232 920.78 152 329.21 14 163,576.80 1 069 343.98 Davao Central Warehouse 10 310 756.00 108 196.38 (1 206 667.24) 11 517 423.24 Club Inc. 4 851,894.00 48_1_518.94 4 077 860.92 774 033.08 Davao Regional Hospital 15 451,062.84 15'h_510.62 De Los Santos Med.Ctr. 10 535 625.73 4 915 437.11 Diagnostic Corp. 44 764 014.47 447 640.07 296 745.57 3 631.49 36 906 409.12 7 857 605.35 Dranix Distributor Inc.IIoilo 206 136.46 90 609.11 107 054 277.70 1 070,552.93 E. Berlin Pharmacv 102 659,130.47 1 026,591.32 76 910 417.45 30 143 860.25 Erlinda G. Germar/ Farmacia 78 820 886.01 23 838 244.46 Fatima & Fatima Soda Founta 3 331 046.11 30,110.01 Ever Commonwealth Center, 3 010 996.18 320 049.93 Inc. 8 130 608.00 81 306.08 15 084 981.00 150 849.81 8 031427.66 99 180.34 Evercare Pharmacv 15 078 129.00 6 852.00 28 603 984.71 286 039.85 Everplus Superstore Inc. 20 342 184.64 8 261 800.07 13 359 095.27 133 590.96 Extract Sales Incorporated 1 093 587.21 10 935.87 13 355 251.11 3 844.16 150 296.25 943 290.96 FEB Cuisine Corp. 14 283 673.00 142 836.22 784 031.06 FEU - Dr. Nicanor Reyes 84 000.00 1 680.00 13 499 641.94 Medical Foundation 6 447.26 77 552.74 10 381 614.12 103 816.14 5,058 537.38 Gaisano Bros. Mdsg. Inc. 108 432 225.46 1 084 545.61 5 323 076.74 1647 994.30 Grand Union Supermarket 106 784 231.16 52 175 936.31 Inc. Operator 61 824 609.38 618 246.09 Inter-Medical Unified System, 9 648 673.07 122 071.32 Inc. 12 455 928.00 124 559.28 100 696 946.24 347,337 544.82 3,473 375.69 12 333 856.68 ISS Facility Services Phil. Inc. 246 640,598.58 37 678.36 26,710 298.00 267 102.98 320 262.12 Jemstar Trading Corporation 1 781 627.77 17 816.27 26 672 619.64 1 461 365.65 Juliano Susan G. 158 017.92 1 580.17 118 004.15 40 013.77 K2 Drug & Medical Supplies 17 856.47 257.12 15 943.28 1,913.19 Larrazabal Susanna Ortega 25 287 731.24 136 521.59 15 908 113.44 9 379,617.80 LTS Affiliates Inc. 32 028,938.00 320,289.38 Lucena United Doctors 30 342,354.11 303,423.53 31 301 758.99 727 179.01 Incorporated 54 556 608.66 545 566.09 29 755 646.84 586 707.27 54 500 131.63 Manson Drug Corp. 300 785.66 3 007.87 56 477.03 18 000.00 160.71 (29 619.72) Marionnaud Philippines Inc. 16 071.43 330 405.38 58 770 014.28 587 700.15 1928.57 Mary Johnston Hospital Inc. 7 601 762.08 76 017.61 54 026 909.59 Medical Mission Group 6 162 002.66 4 743 104.69 Hospital & Health Services 139 984 747.45 1 399 847.48 1 439 759.42 Cooper 294 471 060.57 3 776 666.97 132 244 275.27 Metropolitan Pharmaceutical 137 624 178.74 7 740 472.18 Products Inc. 2 678 348.21 26 783.48 Mindanao Sanitarium Ad 2 187 098.21 .. 156 846 881.83 Hospital 491 250.00 Mount Carmel Diocesan General Hospital Neqros Union Drug Co., Inc. Norvic Drugs Corporation Nueva Ecija Prohealth Inc./Heart Of Jesus Hospital Oslob District Hospital Perpetual Succor Hospital & Maternity, Inc. Philex Mininq Corporation Philippine Long Distance Telephone Company Philippine Heart Center Province Of Pampanga

