FORT BONIFACIO DEVELOPMENT CORPORATION v. COMMISSIONER OF INTERNAL REVENUE (Consolidated with Case No. 7728)

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY THIRD DIVISION FORT BONIFACIO CTA Case Nos. 7696 & 7728 DEVELOPMENT CORPORATION, Members: BAUTISTA, Chairperson Petitioner, PABON-VICTORINO, and RINGPIS-LIBAN,]]. -versus- COMMISSIONER OF INTERNAL REVENUE, Respondent. Promulgated: .JUL1 5 2015 ~ ;z.�, >9 ;I'� J'f-7,.. X----------------------------------------------------------------------------------------------X DECISION RINGPIS-LIBAN,J.: This is a Petition for Review 1 filed by Fort Bonifacio Development Corporation seeking to set aside and cancel the deficiency tax assessments of the respondent Commissioner of Internal Revenue in the total amount of P234,613,502.74, representing its deficiency Value-Added Tax (VA1), Withholding Tax on Compensation (WTC), Expanded Withholding Tax (EW1), Documentary Stamp Tax (DS1), Final Withholding Tax on Fringe Benefits (FB1) and Income Tax for taxable year 2003, broken down as follow~ 1 Docket, Vol. I, pp. 4 to 58. ...._...-

DECISION CfA Case Nos. 7696 & 7728 Type ofTax Basic Interest Total Value-Added Tax p 43,599,988.80 p 26,446,678.14 p 70,046,666.94 2 Withholding Tax on Compensation 18,359,638.41 11,186,804.33 3 Expanded Withholding Tax 24,152,761.91 14,716,641.78 29,546,442.74 Final Withholding Tax on Fringe 3,938,395.64 2,399,723.81 4 Benefits Documentary Stamp 7,774,970.37 38,869,403.69 Tax 48,302,723.51 Income Tax P146,128,478.64 5 Total 6,338,119.45 4,780,009.18 6 28,955,166.86 12,554,979.55 p 88,485,024.10 77,257,890.37 7 P234,613,502.74 STATEMENT OF FACTS Petitioner Fort Bonifacio Development Corporation (FBDC) is a domestic corporation duly registered with the Securities and Exchange Commission and existing under and by virtue of the laws of the Republic of the Philippines, with principal office address at 2nd Floor, Bonifacio Technology Centre, 31st St., corner 2nd Ave., Bonifacio Global City, Taguig City, Metro Manila. 8 Respondent Commissioner of Internal Revenue (CIR) is the duly appointed head of the Bureau of Internal Revenue (BIR) empowered, among others, to decide on disputed deficiency internal revenue tax assessments, with office address at the Office of the Commissioner of Internal Revenue, BIR National Office Building, Agham Road, Diliman, Quezon City, Metro Manila.9 On February 23, 2005, the BIR issued Letter of Authority (LOA) No. 2001 0001295710 to Revenue Officer Joseph Christian B. Santos, authorizing him to examine FBDC's books of accounts and other accounting records for taxable year 2003. By virtue of the said LOA, respondent sent several reques~ 2 Exhibit "9", CTA Case No. 7696, BIR records, p. 534. 3 Exhibit "8", CTA Case No. 7696, BIR records, p. 535. 4 Exhibit "10", CTA Case No. 7696, BIR records, p. 533. 5 Exhibit "11", CTA Case No. 7696, BIR records, p. 532. 6 Exhibit "12", CTA Case No. 7696, BIR records, p. 531. 7 Exhibit "24", CTA Case No. 7728, BIR records, p. 178. 8 Par. 1, Summary of Admitted Facts, Joint Stipulation of Facts and Issues (JSFI), CTA Case. No. 7696, Vol. I, Docket, p. 168. 9 Par. 2, Summary of Admitted Facts, JSFI, CTA Case. No. 7696, Vol. I, Docket, p. 168. 10 "Exhibit "1" and "15", BIR Records, p. 3.

DECISION CfA Case Nos. 7696 & 7728 for presentation of records/documents 11 and letter 12 requesting for the submission of additional documents to FBDC. On November 30, 2006, the BIR issued a Notice of Informal Conference 13 to FBDC and subsequently, the BIR issued a Preliminary Assessment Notice14 (PAN) to FBDC, finding it liable to pay deficiency Value Added Tax (VAT) in the amount of P70,046,666.93, Withholding Tax on Compensation (WC) in the amount of P29,546,442.74, Expanded Withholding Tax (EWT) in the amount of P38,869,403.69, Final Withholding Tax on Fringe benefits (FBT) in the amount of P6,338,119.46, Documentary Stamp Taxes (DST) in the amount of P12,554,979.55. On January 2, 2007, 15 the BIR issued to FBDC a Formal Letter of Demand (FLD) and Assessment Notice Nos. VT-03-00021 16 WC-03-00009417, , EWT-03-000171 18 , DST-03-000151 19 , and FBT-03-000041 20 for FBDC's deficiency VAT, WC, EWT, DST, and FBT, respectively. Then, on April 13, 2007 21 , the BIR issued another FLD with Details of Assessment and the corresponding Assessment Notice No. INC-03-000186 against FBDC, finding a deficiency income tax assessment in the amount ofP77,257,890.37.22 The details of the computations for the alleged deficiency tax assessments are as follows: 23 A. Value Added Tax On Leases Leases LCR Beg p 39,491,000.00 Add: Sales 186,226,299.00 /'Y" 11 Exhibits "2", "3", "4", "16", "17" and "18", BIR Records, pp. 1-8. 12 Exhibits "5" and "19", BIR Records, p. 9. 13 Exhibits "6" and "21", BIR Records, p. 350. 14 Exhibit "7", BIR Records, pp. 490-495. 15 Exhibit "13", BIR Records, pp. 536-541; Par. 3, Summary of Admitted Facts, JSFI, CTA Case. No. 7696, Vol. I, Docket, pp. 168-169. 16 Exhibit "9", BIR Records, p. 534; Par. 3, Summary of Admitted Facts, JSFI, CTA Case. No. 7696, Vol. I, Docket, pp. 168-169. 17 Exhibit "8", BIR Records, p. 535; Par. 3, Summary of Admitted Facts, JSFI, CTA Case. No. 7696, Vol. I, Docket, pp. 168-169. 18 Exhibit "10", BIR Records, p. 533; Par. 3, Summary of Admitted Facts, JSFI, CTA Case. No. 7696, Vol. I, Docket, pp. 168-169. 19 Exhibit "12", BIR Records, p. 531; Par. 3, Summary of Admitted Facts, JSFI, CTA Case. No. 7696, Vol. I, Docket, pp. 168-169. 20 Exhibit "11", BIR Records, p. 532; Par. 3, Summary of Admitted Facts, JSFI, CTA Case. No. 7696, Vol. I, Docket, pp. 168-169. 21 Exhibit "23", BIR Records, pp. 181-182; Par. 4, Summary of Admitted Facts, JSFI, CTA Case. No. 7696, Vol. I, Docket, p. 169. 22 Exhibit "24", BIR Records, p. 177-178; Par. 4, Summary of Admitted Facts, JSFI, CTA Case. No. 7696, Vol. I, Docket, p. 169. 23 Summary of Admitted Facts, JSFI, Vol. I, Docket, pp. 169-173.

DECISION CTA Case Nos. 7696 & 7728 Less: Ending P49,349,180.23 88,832,000.00 Gross Receipts on Leases 27,226,990.58 136,885,299.00 during the year 76,576,170.81 Add: Underdeclared receipts SLS vs. CRB Advancerent per CRB On Sales of Real Estate 1,119,084,846.36 Collections pertaining to 55,968,000.00 principal 75,558,726.00 110,892,726.00 Interest Receivable beg. 20,634,000.00 Interest Inc. - Install Sales per Return Interest Receivable End Others 17,27 4,198.00 Realized forex gain 830,652.00 Gain on sale of property Other receivables Beg. 56,810,000.00 Development Control Fees 3,804,675.00 Marketing and management Fees 1,280,048.00 5,478,932.00 Miscellaneous 394,209.00 59,617,000.00 Other receivables End 2,671,932.00 Gross Receipts subject to 1,464,215,824.17 VAT 146,421,582.42 Output tax per audit 111,167,313.78 Outputtaxperreturn 35,254,268.64 Output tax still due Othe findings 111,167,313.78 Disallowed utilization of 55,140,862.46 Presumptive input VAT 51,281,906.17 106,422,768.63 Output VAT Less 4,744,545.15 Input VAT claimed for 3,552,470.45 the Year VAT payments for the /Y' year Amount claimed from presumptive Input Disallowed Disallowed Input Tax - invalid taxpayers

DECISION CTA Case Nos. 7696 & 7728 Disallowed Input Tax - 48,704.56 FBDC Supp. Per SLP 43,599,988.80 Amount still due 26,446,678.14 Surcharge P70,046,666. 93 Interest 1/27/2004 to 1/31/2007 Compromise Deficiency VAT B. WITHHOLDING TAX- COMPENSATION Total Expenses subject to withholding P82,164,831.35 tax - compensation P684,179.16 1 ~065~386.51 Less: Exempt transactions: 81,099,444.84 Non-taxable 13th month 381~207.35 SSS, GSIS, Pag-Ibig 23,863,323.51 24~382,441.68 Total transactions subject tow/tax Less transactions subject to w/tax 519~118.17 Taxable Salaries 56,717,003.16 Taxable 13th Month 32% Transactions not subject tow/tax- compensation 18,149,441.01 Rate Withholding tax still due 705,224.01 Add: Other findings Late filing of March 03 return 176,306.00 3,091.39 Base Surcharge 20,000.00 Interest 8 days Compromise 569,100.00 175,912.00 Professional Fees received by JMKLim 90~000.00 165,112.00 10,800.00 Per 1601C Per 1601E 659,100.00 Taxable Income 147,112.00 Tax Withheld per 1601C 18,000.00 Tax Withheld per 1601E Amount still due P18,359 ,638.41 Surcharge Interest 1-15-04 to 1-31-07 P11,186,804.33 Compromise 11 '186,804.33 Deficiency W/T Compensation P22,546,442.24 C. EXPANDED WITHHOLDING TAX#

DECISION CTA Case Nos. 7696 & 7728 EWT due on Actual Expenses P30,021,558.86 subject to withholding 13,646,035.55 EWT due on expenses subjected to withholding EWT still due based on 14,716,641.78 16,375,523.31 expenses not subjected to withholding tax 7,126,786.67 Add: Other audit findings 119,898.65 b. Alphalist vs. SLP discrepancy 473,291.82 7,261.46 c. Discrepancy in taxpayer's Alphalist (erroneous 25,000.00 computation 25,000.00 24,152,761.91 d. Late filing of the 1601E March 03 14,716,641.78 Basic 1,893,167.26 Surcharge Interest 7 days Compromise e. Late filing of 1604E 2003 Amount still due Surcharge Interest 7 days Compromise Deficiency EWT P38~862~403.62 D. DOCUMENTARY STAMP TAX: Base Rate DSTDue On Leases (Sales per P3/P2000; p 186,225.30 Return) On Sale of Properties P186,226,299.00 P1/P1000 2,148,572.85 New 7,07 6,380.28 Cash Sales 143,238,190.00 P15/P1000 471,758,685.45 P15/P1000 Othe Contracted 152,60,000.00 P15/P1000 2,289,000.00 Agreements Transfer of Lot to P3/P2000; 1,113.00 CWDC 1,106,000.00 P1/P1000 Management ?V Agreement w/ Related Parties

DECISION CfA Case Nos. 7696 & 7728 Management P3/P2000; 29,734.00 Agreement other than 29'733,000.00 P1/P1000 Related Parries Advances to Affiliates 579,744,000.00 P0.30/P200 869,616.00 per cash Flows 12,600,641.43 4,825,671.06 Total Payments DST Still Due 7,774,970.37 Surcharge 4,780,009.18 Interest 1-05-04 to 1-31-07 Compromise DST Still Due P12,554,2'Z2.55 E. FINAL WITHHOLDING TAX- FRINGE BENEFITS Representation and ! Entertainment Transportation and Travel p 5,734,965.00 Membership Fees 350,399.00 . Grossed up value 2,653,534.00 Rate 8,738,898.00 Fringe benefits tax due FBT Payments 0.68 Amount still due 12,851,320.59 Surcharge Interest 1-15-04 to 1-31-07 0.32 Compromise 4,112,422.59 Deficiency Final Withholding 174,026.94 Tax - Fringe Benefits 3,938,395.64 2,399,723.81 2,399,723.81 p 6,399,723.81 F. INCOME TAX Revenues Per ITR Realized revenue on sale of real P1,205,596,247.00 estate 186,226,299.00 Lease of Properties Interest on installment contracts fr Sales

DECISION erA Case Nos. 7696 & 7728 Non operating & other income 450,000,000.00 Dividend from foreign 75,558,726.00 3,804,675.00 subsidiary 17,27 4,198.00 Interest in installment sales 1,280,048.00 Development control fees 830,652.00 Realized forex gain 394,209.00 Marketing & management fees Gain on sale of property 1,940,965,054.00 Miscellaneous 938,062,042.00 Cost and expenses Cost of real estate sold 805,039,304.00 Total General and Administrative Expenses Marketing and Selling 3 7,961,444.00 Commissions 5,625,871.00 Others /(Advertising per ITR) 1,786,688,661.00 INCOME FROM OPERATIONS 154,276,393.00 Tax Due 49,368,445.76 payments: Unexpired Payment MCIT 49,368,445.76 -- a. Disallowed expenses not subjected to withholding tax On Compensation 56,717,003.16 On Expanded Withholding Tax 16,375,523.31 On Fringe Benefits Tax 8,738,898.00 (Expense) b. Discrepancy in interest income on installment contract perFS vs. ITR Per F/S 76,150,000.00 Per ITR 75,558,726.00 591,274.00 2,376,382.00 c. Overclaimed Retirement expense-per monthly trial balance final ;+� Retirement expenses disallowed (debits to retirement plan expense) 3,379,382.00 Retirement cost added back to taxable income per recon 1,003,000.00 d. Interest Arbitrage Computation (Non deductible expense) Interest Income subject to final tax Interest inc. - ST Investment TB taken from worksheet au d. 9,861,790.74

DECISION CTA Case Nos. 7696 & 7728 Interest inc. - ST 2,927,553.26 Investment TB taken from worksheet aud. 592,264.48 13,381,608.48 Interest Inc. - Bank 16,727,010.60 Deposits 0.38 TOTAL 6,356,264.03 Grossed Up value at 80% 2,694,884.00 Rate Interest Deduction 3,661,380.03 Claimed as non deductible interest exp. -------- 62,485,550.46 Discrepancy - Additional non 150,946,010.96 deductible portion of interest ex_Q_ense 32% e. Debit to Miscellaneous Income p 48,302,723.51 (Batch 108747) Reduction of income account while 28,955,166.86 reducing the advances-metro pacific p 77,257,890.36 (asset) account . Total Rate Still Due Surcharge Interest (April 16, 2004 to April 15, 2007 Compromise Deficiency Income T~x On February 5, 2007, or within the reglementary period, FBDC administratively protested against the alleged deficiency VAT, WC, EWT, FBT, and DST assessments by filing a protest letter dated February 2, 2007 with the BIR.24 Likewise, on May 10, 2007, or within the reglementary period, FBDC administratively protested against the deficiency income tax assessment by filing a protest letter dated May 9, 2007 with the BIR.25 On March 30, 2007 and on July 9, 2007, FBDC submitted additional documents to the BIR in support of its protest against the said deficiency VAT, WC, EWT, FBT, and DST/6 and income tax27 assessments. However, respondent CIR did not act upon the protest of FBDC against the alleged deficiency VAT, WC, EWT, FBT, and DST assessments within the ~ 24 Par. 6, Summary of Admitted Facts, JSFI, CTA Case. No. 7696, Vol. I, Docket, p. 173. 25 Par. 2, Stipulated Facts, JSFI, CTA Case. No. 7696, Vol. I, Docket, p. 177. 26 Par. 7, Summary of Admitted Facts, JSFI, CTA Case. No. 7696, Vol. I, Docket, p. 173. 27 Par. 3, Stipulated Facts, JSFI, CTA Case. No. 7696, Vol. I, Docket, p. 177.

DECISION CTA Case Nos. 7696 & 7728 180-day period provided for under Section 228 of the National Internal Revenue Code of 1997, as amended (NIRC of 1997, as amended). The said 180-day period expired on September 26, 2007.28 Similarly, respondent CIR did not act upon the protest of FBDC against the alleged deficiency income tax assessment within the 180-day period which expired on January 5, 2008.29 Thus, on October 26, 200730 and February 4, 2008,31 respectively, FBDC flied the present Petitions for Review. On February 14, 2008, FBDC filed its "Ex Parte Motion for Consolidation",32 where it prayed for the consolidation of the trial of CTA Case Nos. 7228 and 7696. The Court granted the aforesaid motion in the Resolution33 dated June 4, 2008. In CTA case No. 7696, respondent CIR raised the following special and affirmative defenses:34 "VALUE-ADDED TAX (VA1) 6. Petitioner derives income primarily on the sale of real estate, lease of buildings and interest on installment contracts wherein bulk of its operations, however, are centered on sale of real properties. A gross underdeclaration of output VAT was arrived at amounting to P35,524,268.64 after identifying items subject to VAT on its cash receipts module such as advance rent and gross comparison between items declared per cash receipts module and summary list of sales for the year. It is worthy to note that petitioner's summary list of sales coincide with the output VAT declaration it made for the year. 6.1 Collections pertaining to principal on sale of properties were identified as well as gross receipts on interest thereto which were aptly subjected to output tax. Other miscellaneous items such as development control fees, marketing management fees were taken from the company's abstract ledger and subjected to VAT~ 28 Par. 8, Summary of Admitted facts, JSFI, Vol. I, Docket, p. 174. 29 Par. 4, Stipulated Facts, JSFI, CTA Case. No. 7696, Vol. I, Docket, p. 177. 30 Petition for Review, CTA Case. No. 7696, Vol. I, Docket, pp. 4-28. 31 Petition for Review, CTA Case No. 7228, Docket, pp. 1-13. 32CTA Case No. 7228, Docket, pp. 61-62. 33 CTA Case. No. 7696, Vol. I, Docket, pp. 126-127. 34 Answer, CTA Case. No. 7696, Vol. I, Docket, pp. 74-82.