DECISION CTA CASE NO. 8801 Provincial Government Of 3 372 840.00 33 728.40 2 530 189.39 842,650.61 Neqros Occidental Provincial Government Of 314 065.00 2 804.15 283 640.18 30 424.82 Nueva Vizcava- Nueva Vizcava Provincial Government Of Or. 1 868 680.08 17 421.92 1486 520.11 382 159.97 Neg. Puregold Junior Supermarket 109 971 961.92 1 099 719.66 60 160 645.38 49 811 316.54 Inc. Research Institute For Tropical 18 780 384.92 187 737.62 16 784 499.05 1995 885.87 Medicine 330 641 059.97 3 306 387.59 325 551 286.74 5 089 773.23 Right Choice Supermarket 233 134.67 2 331.34 233 134.60 0.07 24 567 322.17 244 230.89 18 957 477.40 5 609 844.77 Rilem Pharma Corp. 6 343 721.00* 63 437.21 6 342 824.78 896.22 Rivera Medical Center Inc. 10 635 565.00 106 355.73 10 472 530.83 163 034.17 Roldan, Kenneth Bautista- 127 323 391.00 1 273 233.91 12 740 561.88 114 582 829.13 Netnet 6 823 716.27 68 237.16 6 517 936.44 305 779.83 Royal Duty- Free Shops Inc. 29 549 624.00 295 496.24 28 405 611.84 1144 012.16 35 528,582.00 355 285.82 35 449 835.41 Rustan Supercenters Inc. 47 922 257.00 479 222.57 43 927 289.23 78 746.59 San Pedro Doctors Hospital 165 275 664.38 1652 756.64 161 868 769.29 3 994 967.77 Inc. 3 406 895.09 45 815 791.00 408 936.17 Super 8 Retail Systems Inc. 63 669 284.14 636,691.95 38 498 667.54 7 317 123.46 52 213 056.54 11 456 227.60 Suy Sing Commercial Corp 1 889 289 750.00 18 892 897.50 10 366 943.01 103 669.42 1 846 923 169.36 42 366 580.64 The Landmark Corporation 5 268 888.92 5 098 054.09 5. 409,204,731P19.S1 54,868 554.21 Vaduz Marketinq Inc. 4,601,962,418.33 807.241,953.18 Veterans Memorial Medical Center Waltermart Supermarket Inc. Watsons Personal Care Stores (Phils.). Inc. Wing An Marketinq Inc. Subtotal TOTAL PS 571 037,147.16 P56,494 834.38 P4,601,962,418.33 P969 074,728.83 *Income payment per BIR Form No. 2307 included VAT amount. Independently computed income payment based on tax withheld. SALE OF SERVICES Per BIR Form 2307 Service Income per General Income Payment Tax Withheld Ledger Difference (A) (8-) (A-B) Customer Name INCOME PAYMENT PER SALES REGISTER IS LESS THAN THE INCOME PAYMENT REFLECTED IN THE CWT CERTIFICATES Abbott Laboratories 237 571 740.90 5 526 721.13 25 002 625.57 212 569 115.33 Alkem Laboratories Inc. 159 777.76 3 195.56 137 450.19 22 327.57 B. Braun Medical Supplies 6 581,894.42 88,666.62 917 383.47 5 664 510.96 Bayer Philippines Inc. 12 477.307.25 508 149.29 9 705 279.35 2 772 027.90 Fresenius Kabi PhiliPPines Inc. 10 100 859.16 204 030.19 9 286 767.80 814 091.36 Galderma Philippines Inc. 1 334.800.50 26.696.01 185 091.04 1,149 709.46 Glaxosmithkline Philippines Inc. 75 573 915.50 1 417.195.47 32 490 214.39 43 083 701.11 Msd (I.A) Corp Ph 22 417 495.87 448 349.93 12 335 460.20 10 082 035.67 Novartis Healtcare Philippines, 89 228 264.81 1 754 719.18 37 736 808.38 51 491 456.43 Inc. Oep Philippines Inc. 3 497 199.98 69 180.59 3 319 125.72 178 074.26 Pascual Laboratories Inc. 55 910 118.00 559 101.18 5 747 749.48 50 162 368.52 pfizer Inc. 80 051 571.00 1 587 316.28 27 605 441.69 52 446 129.31 Reckitt Benckiser Healthcare (Phil) Inc. 103 198 827.70 2 746 302.20 3 528 596.62 .. 99 670 231.08 9 869 251.00 197 385.02 7,779 982.91 2 089 268.09 Sandoz Philippines Corp.