DECISION CTA Case Nos. 7696 & 7728 6.2 On input taxes, there was a disallowance of applied presumptive input tax for the year amounting to P4,744,545.15 arising from a Court of Appeals decision (CA G.R. No. 615117) affirming the fact that petitioner is not entitled to presumptive input as this arose from 8% beginning inventory on which real estate companies are entitled to such on improvements only based on Section 4.105-1 of Revenue Regulations 7-95. Petitioner based its claim on inventory of lots. 6.3 Another issue on disallowed input taxes were sources of input on which P3,552,470.45 and P48,704.56 were accounted for as unregistered/invalid taxpayers. Thus, deficiency VAT were assessed thereon amounting to P70,046,666.93 inclusive of increments. WITHHOLDING TAX ON COMPENSATION 7. Discrepancies in withholding tax on compensation were arrived at after an analysis of petitioner's general ledger. The examiners closely identified items which have an impact in the computation of its withholding taxes then matched the figure total with the amount declared per alphabetical listing form 1604CF. The total transactions not subjected to withholding tax on compensation amounted to P56,717,003.16 or deficiency exposure of P18,149,441.01. 7.1 Additional findings were late filing of one of its returns in which a corresponding surcharge was incorporated in the discrepancy. Other discrepancies include one of petitioner's employees receiving both compensation and professional income with different application of withholding taxes. The said employee's compensation being subjected to graduated rates per Section 24 of the NIRC of 1997 and professional income using expanded withholding taxes. Both sources of income were treated as part of the employee's compensation as clearly defined in Section 32 of the NIRC of 1997. Thus, deficiency withholding taxes on compensation amounted to P29,546,442.74 inclusive of increments. EXPANDED WITHHOLDING TAXES 8. Expenses subject to expanded withholding taxes per Revenue Regulations 2-98 as amended by Revenue Regulations 17-2003 and clarified by Revenue Memorandum Circular 72-04 a~

DECISION CTA case Nos. 7696 & 7728 disclosed by petitioner per returns, financial statements and general ledger were duly accounted for. The figures were matched against its alpha list of expanded withholding taxes and any discrepancies arising therefrom were assessed for deficiency expanded withholding tax for the year. 8.1 Other audit findings include matching inconsistencies on petitioner's summary list of purchases and alphabetical list of EWT Form 1604E wherein unmatched figures (purchases not equal to income payment) were assessed for non-withholding or a total discrepancy of P7,126,786.87. 8.2 Other findings include computation errors per alpha list amounting to P119,898.65 and two (2) accounts of late filing of returns and alpha list. Total deficiency taxes on expanded withholding tax amounted to P38,869,403.69 inclusive of increments. FINAL WITHHOLDING TAX- FRINGE BENEFITS 9. Transportation and travel expenses, membership fees and representation and entertainment expenses subject to final withholding tax on fringe benefits were assessed pursuant to Section 33 of the NIRC of 1997, Revenue Regulations 2-98 and Revenue Regulations 3-98 or a total deficiency of P6,338,119.46 inclusive of increments. DOCUMENTARY STAMP TAX (DST) 10. Certain transactions were subjected to DST which include sale and lease of real properties entered into during the year. These are subject to DST pursuant to Sections 180, 194 and 196 of the NIRC of 1997. Other transactions include management agreement transactions and certain advances treated as extended loans. Deficiency DST amounted to P12,554,979.55 inclusive of increments. 11. Petitioner was duly informed of the facts and the law on which the assessments are based. Contrary to its assertion, the Formal Letter of Demand did not merely contain the computation of the tax deficiencies and the interest due thereon rather, the complete details of the assessments were attached to the Formal Letter of Demand showing the facts and the law on which the assessments were made. xxx xxx xxx Moreover, in accordance with the policy of respondent to give taxpaye~

DECISION CTA Case Nos. 7696 & 7728 opportunity to present their side of the case, a letter dated 30 November 2006 was sent to petitioner and duly received by it on 4 December 2006, inviting it for an informal conference to enable it to go over the findings and present objections, if any, as well as to submit whatever evidence it may have. 12. The assessments for deficiency VAT and DST were issued within the prescriptive period. Examination of petitioner's books of accounts and financial statements showed substantial underdeclarations of taxable sales and receipts. Such underdeclaration constitutes prima facie evidence of a false or fraudulent return as provided under Section 248 (B) thus: XXX XXX XXX Therefore, since it has been established that petitioner falsely underdeclared its returns, the right of the Government to collect the deficiency taxes has not yet prescribed. The Government is given, in such cases, a period of ten (1 0) years to assess and collect taxes under Section 222 (A) which provides thus: XXX XXX XXX 13. The assessments for deficiency withholding tax on compensation has not yet prescribed. The corresponding expense portion of the findings was disallowed through a separate Final Assessment Notice issued to petitioner for income tax under Assessment Notice No. INC-03-000186 which was received on 13 April 2007. Furthermore, petitioner cannot raise the issue of prescription since the assessment was made based on the annual method (all expenses subject to withholding tax compensation for the entire year were accounted as one) and not on a monthly basis of computing withholding tax liability. It must be observed that although monthly withholding taxes are required to be remitted on the 1Oth day of the following month, it is not until a final adjustment return shall have been flied that the taxes paid thereon are considered final. xxx xxx xxx 14. As can be gleaned from petitioner's annual information return (1604CF) there were certain adjustments made on the last month of the year to correct its withholding tax liabilities. This is manifested as overwithheld taxes which it corrected through reduction of remittances for December, its final return. In other words, petitioner's monthly returns flied from January to N

DECISION CTA Case Nos. 7696 & 7728 November are not true representations of all its transactions subject to withholding tax for the year. 15. Finally, the assessment was prepared based on the declarations made by petitioner on its alphalist of expenses subject to withholding tax (1604CF and 1604 E) and not on petitioner's monthly returns. Since petitioner's declarations in its alphalist didn't match its declared monthly returns, it is imminent to use the alphalist data since it is the final declaration of petitioner after considering all its adjustments for the year. 16. The deficiency assessments for expanded withholding tax and final withholding tax - fringe benefits have not yet prescribed. Petitioner cannot raise the defense of prescription since the assessments were made based on the annual method (all expenses subject to expanded withholding tax for the entire year were accounted as one) and not on a monthly basis of computing withholding tax liability. It must be observed that although monthly withholding taxes are required to be remitted on the 1orh day of the following month, it is not until a final adjustment return has been ftled that the taxes paid thereon are considered final tax due. Neither amount can serve as the final figure to quantify what is correctly due the government. Finally, the assessments were prepared based on the declarations made by petitioner on its alphalist of expenses subject to withholding tax (1604CF & 1604E) and not on petitioner's monthly return. Since petitioner's declaration in its alphalist didn't match its declared monthly returns, it is imminent to use the alphalist data since it is the final declaration of petitioner after considering all of its adjustments for the year. x x x" On the other hand, in CTA Case No. 7728, respondent CIR raised the following special and affirmative defenses:35 "SPECIAL AND AFFIRMATIVE DEFENSES 5. Petitioner was sufficiently informed in writing of the law and facts on which the deficiency income tax was made. XXX XXX XXX 6. The assessment issued against petitioner is valid being supported by factual and legal bases.r' 35 Special and Affirmative Defenses, Answer, CTA Case. No. 7728, Docket, pp. 43-46.

DECISION erA case Nos. 7696 & 7728 XXX XXX XXX Based on the investigation conducted by revenue officers, petitioner derives income primarily on sale of real estate, lease of buildings and interest on installment contracts. Bulk of its operations, however, are centered on sale of real properties. Details of discrepancies are briefly outlined hereunder: a. Disallowed expenses not subject to Withholding taxes - certain expenses claimed by petitioner for the year have been found to not being subjected (sic) to withholding taxes: On compensation- P56,717,003.16; on EWT - 16,375,523.31; on Final withholding tax (Fringe Benefits) P8,738,898.00. These items were disallowed pursuant to Section 34(K) of the NIRC of 1997 which states that any amount paid or payable which is otherwise deductible from gross income shall be allowed as a deduction only if it is shown that the tax required to be deducted and withheld therefrom has been paid to the Bureau of Internal Revenue and implemented by RR2-98; b. Discrepancy in the amount of P591,274.00. Said amount was found to have been unreported on Interest income per Income tax against per Audited Financial Statements. Said unreported income is subject to Income tax pursuant to Section 32 of the NIRC of 1997; c. Portion of retirement expenses claimed during the year were disallowed since there is no BIR letter of approval of the retirement plan provided by the taxpayer in line with compliance requirements of RA 4917. Retirement expenses charged to income amounting to P2,376,382.00 were disallowed as the net of retirement cost were added back by petitioner per FS-ITR reconciliation; d. Understatement on non-deductible portion of interest expense in the amount of P3,661,380.03/V'

DECISION CTA Case Nos. 7696 & 7728 Such amount was disallowed because the Interest income subject to final tax was verified to be understated which is used as basis for the non-deductible portion of interest expense as covered by the underlying provisions of Section 34(B) of the NIRC of 1997; e. Debits to Miscellaneous Income in the amount of P62,485,550.46. A close scrutiny of their entries per monthly trial balance would reveal a reduction to miscellaneous income account with a corresponding decrease to their advances (asset) account understated the income subject to income tax under Section 32 of the NIRC of 1997. The amount of P62,485,550.46 was added back to taxable income under the same provts1on. 7. The unexpired or unapplied Minimum Corporate Income Tax (MCIT) may only be considered in computing income tax liability if verified and supported by records and computations. In the instant case, petitioner failed to substantiate its alleged MCIT, hence the issuance of the assessment. XXX XXX XXX On June 19, 2008, the parties flied their respective consolidated pre-trial briefs36 and on August 4, 2008, the parties flied their Joint Stipulation of Facts and Issues.37 In support of its Petitions, FBDC presented the following witnesses: Ms. Jennifer P. Salvador38 - Financial Analyst for Tax of FBDC; Atty. Rosario S. Bernaldo39 - Court Commissioned Independent Certified Public Accountant; Ms. J enette S. Basister 40 - Sales Administrative Assistant of FBDC; and Ms. Anna Lisa P. Mesina41 - Finance Manager under the comptrollership group ofFBDCr 36 CTA Case No. 7696, Vol. I, Docket, pp. 129-138; 139-157. 37 CTA Case No. 7696, Vol. I, Docket, pp. 168-179. 38 Minutes of the hearing dated November 10, 2008 and December 10, 2008, p. 223 and 327, respectively; Exhibits "EEE", "EEE-3", "EEE-4", "EEE-5", "EEE-6" and "EEE-7". 39 Minutes of the Hearing dated February 26, 2009, Vol. I, Docket, p. 375; Exhibits "BBBBB" and "CCCCC". 40 Minutes of the Hearing dated February 18, 2009, Vol. I, Docket, p. 371, 387; Exhibit 54-50. 41 Minutes of the Hearing dated July 26, 2012, Vol. II, Docket, p. 781; Exhibit "EEEEE", "E5-2", "EEEEE-3" and "EEEEE-4".