DECISION CTA CASE NO. 8801 Sanofi- Aventis Philippines Inc. 19 920 254.50 398 405.09 12 322 163.26 7 598 091.24 Sanofi Pasteur Inc. 28 667,725.50 482,299.15 5 453 826.65 23 213 898.85 Schering- Plough Corp. 59 966,008.98 1199,269.09 4 342 434.71 55,623 574.27 TOTAL P816 527 012.83 P17 216 981.98 P197,896,401.44 P618,630,611.39 Consequently, petitioner's claimed CWT in the amounts of P10,121,236.91 and P13,090,532.87 related to the unverified sales of goods and services in the amounts of P969,074,728.83 and P618,630,611.39, respectively, shall be denied as follows: SALE OF GOODS Tax Withheld ICPA's Income Payment Deduction (A) Computation of per BIR Form 2307 from Customer Name Sales Amount per INCOME PAYMENT WITH Sales Register (C) Petitioner's NO CORRRESPONDING CWTCiaim RECORD IN THE SALES (B) [D=A-(A x B/C) REGISTER Barili District Hospital p 756.61 - p 75 661.00 p 756.61 Benguet Provincial Government Cebu Doctors College Inc. 166.70 - 18 670.00 166.70 Cypress Manufacturinq Limited Daanbantayan District Hospital 1 526.79 - 152 678.57 1 526.79 DOH - Regional Health Office - CAR 10 452.00 - 1 045 200.00 10 452.00 Dynasty Management & Development Corp 16.18 - 1 618.00 16.18 Emilus Supermarket Systems Inc. 2 571.43 - 257 142.86 2 571.43 Everlink Distribution Group, Inc. Far East Noble House 735 017.49 - 75 382 233.93 735 017.49 FMC Renalcare Corp. Gaisano Dadaingas Inc. 498.95 - 49,894.69 498.95 Handyman Express Mart Inc. 30 775.44 30 775.44 Lion Commercial Corp. 30 775.44 - 38 638 763.36 383 286.13 Provincial Government Of Cavite 431125.00 4,311.25 Riviera Mercantile Sys. Inc. 383 286.13 - 66 893.25 Sara Lee Philippines Inc. 73 275.00 668.94 Shogun Management & 4 311.25 - 294 308.02 732.75 Development Corp. 780 535.89 2 943.08 Shopmore Commercial Corp. 668.94 - 4 044 159.00 7 369.44 Waltermart Handyman, Inc. 89 285.71 40 441.59 Subtotal 732.75 - 1 785.71 2 943.08 - 7 369.44 - 40 441.59 - 1 785.71 - 399 260.26 - 40 030 611.29 399 260.26 2 453.18 - 245 319.64 2 453.18 1 246.25 - , 124 625.00 1 246.25 , 1,626. 280.17 - 161,832,775.65 , 1,626,280.17 INCOME PAYMENT PER p 203 810.41 p 20 233,930.44 p 20 381 040.24 p 1 471.10 SALES REGISTER IS LESS 1 537.49 THAN THE INCOME 111 793.00 11 025 551.42 11179 300.00 3 743.92 PAYMENT REFLECTED IN THE CWT CERTIFICATES 29 544.20 2 580 027.64 2 954 419.83 AB Pharma Inc. Ace Hardware Phil's Inc. Ace Med Inc.