DECISION CTA Case Nos. 7696 & 7728 FBDC likewise filed its Formal Offer of Evidence42 on January 29, 2013. In the Court's Resolution 43 dated March 18, 2013, the Court admitted as evidence Exhibits "A" to "DDD", "FFF" to "TIT-1"' "UUU" to "SSSS-44- a1""'' "SSSS-65" to "toSSS"BS-B6B8-BaB"'-1"A1"A' A"ACCAC"'C"CA"A' A"ACACC-1C"'C"-B1"B' B"BCBC"C' C"BCB-2B"BBto- "BBBBB-2" "CCCCC-9", "FFFFF" to "HHHHH", ''JJJJJ" to "MMMMM-11", """"''t'o'WBMED0BEDM"W0BEED0MWBEED0BMEEW0D---M117W'D"-"'M'a-,"1"""a''C3'nt'"C'od"'SC0"S"ECES0'SCE'EWW0-"EE5W0'W0EE""0WECEW' 0-CE"W2WS"C""SWCWSttooC-S-1t--8"o"541'EU'0"'''E-''Ua"E"UD"'E'F''UWDW"EFSU-DFWWS4UFSD-WWFaS"D"'F-WW.5-""13HEW'W"""o'E'-Dw-1"E1SD0e6"vS''"'D''e'SG'"rDS,EG-DE5E''G'1Wx'-EX-h1Ga-WiX""1bG''"XiW"tG'"sXEBW"-"EXE2BTW"EE'B'IEE-TB1-E-B231tt""'oo"'-''' a" to "IIIII", "GGGGGG" and "GGGGGG-1" for failure to have the said exhibits identified during trial; Exhibits "SSSS-45" to "SSSS-49", "SSSS-51", ""SWSWSSW-5W1-aW" -1to5""SanSdSS"-D64D-aD"D' "DNDN-1N"N, fNor"'fa"iWlurWe WofWFBWD-9C"'su"bWmWit WthWe oWri-g1in1a"l' document for comparison; Exhibits "TTIT-1", "TTIT-2.1" to ''TTIT-2.65", ""''::UXXUXXU:XXUXX---122'."'1' "'':tXoXto:"XUX"U:-X7U''X'UX'':-XX17X-2":X.'1X2""-V,8'V'' "V''Y:XVYX-Y1:X"YX-1t-o1.11"'''''W'':tXoWXW:X"YWXY--13Y5"'Y''' -''1:"X.:5XX4X:5X:"XXX-1a-18n"'d''' "NNNNNN" for failure of FBDC to present the duly marked exhibits and for failure to show whether the documents presented were originals, faithful reproductions of the originals, or mere photocopies; and Exhibits ":XX:XX-3" and ":XX:XX-6", for failure of FBDC to present the duly marked exhibits, for failure to have the said exhibits identified during trial, and for failure to show whether the documents presented were originals, faithful reproductions of the originals, or mere photocopies. On April 16, 2013, FBDC filed its motion for reconsideration44 and in the Resolution45 July 25, 2013, the Court admitted Exhibits "NNNNNN" and "IIIII" but still denied the admission of Exhibits "TTIT-1 ", "TTIT-2.1" to "TTIT-2.65", "UUUU-1" to "UUUU-17", "VVVV-1" to "WWWW-3", ""::XXXX:XXXX--118"'",":X":XX:XXXXX-2-"2'.1"":XXto:X"X:X-7X":'X"X:X-2X.1X2X".-8S"u' b"s:XeqXu:eXnXtl-y1,1"o'n":XAXug:XuXst-1154",' 2013, FBDC filed its omnibus motion46 which prayed for the admission of the above-denied exhibits, among others. In the Court's Resolution47 dated January 14, 2014, the Court resolved to admit Exhibits "TTIT-1", "TTIT-2.1" to "TTIT-2.65", "UUUU-1" to "UUUU-17", "VVVV-1" to "WWWW-3", "''::XXXXX:XXX--11'8''",'':X":XX:XX:XX-X2'-''2.'1':"X,X":X:XXX-7:X'''X''-:2X.1X2:"XXa-n8d''' ''':'XYXY:YXYX--111.1'"'' ''t:Xo X":XYXY-Y1Y5''-' 1.545". However, Exhibits ":XX:XX-2.2" to ":XX:XX-2.11" were denied /Y 42 Vol. 11, Docket, pp. 991-1118. 43 Vol. II, Docket, pp. 1125-1127. 44 Vol. Ill, Docket, pp. 1124-1230. 45 Vol. Ill, Docket, pp.1268-1270. 46 Vol. Ill, Docket, pp. 1272-1274. 47 Vol. IV, Docket, pp. 1999-2001.

DECISION CTA Case Nos. 7696 & 7728 admission for failure to present the duly marked exhibits and for failure to show whether the documents presented were originals, faithful reproductions of originals, or mere photocopies. On the other hand, respondent presented her witness Joseph Christian B. Santos48 - Revenue Officer IV - Regular Large Taxpayers Audit Division II of the BIR. Moreover, respondent filed its Formal Offer of Evidence49 and in this Court's Resolution50 dated February 17, 2014, the Court admitted Exhibits "1 to 14, and 20 to 26-A", inclusive of sub-markings. However, Exhibits "15, 16, 16-A, 17, 17-A, 18, 18-A and 19" were denied admission by the Court for failure of respondent to submit the originals for comparison. On March 4, 2014, respondent filed her motion for partial reconsideration51 and on May 2, 2014, the Court issued a Resolution52 granting respondent's partial motion for reconsideration and admitting Exhibits "15, 16, 16-A, 17, 17-A, 18, 18-A and 19". On August 13, 2014, the respondent filed her memorandum 53 while FBDC failed to file the same. Consequently, in this Court's Resolution54 dated July 31, 2014, the case was deemed submitted for decision. Hence, this Decision. THE ISSUES The parties submitted the following issues 55 for this Court's resolution: 1. Whether or not petitioner is liable for deficiency VAT in the amount of P70,046,666.9356; 2. Whether or not petitioner is liable for deficiency Withholding Tax on Compensation in the amount ofP29,546,442.74; ~ 48 Exhibit "26", Vol. Ill, Docket, pp. 1247-1253. 49 Vol. IV, Docket, pp. 1983-1995. 50 Vol. IV, Docket, pp. 2003-2004. 51 Vol. IV, Docket, pp. 2005-2007. 52 Vol. IV, Docket, pp. 2024-2025. 53 Vol. IV, Docket, pp. 2028-2038. 54 Vol. IV, Docket, p.2041. 55 Issues to be Tried and Resolved, Joint Stipulation of Facts and Issues (JSFI), CTA Case No. 7696, docket, vol. one, p. 178. 56 Should be P70,046,666.94.

DECISION CTA Case Nos. 7696 & 7728 3. Whether or not petitioner is liable for deficiency Expanded Withholding Tax in the amount ofP38,869,403.7457; 4. Whether or not petitioner is liable for deficiency DST in the amount of P12,554,979.55; 5. Whether or not petitioner is liable for deficiency Final Withholding Tax- Fringe Benefits in the amount ofP6,399,723.81 58; 6. Whether or not petitioner is liable for deficiency Income Tax for taxable year 2003 in the amount ofP77,257,890.37; 7. Whether or not petitioner was sufficiently informed in writing of the law and facts on which the assessments were made; 8. Whether or not the right of the respondent to assess has prescribed; 9. Whether or not the deficiency tax assessments have factual and legal bases; and 10. Whether or not the unexpired Minimum Corporate Income Tax (MCIT) of petitioenr from prior periods should be considered in determining the actual deficiency income tax liability of petitioner, if there is any. 11. Whether or not FBDC was sufficiently informed in writing of the law and facts on the basis of which the alleged deficiency tax assessments were made. 12. Whether or not the right of the respondent to assess for the alleged deficiency tax assessments has prescribed. 13. Whether or not the alleged deficiency tax assessments issued against FBDC has factual and legal bases. 14. Whether or not the unexpired Minimum Corporate Income Tax (MCIT) of petitioner from prior periods should be considered in determining the actual deficiency tax income liability of FBDC, if th~~~ # 57 Should be P38,869,403.69. 58 Should be P6,338,119.45.