DECISION 1,447 808.32 144 670 718.92 144 780 830.81 1101.12 erA CASE NO. 8801 Page 24 of 32 6 913.70 522 706.14 774 335.04 2 246.68 Act General Merchandise & 58 545.36 5 576 733.70 5 854 536.00 2 778.02 Druq Inc. 14 733.87 1 356 312.03 1473 385.94 1170.74 Adela Serra Ty Memorial 14 682.86 1468 286.22 9 517.94 Medical Center 516 492.10 Allah Valley Medical Specialists 2 145 527.65 214 552 762.01 83 761.60 Center Inc. 45,148.57 206 176 602.34 5 055 641.35 7 172.37 336 657.61 4 252 494.34 Antipolo City Hospital Inc. 25 884.71 10 312 376.74 34 709 394.08 236 634.54 Asia Renal Care (Phils.) 2 483 890.32 2 588 471.00 1 045.81 Asociacion Benevola De Cebu, 178 528.32 Inc. (Chong Hua Hospital) 232 944.64 16 969 829.26 17 852 832.00 8 830.03 9,053 476.24 10,912 837.60 39 689.79 Benquet General Hospital 19 341.77 1884 554.97 2 163 237.24 2 491.73 Botica Real 2 052.73 86 284.32 229 906.03 1 282.34 Bureau Of Corrections 115 443.41 356 523.16 11 544 341.00 Cagayan De Oro Medical Center 456 900.51 18 256 901.26 45 690 051.00 111 878.18 Inc. 274 331.50 513.39 47 767.86 51 339.29 Cagayan Valley Medical Center 15 714.29 136 562.50 1 760 000.00 35.71 297 133.86 21 333 043.66 29 713 385.71 14 494.98 Cebu Far Eastern Drug Inc. 20 089.29 1169 709.18 2 008 928.57 83 803.42 Center For Health Development 515 447.18 50 543,219.22 51 544,719.99 8 392.20 Iv-B 10,015.01 Christ The King Medical 1 238 295.68 119 035 961.00 123 829,568.00 Services Inc. 24 282.61 137 573.71 2 428 261.00 47 936.07 1453.03 155 012.68 160,039.20 22 906.87 City Government Of Pasiq 917 987.76 76 510 309.92 91 798 776.00 45.64 Cjty Government Of Bago 7 385.12 735 418.37 738 512.00 152 884.66 City Government Of Binan 30 932.35 2 618 366.10 3 205 653.65 30.94 City Government Of Makati 101 012.65 1 671 797.18 10 101 256.00 5 666.92 304 859.50 30 352 181.41 30 485 949.18 City Government Of Muntinluoa 84 294.66 152 329.21 14 163 576.80 15 232 920.78 1 337.68 City Supermarket Incorporated 108 196.38 (1 206,667.24) 10 310 756.00 Colinas Verdes Hospital 48 518.94 4 851 894.00 10 693.44 Managers Corp. 4 077 860.92 120 858.60 154 510.62 15 451 062.84 Commission On Audit 10 535 625.73 7 740.33 447,640.07 44 764 014.47 Commission On Elections 3 631.49 36 906 409.12 296 745.57 49 154.37 Complete Solution Pharmacy 206 136.46 And Gen. Mer. 1 070 552.93 107,054 277.70 78 576.04 1 026 591.32 76,910 417.45 102,659 130.47 1108.85 CVC Supermarket Inc. 78,820 886.01 30 110.01 3 331 046.11 301 441.46 Davao Adventist Hospital Inc. 3 010 996.18 238 382.45 Davao Central Warehouse Club, 81 306.08 8 130 608.00 Inc. 150 849.81 8 031427.66 15 084 981.00 2 893.00 15 078 129.00 Davao Regional Hospital 286 039.85 28 603 984.71 991.80 De Los Santos Med. ctr. 20 342,184.64 68.52 Diagnostic Corp. 133 590.96 13 359 095.27 10 935.87 13 355,251.11 1 093,587.21 82 618.00 Dranix Distributor Inc. Iloilo 142 836.22 150,296.25 E. Berlin Pharmacy 14 283,673.00 38.44 Erlinda G. Germar/ Farmacia 13 499 641.94 9 432.91 Fatima & Fatima Soda Founta 7 840.28 Ever Commonwealth Center, Inc. Evercare Pharmacy Everplus Superstore Inc. Extract Sales Incorporated Feb Cuisine Corp. Feu- Dr. Nicanor Reyes Medical Foundation Gaisano Bros. Mdsg. Inc. Grand Union Supermarket Inc., Operator Inter-Medical Unified System, Inc. ISS Facility Services Phil. Inc. Jemstar Trading Corporation