DECISION CTA Case Nos. 7696 & 7728 From the foregoing, there are three (3) main issues to be resolved by the Court: (1) Whether or not the right of the respondent to assess has prescribed; (2) Whether or not the assessment has factual and legal bases sufficient to inform petitioner thereof; and (3) Whether or not respondent CIR is correct in assessing petitioner for deficiency VAT, DST, WTC, EWT, FBT and Income Tax for taxable year 2003 in the aggregate sum ofP234,613,502.74. THE COURT'S RULING I. Whether or Not the Right of the Respondent to Assess Petitioner's Deficiency VAT and DST has Prescribed Deficiency VAT Petitioner alleges that for taxable year 2003, it flied its Quarterly VAT Returns on the following dates:59 Taxable Quarter Date Filed Last Day to File (2003) Return April 24, 2003 1st Quarter July 24, 2003 April 25, 2003 2nd Quarter October 27, 2003 July 25, 2003 3rd Quarter January 26, 2004 October 27, 2003 4th Quarter January 26, 2004 With respect to DST, petitioner argues that for purposes of the 3-year prescriptive period, the counting of the period to assess deficient DST shall be reckoned from the date the DST return subject of the deficiency tax assessment was actually flled.60 On the other hand, respondent argues that her right to assess petitioner's deficiency VAT and DST has not yet prescribed considering the falsity of petitioner's returns. Thus, respondent has 10 years after the discovery of the falsity, within which to assess petitioner, pursuant to Section 222(a) of the National Internal Revenue Code of 1997, as amended (NIRC of 1997, as amended).~ 59 Par. 5.04, Petition for Review, CTA Case No. 7696, Vol. I, Docket, p. 14. 60 Par. 5.12, Petition for Review, CTA Case No. 7696, Vol. I, Docket, p. 17. 61 "SEC. 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes.-

DECISION CTA Case Nos. 7696 & 7728 Section 203 in relation to Section 114(A) of the NIRC of 1997, as amended, and Section 4(3) of Revenue Regulations No. 06-01 (RR 06-01), respectively provide: "SEC. 203. Period of Limitation Upon Assessment and Collection.- Except as provided in Section 222, internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the return, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period: Provided, That in a case where a return is filed beyond the period prescribed by law, the three (3)-year period shall be counted from the day the return was filed. For purposes of this Section, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day." "SEC. 114. Return and Payment of value-added Tax.- (A) In general. - Every person liable to pay the value-added tax imposed under this Title shall file a quarterly return of the amount of his gross sales or receipts within twenty-five (25) days following the close of each taxable quarter prescribed for each taxpayer: x x x" "(3) SECTION 4(3.3) of Revenue Regulations No. 1-98 is hereby amended to read as follows: 'SECTION 4. Filing ofReturns and Pqyment ofTaxes.- XXX XXX XXX 3. When to File and Pay Monthly VAT declarations of Large Taxpayers shall be filed, and taxes paid, not later than the 1oth day following the end of each month; provided, however, that with respect to Large Taxpayers who availed of the electronic filing and paymen~ (a) In the case of false or fraudulent return with intent to evade or of failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be filed without assessment, at any time within ten (10) years after the diScovery of the falsity, fraud or omission xxx"

DECISION CTA Case Nos. 7696 & 7728 system (EFPS), the deadline for electronically filing the monthly VAT declaration and paying the tax due thereon via the EFPS shall be five (5) days later than the deadline set above. The quarterly VAT returns of Large Taxpayers shall be filed, and the taxes paid, not later than the 25th day following the end of each quarter." (Emphasis supplied) Under the afore-quoted provisions, a VAT taxpayer has twenty-five (25) days following the close of each taxable quarter within which to file a VAT return. In relation thereto, the CIR has three (3) years from the day the return was ftled within which to assess. Furthermore, it is likewise provided that if a return is filed beyond the period prescribed by law, the three (3)-year period shall be counted from the day the return was ftled. On the other hand, in case of false returns, the CIR has 10 years from the date of discovery of the falsity of the return within which to assess a taxpayer under Section 222(a) of the NIRC of 1997, as amended. In the leading case of Jose B. Aznar v. Court of Tax Appeals and Collector of Internal Revenue, 62 the Supreme Court characterized a false return as mere deviation from truth. Hence, to determine whether there is a deviation from what should have appeared in petitioner's returns vis a vis the application of the 3-year or 10-year prescriptive period of respondent's right to assess, the Court shall examine the pieces of evidence submitted by petitioner. Meanwhile, considering that the determination of whether pet:lt:loner filed false returns is intertwined with the correctness of the assessments, the Court shall likewise proceed to determine the correctness thereof. Based on the FLD63 dated January 2, 2007, respondent computed the deficiency VAT assessment as follows: On Leases p 39,491,000.00 Leases LCR Beg 186,226,299.00 Add: Sales 88,832,000.00 Less: Ending Gross Receipts on Leases during the p 136,885,299.00 year p 49,349,180.23 76,576,170.81 Add: Underdeclared receipts S LS vs. 27,226,990.58 CRB ~ Advance rent per CRB 62 G.R. No. L-20569, August 23, 1974. 63 Exhibit "13", CTA Case No. 7696, BIR records, pp. 536-541.

DECISION CTA Case Nos. 7696 & 7728 On Sales of Real Estate p 55,968,000.00 1,119,084,846.36 Collections pertaining to principal 75,558,726.00 110,892,726.00 Interest Receivable Beg. Interest Inc. -Install Sales per Return (20,634,000.00) Interest Receivable End Others 17,27 4,198.00 Realized forex gain 830,652.00 Gain on sale of property Other receivables Beg. p 56,810,000.00 2,671,932.00 Development Control Fees p 3,804,675.00 Marketing and Management Fees Miscellaneous 1,280,048.00 Other receivables End 394,209.00 5,478,932.00 (59,617,000.00) Gross Receipts subject to VAT 1P1 ,464,215,824.17 Output tax ger audit Output tax per return p 146,421,582.42 OOutput tax still due 111,167,313.78 p 35,254,268.64 Other findings Disallowed utilization of Presumptive input VAT Output VAT P111,167,313.78 Less Input VAT claimed for the Year P55,140,862.46 VAT payments for the year 51,281,906.17 106,422,768.63 Amount claimed from Presumptive 4,7 44,545.15 Input Disallowed 3,552,470.45 Disallowed Input Tax- invalid taxpayers Disallowed Input Tax- FBDC Supp. Per 48,704.56 SLP p 43,599,988.80 - Amount still due Surcharge 1/27/2004 to Interest 1/31/2007 26,446,678.14 26,446,678.14 Compromise P70,046,666.94 4 - Deficiency VAT Based from the above computation, the basic deficiency VAT assessment ofP43,599,988.80 arose from the followin~ 64 Erroneously indicated as P70,046,666.93 per FLD.

DECISION p 35,254,268.64 CTA case Nos. 7696 & 7728 4, 7 44,545.15 Page 24 of 100 3,552,470.45 A. Output VAT on the discrepancy in gross 48,704.56 receipts subject to VAT per audit vs. per p 43,599,988.80 returns B. Disallowed presumptive input VAT C. Disallowed input tax -invalid taxpayers D. Disallowed input tax- FBDC supplier per SLP A. Output VAT on the Discrepancy in Gross Receipts Subject to VAT per Audit vs. per Returns- P35,254,268.64 Respondent's verification disclosed that petitioner's taxable gross receipts for the year 2003 amounted to P1,464,215,824.17, obtained from the following income accounts: 1. Leases; 2. Sales of Real Estate including Interest Income on Installment Sales and; 3. Other Income which included: a. Realized Forex Gain b. Gain on sale of property c. Development Control Fees d. Marketing and Management Fees e. Miscellaneous Upon comparison of the P146,421,582.42 output VAT due on the aforesaid gross receipts with the P111,167,313.78 output VAT reflected per petitioner's VAT returns, respondent found an output VAT discrepancy in the amount of P35,254,268.64. On the other hand, petitioner maintains that the deficiency VAT assessment lacks factual and legal bases and submitted the following arguments for each item of income65: 1. Leases a. According to petitioner, the examiners allegedly included in their computation of gross receipts on leases subject to VAT those which are not /*Y 65 Exhibit "A", pp. 4-6; Petition for Review, CTA Case No. 7696, docket, vol. one, pp. 19-22.

DECISION CTA case Nos. 7696 & 7728 subject thereto, on account of the entitlement of certain lessees to tax incentives as PEZA-registered enterprises. Records show that petitioner presented the following pieces of evidence to prove that their lessees are PEZA registered: N arne of Corporation Date of PEZA Certificate of Registration DATA Horizon Philippines May 3, 2002 (Exhibit "XXXXX") May 17,2001 NEC Telecom Software, Inc. (Exhibit ''YYYYY") October 22, 2001 VOCATIV SYSTEMS, INC. *Denied Admission by the Court in (Exhibit "MMMMMM") the Resolution Dated March 18, Hatchasia.com, Inc. 201366 (Exhibit "NNNNNN") The foregoing pieces of evidence submitted by petitioner show that their lessees were PEZA-registered on 2001 and 2002, respectively. However, FBDC failed to show that its respective lessees were, in fact, still PEZA registered during 2003, the taxable year subject of the present Petitions. Hence, the Court is constrained to accord no probative value to the said pieces of evidence for being immaterial or irrelevant to this case. b. Petitioner alleged that respondent subjected to VAT common area usage and service area expenses or common area dues and other reimbursable expenses collected from tenants which are actually not subject to VAT. In this regard, petitioner presented the non-VAT official receipts 67 it issued to lessees for collections of alleged common area allocations in the total amount of P25,232,429.77 with VAT equivalent of P2,523,242. 98. The Court agrees with petitioner that reimbursements-at-cost (i.e., without any mark-up or profit element to the lessor) for shared expenses such as utilities and other maintenance expenses of the leased areas, do not constitute income but are amounts held in trust by the lessor for the service providers. Thus, they should not form part of the taxable gross receipts of the lessor. Nevertheless, petitioner has the burden to prove whether its collections d 66 Supra., Note 36. 67 Exhibits "YYYY-1.1" "YYYY-1.545".

DECISION CTA Case Nos. 7696 & 7728 are mere reimbursements-at-cost in order to be excluded from income and thus, not subject to VAT. In the case of Commissioner of Internal Revenue vs. Tours Specialists, Inc. and The Court ofTax Appeali8, the Supreme Court held that: "As demonstrated in the above-mentioned case, gross receipts subject to tax under the Tax Code do not include monies or receipts entrusted to the taxpayer which do not belong to them and do not redound to the taxpayer's benefit; and it is not necessary that there must be a law or regulation which would exempt such monies and receipts within the meaning of gross receipts under the Tax Code." (Emphasis supplied) An examination of the non-VAT ORs submitted by petitioner reveals that they were all dated during the year 2003 and that the collected amounts were for common area dues, parking fees, electricity and water, among others. However, petitioner failed to present evidence to prove that the collected amounts were mere reimbursements-at-cost and that no amount of profit was added or charged by petitioner. Thus, the Court cannot determine the veracity of the foregoing allegations. For want of evidence, the alleged common area charges of P25,232,429.77 cannot be deducted from petitioner's taxable gross receipts. c. The discrepancies between petitioner's Summary List of Sales (SLS) for 2003 and cash receipts book resulting in findings of under-declaration of gross receipts were the possible results of timing difference. Petitioner states that it records and remits the output tax due on certain rental income upon issuance of the billing invoice and not upon receipt of payment, as if payment was made during the same taxable period, whether the payment was actually received or not. It bears stressing that Section 108(A) of the NIRC of 1997, as amended, imposes 10% VAT on the use or lease of properties based on the lessor's gross receipts as follows: "SEC. 108.- Value-added Tax on Sale of Services and Use or Lease ofProperties.- Ai 68 G.R. No. 66416. March 21, 1990.

DECISION CTA Case Nos. 7696 & 7728 "(A) Rate and Base of Tax.-There shall be levied, assessed and collected, a value-added tax equivalent to ten percent (10%) of the gross receipts, derived from the sale or exchange of services, including the use or lease of properties. XXX XXX XXX The term 'gross receipts' means the total amount of money or its equivalent representing the contract price, compensation, service fee, rental or royalty, including the amount charged for materials supplied with the services and deposits and advanced payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person, excluding value-added tax." (Emphasis supplied) Thus, a lessor's obligation to pay the VAT accrues from the time it received the rental payment, and not upon issuance of the billing. In the instant case, petitioner failed to present evidence to show that the under declaration of gross receipts merely arose from the timing difference in petitioner's recognition of income and the related output VAT. Thus, the Court finds no merit to petitioner's argument. d. The advance rental payments could have constituted security deposits paid by tenants which are not subject to VAT. The term gross receipts under Section 108(A) of the NIRC of 1997, as amended, states that these include 'deposits and advanced payments actually and constructively received' during the taxable year. Therefore, the advance rental payments received by petitioner during the year 2003 are subject to VAT in the month/quarter of receipt. e. Not all entries in the cash receipts module represent actual cash collections subject to VAT. In this regard, petitioner likewise failed to present evidence to support the foregoing argument. Thus, the Court cannot consider the same. At any rate, the Court notes that with regard to the manner by which respondent computed the discrepancy arising from SLS vs. CRB in the amount of P49,349,180.23, and the advanced rent per CRB in the amount of P27,226,990.58, the same resulted in petitioner's gross receipts being subjected twice to deficiency VAT,/Y"

DECISION CTA Case Nos. 7696 & 7728 The Court observes that respondent's computation with respect to the line item of "Output Tax per audit", is based on what respondent considers as the "should-be gross receipts" of petitioner. On the other hand, the line item of "Output Tax per return" is based on petitioner's VAT returns and SLS. Said comparison led to the deficiency assessment. The supplier comparison of SLS vs. CRB and addition of advanced rent per CRB were unnecessary because the computation of "Leases LCR Beg + Sales - Leases LCR ending" results in an all-encompassing amount representing the total collections of petitioner, including the receipts per CRB and the advance rent per CRB, and the output tax due therefrom already formed part of the "Output tax per audit" figure. In fine, respondent's assessment on the P49,349,180.23 discrepancy between SLS and CRB and on the P27,226,990.58 advance rent per CRB in the total amount of P76,756,170.81 should be cancelled and withdrawn due to incorrect double taxation. 2. Sales of Real Estate With regard to the deficiency VAT assessment on real estate sales, petitioner argued that the VAT discrepancy on the sale of real property is the possible result of the timing difference inherent in the real estate business in complying with existing revenue regulations as petitioner already reports and remits the full VAT on the sale transactions where the buyer has already paid at least 25% of the selling price during the initial year of sale. Moreover, petitioner states that for administrative convenience, it remits the full VAT on the sale of its condominium units, regardless of whether some actually qualify as installment sales. Furthermore, petitioner points that the income on installment sale could actually and possibly refer to interest receivables from intercompany advances of petitioner to its subsidiaries. Some of the advances were intended as additional capital contribution and/or deposit for future subscription. Since petitioner is not a lending investor, dealer in securities, or financial institution, its interest receivable, if any, from intercompany advances is not subject to VAT. Again, petitioner's assertions are unsupported by documentary proof. Thus, the Court has no basis to ascertain whether petitioner's assertions are correct. On the other hand, the Court-commissioned Independent Certified Public Accountant (ICPA), R. S. Bernaldo & Associates through its Partne?r'

DECISION CTA Case Nos. 7696 & 7728 Ms. Rosario S. Bernaldo, reported that interest income from certain installment sales were included by the BIR examiners in their computation of gross receipts subject to VAT. According to the ICPA, examination of the supporting documents provided by petitioner showed that a certain portion of the collections pertaining to petitioner's sale of lots amounting to P1,119,084,846.36 used by the BIR was already inclusive of the interest income on installment sales. This actually refers to the sale of land in favor of WAFCO Trading Corporation that yielded interest income in the amount ofP5,171,723.0069� However, verification of the records shows that the supporting documents referred to by the ICPA were not formally offered before this Court. Thus, the Court cannot determine the veracity of the ICPA finding. 3. Other Income Petitioner avers that the realized foreign exchange gain reported in its AITR is connected with the intercompany advances it granted to its subsidiaries as these were stated in foreign currency. Petitioner explained that when these advances were restated in local currency at year end, foreign exchange gains were accordingly recorded. It is petitioner's view that these realized foreign exchanges, being non-trade in nature, are not subject to VAT. However, petitioner failed to submit supporting documents to prove the actual nature of its realized foreign exchange gain. In the absence of proof to the contrary, the said realized foreign exchange gain shall be deemed to have been earned by petitioner in the ordinary course of its business of leasing and sale of real properties for the year 2003 and is subject to VAT pursuant to Section 1OS in relation to Section 108(A) of the NIRC of 1997, as amended. As to the development control fees, management and marketing fees, petitioner stated that it has properly reported and remitted the VAT due thereon. However, petitioner likewise failed to present evidence to support the same. With respect to the gain on sale of property and equipment, petitioner did not refute the findings of the respondent's examiner. Moreover, in the consolidated Supreme Court (SC) cases of Mindanao I Geothermal Partnership and Mindanao II Geothermal Partnership vs. Commissioner of Internal Revenue, 70 the SC clarified the term and VAT treatment to an "incidental" transaction, to wi~ 69 Exhibit "AAAAA", p. 15. 70 G.R. Nos. 193301 and 194637, dated March 11, 2013.

DECISION CTA Case Nos. 7696 & 7728 "Mindanao II asserts that the sale of a fully depreciated Nissan Patrol is not an incidental transaction in the course of its business; hence, it is an isolated transaction that should not have been subject to 10% VAT. Section 105 of the 1997 Tax Code does not support Mindanao II's position: SEC. 105. Persons Uabie. - Any person who, in the course of trade or business, sells barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to the value- added tax 01AT) imposed in Sections 106 to 108 of this Code. The value-added tax is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services. This rule shall likewise apply to existing contracts of sale or lease of goods, properties or services at the time of the effectivity of Republic Act No. 7716. The phrase "in the course of trade or business" means the regular conduct or pursuit of a commercial or an economic activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a nonstock, nonprofit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity. The rule of regularity, to the contrary notwithstanding, services as defined in this Code rendered in the Philippines by non-resident foreign persons shall be considered as being rendered in the course of trade or business. (Emphasis supplied) Mindanao II relies on Commissioner of Internal Revenue v. Magsqysqy Unes, Inc. (Magsqysqy) and Imperial v. Collector of Internal Revenue (Imperia~ to justify its position. Magsaysay, decided under the NIRC of 1986, involved the sale of vessels of the National Development Company (NDC) to Magsaysay Lines, Inc. We ruled that the sale of vessels was not in the course of NDC's trade or business as it was involuntary and made pursuant to th~