DECISION CTA CASE NO. 8801 Juliano Susan G. 1 680.00 6 447.26 84 000.00 1 551.05 103 816.14 5 323 076.74 10 381 614.12 K2 Drug & Medical Supplies 1 084 545.61 106 784 231.16 108 432 225.46 so 585.37 618 246.09 9 648 673.07 61 824 609.38 Larrazabal Susanna Ortega 16 483.34 521 759.36 Lts Affiliates Inc. Lucena United Doctors 124 559.28 12 333 856.68 12 455 928.00 1 220.71 Incorporated 3 473 375.69 246 640 598.58 347 337 544.82 1 006 969.53 Manson Druo Coro. 267 102.98 26 672 619.64 26 710 298.00 376.78 17 816.27 1 461,365.65 1 781 627.77 3 202.62 Marionnaud Philippines Inc. 1 580.17 118,004.15 158,017.92 400.14 Mary Johnston Hospital Inc. Medical Mission Group Hospital 257.12 15 943.28 17,856.47 27.55 & Health Services Cooper 136 521.59 15 908.113.44 25 287 731.24 Metropolitan Pharmaceutical so 638.01 Products Inc. Mindanao Sanitarium Ad 320 289.38 31 301 758.99 32 028 938.00 7 271.79 Hospital 303 423.53 29 755 646.84 30 342.354.11 5/867.07 Mount Carmel Diocesan General 545 566.09 54 500 131.63 54 556 608.66 Hospital 564.77 Neoros Union Druo Co. Inc. 3 007.87 (29 619.72) 300 785.66 3 304.07 160.71 16.071.43 18,000.00 17.22 Norvic Drugs Corporation Nueva Ecija Prohealth 587 700.15 54 026 909.59 58 770,014.28 47 431.05 Inc./Heart Of Jesus Hospital 76 017.61 6 162 002.66 7 601,762.08 14 397.59 Oslob District Hospital 1 399 847.48 132 244 275.27 139 984.747.45 77/404.72 Perpetual Succor Hospital & 3 776 666.97 137 624 178.74 294 471 060.57 2 011 601.54 Maternity, Inc. 26 783.48 2 187 098.21 2 678,348.21 4/912.50 Philex Minino Corooration Philippine Long Distance 33 728.40 2 530 189.39 3 372.840.00 8/426.51 Telephone Comoany 2 804.15 283 640.18 314.065.00 271.65 Philippine Heart Center 17 421.92 1486 520.11 1 868.680.08 3/562.92 Province Of Pamoanoa Provincial Government Of 1 099 719.66 60 160 645.38 109 971 961.92 498/113.18 Negros Occidental Provincial Government Of 187 737.62 16 784 499.05 18 780 384.92 19/951.82 Nueva Vizcaya- Nueva Vizcaya 3,306 387.59 325 551 286.74 330 641 059.97 Provincial Government Of Or. so 897.38 Neg. 2 331.34 233 134.60 233 134.67 Puregold Junior Supermarket 244 230.89 18 957 477.40 24 567 322.17 0.00 Inc. 55 769.10 Research Institute For Tropical Medicine 63 437.21 6 342 824.78 7 045 642.41 6 327.99 106 355.73 10 472 530.83 10 635 565.00 1 630.34 Right Choice Supermarket 1,273 233.91 12 740 561.88 127 323 391.00 1145 828.29 3 057.80 Rilem Pharma Corp. 68 237.16 6 517 936.44 6 823 716.27 11 440.12 295 496.24 28 405 611.84 29 549 624.00 Rivera Medical Center Inc. 355 285.82 35 449 835.41 35 528 582.00 787.47 Roldan/ Kenneth Bautista- 479 222.57 43 927 289.23 47 922 257.00 39 949.68 Netnet 1 652 756.64 161 868 769.29 165 275 664.38 34 068.95 Royal Duty- Free Shoos Inc. 408 936.17 38 498 667.54 45 815 791.00 65 310.16 636 691.95 52 213 056.54 63 669 284.14 114 562.12 Rustan Supercenters Inc. 18 892 897.50 1 846 923 169.36 1 889 289 750.00 423 665.81 San Pedro Doctors Hospital Inc. 103 669.42 5 268 888.92 10 366 943.01 so 980.54 Super 8 Retail Systems Inc. 1'54,868. 554.21 1'4,601,962 418.33 1'5. 4111719,504.25 " 8,494,956.74 Suy Sing Commercial Corp ... The Landmark Corporation Vaduz Marketing Inc. Veterans Memorial Medical Center Waltermart Supermarket Inc. Watsons Personal Care Stores (Phils.), Inc. Wing An Marketing Inc. Subtotal

DECISION CTA CASE NO. 8801 I TOTAL PS6,494,834.38 I P4,601,962,418.33 I PS,S72,552,279.90 I P10,121,236.91 I SALE OF SERVICES Customer Name Tax Withheld Service Income Income Payment Deduction from INCOME PAYMENT PER (A) per General per BIR Form Petitioner's CWT SALES REGISTER IS LESS Ledger 2307 Claim [D=A-(A x THAN THE INCOME 5 526 721.13 (B) (C) PAYMENT REFLECTED IN 3 195.56 B/C) THE CWT CERTIFICATES Abbott Laboratories 88 666.62 25 002 625.57 237 571 740.90 4 945 075.61 508 149.29 137 450.19 159 777.76 446.55 Alkem Laboratories Inc. 204 030.19 917 383.47 