DECISION CTA Case Nos. 7696 & 7728 Government's policy for privatization. Magsaysay, in quoting from the CTA's decision, imputed upon Imperial the definition of "carrying on business." Imperial, however, is an unreported case that merely stated that 'to engage' is to embark in a business or to employ oneself therein. Mindanao II's sale of the Nissan Patrol is said to be an isolated transaction. However, it does not follow that an isolated transaction cannot be an incidental transaction for purposes of VAT liability. Indeed, a reading of Section 1OS of the 1997 Tax Code would show that a transaction "in the course of trade or business" includes "transactions incidental thereto." Mindanao II's business is to convert the steam supplied to it by PNOC- EDC into electricity and to deliver the electricity to NPC. In the course of its business, Mindanao II bought and eventually sold a Nissan Patrol. Prior to the sale, the Nissan Patrol was part of Mindanao II's property, plant, and equipment. Therefore, the sale of the Nissan Patrol is an incidental transaction made in the course of Mindanao II's business which should be liable for VAT." The Gain on Sale of Property and Equipment (PE), as held in the above- quoted case, is also considered incidental to petitioner's business since the said property was once part of petitioner's PE. Considering the foregoing, the Court finds that respondent has ample basis in including in her computation of deficiency VAT, petitioner's other income, net of receivables as of year-end in the amount of P20,776,782.00 representing the sum of the realized forex gain of (i.e., P17,274,198 plus P830,652 plus P2,671,932), and the interest income on installment sales in the amount ofP110,892,726.00. B. Disallowed Presumptive/Transitional Input Tax -P4,744,545.15 According to petitioner, their presumptive input tax should not be disallowed because of the favorable decision of the Supreme Court in G.R. No. 158885 dated April 2, 200971 � The Court notes, however, that the same is not yet final and executory as the opposing party submitted a Motion for Reconsideration therefore. At any rate, the Court agrees with the raison d'etre of the High Court in ruling in favor of petitioner.~ 71 Fort Bonifacio Development Corp. vs. CIR, G.R. Nos. 158885 & 170680, April 2, 2009.

DECISION CTA Case Nos. 7696 & 7728 The SC stated that there is nothing in Section 105 of the Old NIRC that prohibits the inclusion of real properties, together with the improvements thereon, in the beginning inventory of goods, materials, supplies, based on which inventory the transitional input tax credit is computed. This is based on the contention of then-respondent that based on Section 4.105-1 of Revenue Regulations (RR) No. 7-95 wherein it was specifically stated that for real estate dealers, only the beginning inventory pertaining to improvements made on real properties are to be given such transitional input tax credit. Accordingly, had Section 100 [of R.A. No. 7716] supplied any differentiation between the treatment of real properties or real estate dealers and the treatment of the transactions involving other commercial goods, then such differing treatment would have constituted the statutory basis for the CIR to engage in such differentiation which the respondent in the cited case sought to accomplish through Section 4.105-1 of RR 7-95. 72 Yet the amendments introduced by R.A. No. 7716 to Section 100, coupled with the fact that the said law left Section 105 [now Section 111] intact, reveal the lack of any legislative intention to make persons or entities in the real estate business subject to a VAT treatment different from those engaged in the sale of other goods or properties or in any other commercial trade of business. Moreover, the SC disagreed with the Decisions of this Court and the Court of Appeals (CA) that there is an underlying presumption that in order to avail of transitional/presumptive input VAT on the beginning inventory of real estate dealers who were subjected to VAT in 1996, there should be a sales tax that was previously paid by petitioner in its purchase of inventory. However, since petitioner acquired the land from the government in a VAT-exempt sale, this Court and the CA denied its entidement to transitional/presumptive input tax credit. The SC proceeded to state that the transitional input tax credit operates to benefit newly VAT-registered persons, whether or not they previously paid taxes in the acquisition of their beginning inventory of goods, materials and supplies. During that period of transition from non-VAT to VAT status, the transitional input tax credits serves to alleviate the impact of the VAT on the tax on the taxpayer. Considering the foregoing, the Court finds the cancellation of respondent's assessment of deficiency VAT on petitioner's transitional input tax in the amount ofP4,744,545.15, to be in order/V' 72 ld.

DECISION CTA Case Nos. 7696 & 7728 C. Disallowed Input Tax due to Invalid Taxpayers -P3,552,470.45; D. Disallowed Input Tax due to Invalid FBDC Supplier - P48,704.56 Based on petitioner's Summary List of Purchases (SLP) for the year 2003, respondent disallowed petitioner's claimed input VAT in the amount of P3,552,470.45 because these input taxes were allegedly derived by petitioner on its purchases from unregistered or invalid taxpayers, to wit?3 Supplier Input VAT Reason for disallowance I Aurora S. Bautista Conrado S. Realubit p 6,227.27 Not VAT registered Full Circle Communications Gligorick C. Garupa 10,499.38 Registered only in 2005 I4 Trading & Advertising JT Zhang & Company Inc. 17,203.47 Registered only in 2005 M~a Trading Inc. Makati Development Corp. 71,061.15 Not VAT registered Manuel V. Pangilinan Melanie Rita Galita 3,927.14 Does not exist Mold Food Corp. Pasto Cafe & Bar Inc. 117.55 Not VAT registered Philippine Health Insurance Corp. 4,454.55 Not VAT registered R]_ Calpo & Partners Ricardo S. PaScua 1,431.82 Not VAT registered Rudy S. Labos & Associates Inc. 24,450.00 Not VAT registered Superfi.x Auto Concept Will Decena and Associates 17,382.07 Not VAT registered --~ 14.73 Percentage tax registered 69.42 Registered only in 2005 630 Not VAT registered 54,000.00 Does not exist 1,410,459.76 Not VAT registered 1,396,861.71 2004 Registered 79,062.75 Does not exist 454,617.68 Percentage tax registered p 3,552,470.45 In its protest letter7\ petitioner stated that it will be presenting VAT invoices or official receipts to support the disallowed input tax. Further, petitioner asserted that if indeed the said suppliers are invalid taxpayers, then the BIR should collect the deficiency taxes from such invalid taxpayers and not from petitioner. To require petitioner to substantiate its claimed input tax beyond and more than what the VAT law requires would be unjust, discriminatory and burdensome on the part of petitioner who has neither the means nor the resources to determine the validity of the taxpayer's VAT /Y 73 Exhibit "CCCCC". 74 Exhibit "A", p. 6.

DECISION CTA Case Nos. 7696 & 7728 invoices or official receipts, which are otherwise appearing to be validly BIR approved receipts or invoices. The Court partially finds for petitioner. A VAT invoice or official receipt constitutes sufficient proof of creditable input VAT on domestic purchases of goods or services, respectively, as provided for under Section 11 O(A) of the NIRC of 1997 [prior to its amendment under Republic Act (RA) No. 9337], which states in part: "SEC. 110. Tax Credits.- (A) Creditable Input Tax.- (1) Any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section 113 hereof on the following transactions shall be creditable against the output tax: XXX XXX XXX (b) Purchase of services on which a value-added tax has been actually paid. (2) The input tax on domestic purchase of goods or properties shall be creditable: (a) To the purchaser upon consummation of sale and on importation of goods or properties; and XXX XXX XXX However, in the case of purchase of services, lease or use of properties, the input tax shall be creditable to the purchaser, lessee or licensee upon payment of the compensation, rental, royalty or fee." (Emphasis supplied) The Court observes that the word "or" in Section 110(A)(1) indicates an alternative. However, further reading of the above Section 11 O(A) (1) (b) and Section 110(A)(2)(a) reveals that input VAT on domestic purchases of goods or properties shall be allowed as tax credit to the purchaser upon consummation of sale, which means upon issuance by the seller of the VAT invoice evidencing the sale of goods or properties. On the other hand, the inp~

DECISION CTA Case Nos. 7696 & 7728 VAT on purchases of services shall be available as tax credit to the purchaser only upon payment of the compensation or fee, i.e., upon issuance by the seller of the VAT official receipt evidencing receipt of the payment for services performed or yet to be performed. In the case of AT&T Communications SenJices Philippines, Inc., vs. Commissioner of Internal Revenue, 75 the Supreme Court held that a VAT sales invoice must support the sale of goods or properties while a VAT official receipt must substantiate the sale of services, thus: "For emphasis, even prior to the enactment of R.A. No. 9337, which clearly delineates the invoice and official receipt, our Tax Code has already made the distinction. Section 113 of the NIRC of 1997, as amended, is the focal provision, to wit: SEC. 113. Invoicing and Accounting Requirements for VAT-registered Persons. - (A) Invoicing Requirements. - A VAT- registered person shall, for every sale, issue an invoice or receipt. In addition to the information required under Section 237, the following information shall be indicated in the invoice or receipt: (Emphasis supplied) XXX XXX XXX Although it appears under the above-quoted provision that there is no clear distinction on the evidentiary value of an invoice or official receipt, it is worthy to note that the said provision is a general provision which covers all sales of a VAT registered person, whether sale of goods or services. It does not necessarily follow that the legislature intended to use the same interchangeably. The Court therefore cannot conclude that the general provision of Section 113 of the NIRC of 1997, as amended, intended that the invoice and official receipt can be used for either sale of goods or services, because there are specific provisions of the Tax Code which clearly delineates the difference between the two transactions. r' 75 G.R. No. 185969, November 19, 2014.