B. Braun Medical Supplies 6 581 894.42 76 308.28 26 696.01 9 705 279.35 12 477 307.25 112,893.27 Bayer Philippines Inc. 1 417 195.47 9 286 767.80 10 100 859.16 16 444.07 Fresenius Kabi Philippines Inc. 448 349.93 185 091.04 1 334,800.50 22 994.19 32 490 214.39 75 573 915.50 807 924.61 Galderma Philippines Inc. 1 754 719.18 12,335 460.20 22 417 495.87 201 640.72 69 180.59 Glaxosmithkline Philippines Inc. 559 101.18 37 736 808.38 89 228 264.81 1 012 605.66 Msd (LA) Corp Ph. 3,319 125.72 3 497 199.98 3 522.61 Novartis Healthcare Philippines, 1 587 316.28 5 747 749.48 Inc. 27 605 441.69 55 910 118.00 501 623.69 2 746 302.20 80 051 571.00 1 039 937.05 Oep Philippines Inc. 197 385.02 398 405.09 3 528 596.62 103 198 827.70 2 652 400.04 Pascual Laboratories Inc. 482 299.15 7 779,982.91 9 869 251.00 41 785.36 pfizer Inc. 12 322 163.26 19 920 254.50 151 961.82 Reckitt Benckiser Healthcare 1199 269.09 5 453 826.65 28 667 725.50 390 545.24 (Phil), Inc. P17,216,981.98 4 342 434.71 P197,896,401.44 59 966 008.98 1112 424.10 Sandoz Philippines Corp. P816,527,012.83 P13 090,532.87 Sanofi- Aventis Philippines Inc. Sanofi Pasteur Inc. Schering- Plough Corp. TOTAL In fine, petitioner complied with the three basic requisites for refund of excess CWT for taxable CY 2011 to the extent of only P417,222,162.68, computed as follows: Amount of Claimed CWT p 477,269,935.23 Less: Disllowances 1) CWT without proper BIR Forms No. 2307 Per ICPA report P36,049 212.66 Per this Court's further verification 786,401.46 36,836 002.77 Discrepancy between the CWT per 388.65 petitioner's schedule and CWT per - Petition for Review 2) CWT the related income payments of which were not traced to the sales register and general ledqer

DECISION CTA CASE NO. 8801 Sales of goods P10,121,236.91 Sales of services 13/090,532.87 23,211,769.78 Properly Substantiated CWT P417,222,162.68 We now proceed to determine whether the aforesaid CWT of P417,222,162.68 are unutilized and may be the proper subject of a claim for refund or issuance of tax credit certificate pursuant to Section 76 of the NIRC of 1997, as amended, which reads: "SEC. 76. Final Adjustment Return. - Every corporation liable to tax under Section 27 shall file a final adjustment return covering the total taxable income for the preceding calendar or fiscal year. If the sum of the quarterly tax payments made during the said taxable year is not equal to the total tax due on the entire taxable income of that year, the corporation shall either: (A) Pay the balance of tax still due; or (B) Carry-over the excess credit; or (C) Be credited or refunded with the excess amount paid, as the case may be. In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income taxes paid, the excess amount shown on its final adjustment return may be carried over and credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable years. Once the option to carry-over and apply the excess quarterly income tax against income due for the taxable quarters of the succeeding taxable years has been made, such option shall be considered irrevocable for that taxable period and no application for cash refund or issuance of a tax credit certificate shall be allowed therefor." The above provision prescribes two options to a taxable corporation whose total quarterly income tax payments in a given taxable year exceed its total income tax due. The taxpayer may either file a tax refund (either in the form of cash or tax credit certificate) or avail of a tax credit. However, once the carry-over option is taken actually or constructively it becomes irrevocable for that taxablee....

DECISION CTA CASE NO. 8801 period.45 The phrase "for that taxable period" refers to the taxable year when the excess income tax, subject of the option, was acquired by the taxpayer. 46 In exercising its option, the corporation must signify in its annual corporate adjustment return (by marking the option box provided in the BIR form) its intention either to carry over the excess credit or to claim a refund. To facilitate tax collection, these remedies are in the alternative and the choice of one precludes the other47� A perusal of petitioner's Amended Income Tax Return (AITR)48 for CY 2011 filed on June 13, 2013 shows that petitioner had income tax credits in the total amount of P1,084,014,135.3349 consisting of the prior year's excess credits other than the Minimum Corporate Income Tax (MCIT) in the amount of P606,744,200.10 50 and creditable withholding taxes accumulated during the four (4) quarters of CY 2011 in the aggregate amount of P477,269,935.23 51, to wit: Prior Year's Excess Credits other P269,508 749.26 p 606,744 200.10 than MCIT 207,761 185.97 Creditable Tax Withheld for the First 477,269 935.23 Three Quarters P1,084,014,135.33 Creditable Tax Withheld for the Fourth Quarter Total Tax Credits Petitioner claims that its 2011 income tax due in the amount of P286,241,875.5052 was paid using a portion of its prior year's excess credits of P606,744,200.10 leaving the prior year's excess credits in the amount of P320,502,324.60 (P606,744,200.10 less P286,241,875.50) and creditable taxes withheld during the year 2011 in the amount of P477,269,935.23 totaling P797,772,259.83 53 unutilized as of December 31, 2011, as shown below: ... 45 Phi/am Asset Management, Inc./ vs. Commissioner of Internal Revenue, G.R. Nos. 156637/162004. December 14, 2005; Systra Philippines/ Inc./ vs. Commissioner of Internal Revenue, G.R. No. 176290. September 21, 2007. 46 Commissioner ofInternal Revenue vs. Bank of the Philippine Islands, G.R. No. 178490, July 7, 2009. 47 Philippine Bank of Communications vs. Commissioner of Internal Revenue, et al., G.R. No. 112024, January 28, 1999. 48 Exhibit "P-6". 49 Exhibit "P-6", line 33R. 50 Exhibit "P-6", line 33A. 51 Exhibit "P-6", lines 33F and 33H. 52 Exhibit "P-6", line 32. 53 Exhibit "P-6", line 34B.

DECISION CTA CASE NO. 8801 Income Tax Due p 286,241 875.50 Less: Prior Year's Excess Credits 606 744 200.10 Balance of Prior Year's Excess Credits Add: Creditable Taxes Withheld- 2011 p 320,502 324.60 Excess Creditable Taxes Withheld as of December 31, 2011 477 269 935.23 P797,772,259.83 As illustrated below, the prior year's excess credits of P606,744,200.10 arose from the years 2003 to 2010, thus: Taxable Income Prior Year's (Income Tax CWTfor ExcessCWT Tax Due Excess Credits Still the Year at the end of Ex h. Year (a) (b) Due)/Balance of the Year Prior Year's Excess Credits = (c) (b) less (a) "P-33-a" 2003 230 768 665.60 81 872 706.00 (148 895 959.60) 201 932 078.00 53 036 118.40 "P-33-b" 2004 132 913 922.24 53 036 118.00 (79 877 804.24) 268 776 166.00 188 898 361.76 "P-33-c" 2005 241 944 558.70 188 898 362.00 (53 046 196.70) 287 973 112.00 234 926 915.30 "P-33-d" 2006 231 799 757.70 234,926 915.00 3 127 157.30 304 484 366.00 307 611 523.30 "P-33-e" 2007 341 664 169.70 307 611 523.00 (34 052 646.70) 389 190 279.00 355 137 632.30 "P-33-f" 2008 376 397 087.50 355 137 632.00 (21 259 455.50) 392 075 751.00 370 816 295.50 "P-33-g" 2009 279 561 489.90 370 816 295.00 91 254 805.10 417 215 892.00 508,470 697.10 "P-33-h" 2010 337 760 187.90 508 470 697.00 170 710 509.10 436 033 691.00 606,744 200.10 To prove the existence of its prior year's excess credits, petitioner submitted BIR Forms No. 2307. However, only those pertaining to taxable year 2010 in the total amount of P436,033,691.27, was accounted by the ICPA, to wit: Summary of Findings Annex Income Payment Tax Withheld Reference (Exh. p 29 618 642 348.35 p 296 832 700.36 1. CWT duly supported by oriqinal BIR Form 2307 2. CWT duly supported by certified true copy of "P-19") BIR Form 2307 Annex 8-a 3. CWT duly supported by original BIR Form 2307 Annex 8-b 4 217,889 832.61 43,942 418.50 with incorrect Petitioner's TIN indicated therein 4. CWT duly supported by original BIR Form 2307 Annex 8-c 294 131 240.34 2,902 371.19 with unclear date Annex 8-d 213 227.48 1 903.81 5. CWT certificate supported by photocopies with Annex 8-e 1 939 236 066.22 19 055,743.90 correct name TIN and date P36,070 112 715.00 73 298 553.51 6. CWT certificates not provided P436,033 691.27 ._ Total

DECISION CTA CASE NO. 8801 Based on the foregoing, only the amounts of P296,832,700.36 and P43,942,418.50 totaling P340,775,118.86 were properly supported by BIR Forms No. 2307. However, these CWT do not represent petitioner's excess CWT for CY 2010 since petitioner reflected in its AITR for the said year an income tax due of P337,760,187.90. Deducting this income tax due of P337,760,187.90 from the CWT of P340,775,118.86, yields to an amount of only P3,014,930.96 excess tax credits for CY 2010. As stated earlier, petitioner reflected in its 2011 AITR an income tax due of P286,241,875.50 which when offset against the prior year's (CY 2010) excess tax credits in the amount of P3,014,930.96, there still remains an income tax due of P283,226,944.54 which shall be deducted against the substantiated CWT of P417,222,162.68. Consequently, petitioner's unutilized excess CWT for CY 2011 amounted only to P133,995,218.14, computed as follows: Income Tax Due for CY 2011 p 286,241,875.50 Less: Prior Year's (CY 2010) Excess Credits Balance of Income Tax Due for CY 2011 3,014,930.96 Less: Properly Substantiated CWT for CY 2011 Refundable Excess CWT for CY 2011 p 283,226,944.54 417,222,162.68 P133,995,218.14 In its original 2011 AITR54 electronically filed on April 16, 2012, petitioner marked the option "To be refunded". Moreover, in its subsequent manual filing of the said return on April 30, 2012, petitioner also marked the option "To be refunded"55 � These, together with petitioner's submission of a letter-claim for refund 56 with the respondent's office on April 13, 2012, supplemental letter-claim for refund57 and Application for Tax Credits/Refunds58 with the SIR's Large Taxpayers Service on February 28, 2014 and April 1, 2014, respectively, and the fact that petitioner did not carry-over the present claim to the subsequent CY 2012 59 served as an expression of its choice to have the CWT for CY 2011 refunded. Clearly, petitioner sufficiently proved that it is entitled to a refund of unutilized excess CWT for CY 2011 but in the reduced amount of P133,995,218.14.~ 54 Exhibit "P-3", line 37. 55 Exhibit "P-4", line 37. 56 Exhibit "P-10". 57 Exhibit "P-11". 58 Exhibit "P-12". 59 Exhibits "P-13", "P-14", "P-15", line31A, "P-16", line 33A.

DECISION CTA CASE NO. 8801 WHEREFORE, premises considered, the instant Petition for Review is PARTIALLY GRANTED. Accordingly, respondent is ORDERED to REFUND in favor of petitioner the amount of P133,995,218.14, representing its excess and unutilized creditable withholding taxes for CY ending December 31, 2011. SO ORDERED. CAESAR ~SANOYA Associate Justice WE CONCUR: K0A~-N-i-fo.~cC..cA~scTA.NE(n~~.l\R2.. ~'7�~~~ Associate Justice CATHERINET.MANAHAN Associate Justice ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. ~~-h> C.~~ q. JUANITO C. CASTANEDA,GJR. Associate Justice Chairperson, Second Division

DECISION CTA CASE NO. 8801 CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. Presiding Justice