DECISION CTA Case Nos. 7696 & 7728 In this instance, Section 108 of the NIRC of 1997, as amended, provides: SEC. 108. Value-added Tax on Sale of Services and Use or Lease ofProperties. - XXX XXX XXX (C) Determination of the Tax - The tax shall be computed by multiplying the total amount indicated in the official receipt by one-eleventh (1/11). (Emphasis supplied) Comparatively, Section 106 of the same Code covers sale of goods, thus: SEC. 106. Value-added Tax on Sale of Goods or Pro..o. erties. - XXX XXX XXX (D) Determination of the Tax. - The tax shall be computed by multiplying the total amount indicated in the invoice by one-eleventh (1/11). (Emphasis supplied) Apparently, the construction of the statute shows that the legislature intended to distinguish the use of an invoice from an official receipt. It is more logical therefore to conclude that subsections of a statute under the same heading should be construed as having relevance to its heading. The legislature separately categorized VAT on sale of goods from VAT on sale of services, not only by its treatment with regard to tax but also with respect to substantiation requirements. Having been grouped under Section 108, its subparagraphs, (A) to (C), and Section 106, its subparagraphs (A) to (D), have significant relations with each other." Considering that for the same transaction, the output VAT of the seller becomes the input VAT of the purchaser, the law requires that the input VAT be substantiated by the very same document on which the output VAT was based. Accordingly, the input VAT on purchases of goods must be supported by VAT sales invoices; while the input VAT on purchases of services must be supported by VAT official receipts. /Y'

DECISION CTA Case Nos. 7696 & 7728 In order to be considered as valid VAT invoices or official receipts, the same must contain all the information required under Section 113(A) of the NIRC of 1997 [prior to its amendment under RA No. 9337], as amended, to wit: "SEC. 113. Invoicing and Accounting Requirements for VAT Registered Persons. - (A) Invoicing Requirements. - A VAT-registered person shall, for every sale, issue an invoice or receipt. In addition to the information required under Section 237, the following information shall be indicated in the invoice or receipt: (1) A statement that the seller is a VAT-registered person, followed by his taxpayer's identification number (TIN); and (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax." Corollary thereto, the pertinent portions of Section 4.108-1 of Revenue Regulations No. 7-95, read as follows: "SECTION 4.108-1. Invoicing Requirements.- All VAT- registered persons shall, for every sale or lease of goods or properties or services, issue duly registered receipts or sales or commercial invoices which must show: 1. the name, TIN and address of seller; 2. date of transaction; 3. quantity, unit cost and description of merchandise or nature of service; 4. the name, TIN, business style, if any, and address of the VAT-registered purchaser, customer or client; 5. the word 'zero-rated' imprinted on the invoice covering zero-rated sales; and,/'1""

DECISION CTA Case Nos. 7696 & 7728 6. the invoice value or consideration. XXX XXX XXX Only VAT-registered persons are required to print their TIN followed by the word 'VAT' in their invoice or receipts and this shall be considered as a 'VAT Invoice'. All purchases covered by invoices other than 'VAT Invoice' shall not give rise to any input tax." Such invoice or receipt must be duly registered with the Bureau of Internal Revenue, as prescribed under Section 237 of the NIRC of 1997, which states: "SEC. 237. Issuance of Receipts or Sales or Commercial Invoices. - All persons subject to an internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service: x x x" In the present case, out of the disallowed input VAT of P3,552,470.45, petitioner was able to substantiate by proper VAT official receipts, input VAT in the total amount of P1 ,025,336.57 related to its domestic purchases of services, detailed as follows: Exhibit Supplier OR No. Date Amount "CCCCC-1" Rudy S. Labos & Associates, 2325 4/4/2003 :P 7,640,000.00 "CCCCC-2" Inc. 2653 "CCCCC-3" Rudy S. Labos & Associates, 2551 12/12/2003 397,766.75 Inc. Rudy S. Labos & Associates, 11/14/2003 95,717.19 Inc. p 8,133,483. 94 Subtotal Less: Amt received as w /tax (397,766.75) refund p 7,735,717.19 Subtotal, as adjusted "CCCCC-4" Super Fix Auto Concept 5626 3/13/2003 1,816.36 "CCCCC-5" Super Fix Auto Concept "CCCCC-6" Super Fix Auto Concept 5627 3/13/2003 12,696.87 Subtotal 5628 3/13/2003 8,036.46 p 22,549.69 "CCCCC-7" Will Decena & Associates 1892 12/19/2003 1,325,724.50 '---------- - - -- -- - -- ---------------------- /'V

DECISION CTA Case Nos. 7696 & 7728 "CCCCC-8" Will Decena & Associates 1858 11/5/2003 1,012,610.48 "CCCCC-9" Will Decena & Associates Subtotal 1822 10/24/2003 1,182,100.46 p 3,520,435.44 Total Purchases of Services p 11,278,702.32 p 1,025,336.57 - -- -- ~owable Input VAT (1/11) In addition, petitioner, through the Supplemental Judicial Affidavie6 of its Finance Manager, Ms. Anna Lisa P. Mesina, made the following observation with regard to the disallowance of the input VAT of P1,410,459.76 (included in the total input VAT disallowance ofP3,552,470.45): "(205) Q: XXX A: xxx the input tax reported in the April 2003 VAT returns and SLP of FBDC pertaining to Ricardo S. Pascua in the amount of P1,410,459.76, which was disallowed by the BIR examiners for the reason that payee was not VAT registered was actually corrected by the company in its May 2003 VAT returns and SLP by adjusting its input tax credit deducting the amount of P1,410,459.76, which was in fact considered in Exhibit "CCCCC" even by the BIR examiners under the name of First Pacific Management Services, Inc. of which Mr. Pascua was also associated with. Therefore, for the 2nd quarter VAT returns of FBDC and its SLP for the months of April 2003 or Exhibits "BBBBB-3" and May 2003 or "BBBBB-4", the said disallowed input tax was already adjusted or taken out by FBDC." The Court agrees with the petitioner. A perusal of petitioner's SLP77 for the year 2003 upon which respondent based her disallowance of the P3,552,470.45 input VAT shows that the amount ofP1,410,459.76 appeared twice: 1) as an addition to petitioner's claimed input VAT under the name of Ricardo S. Pascua78 ; and 2) as a deduction from petitioner's claimed input VAT under the name of First Pacific Management Services, Inc.79 In other words, the amount of P1,410,459.76 was not claimed at all as input VAT by petitioner for the year 2003 as this was zeroed-out by the addition and deduction of the same amount. Thus, the deficiency VAT assessment in the amount ofP1,410,459.76 should be cancelled. /Y 76 Exhibit "EEEEE-4", p. 61. 77 Exhibit "CCCCC". 78 Exhibit "CCCCC", p. 3. 79 Exhibit "CCCCC", p. 2.

DECISION CTA Case Nos. 7696 & 7728 Based from the foregoing discussion, it appears that petitioner failed to substantiate all of its claims against the assessment. However, does the failure of petitioner to substantiate all of its allegations constitute deviation from truth so as to categorize its returns as false? The Court does not believe so. In other words, petitioner was able to prove that some of its claims were valid. However, the fact that it was not able to present all the necessary pieces of evidence to prove its claims against the assessment does not make its returns, per se, false. These are evidentiary matters which militate upon the correctness of the assessment and not upon the truth or falsity of petitioner's returns. Consequently, an examination of FBDC's filing of its quarterly VAT Returns in relation to the 3-year period to assess by the respondent CIR is shown as follows: Taxable Quarter Date Filed Last Day to File Last Day of the I (2003) Return 3-year Period to ! Assess 1st Quarter80 April 24, 2003 April 25, 2003 April 25, 2006 2nd Quarter81 July 24, 2003 July 25, 2003 July 25, 2006 yd Quarter82 October 27, 2003 October 27, 2003 October 27, 2006 4th Quarter83 January 26, 2004 January 26, 2004 January 26, 2007 In the instant case, records show that that the respondent CIR issued the FLD on January 2, 2007. Hence, the Court finds that respondent's right to assess FBDC for deficiency VAT for the 1sr, 2nd and 3rd quarter of taxable year 2003 has already prescribed. In sum, petitioner is liable for basic deficiency VAT in the amount of P28,889,366.59, computed as follows: IOn Leases N 80 Exhibit "F". 81 Exhibit "H". 82 Exhibit "J". 83 Exhibit "K".

DECISION CTA Case Nos. 7696 & 7728 Lease Contracts Receivable, Beg, net ofVAT (P39,491,000.00 I 110%) p 35,900,909.09 186,226,299.00 Add: Sales ( 80,756,363.64) Less: Lease Contracts Receivable, End, net of VAT (P88,832,000.00 I 110%) p 141,370,844.45 Gross Receipts on Leases during the year On Sales of Real Estate P50,880,000.00 1,119,084,846.36 Collections pertaining to principal 75,558,726.00 107,680,544.18 Interest Receivable, Beg. Interest Inc. - Install Sales per Return (18,758,181.82) Interest Receivable, End Others 17,274,198.00 Realized forex gain 830,652.00 Gain on sale of property Other receivables, Beg. P3,804,675.00 P56,81 0,000.00 Development Control Fees 1,280,048.00 Marketing and management Fees 394,209.00 5,478,932.00 Miscellaneous (59,617,000.00) Other receivables ,End 2,671,932.00 Gross Receipts subject to VAT P1 ,388,913,016. 99 Output tax per audit p 138,891,301.70 Output tax per return 111,167,313.78 Output tax still due p 27,723,987.92 Other findings: Disallowed Input Tax- invalid taxpayers p 3,552,470.45 1,116,674.12 Less: Input Tax duly supported by VAT ORs (1 ,025,336.57) 48,704.56 Input Tax not claimed by petitioner 1,410,459.76 p 28,889,366.59 Disallowed Input Tax - FBDC Supp. Per SLP Basic Deficiency VAT Deficiency DST On the other hand regarding the time of filing of returns for DST, Section 5 of RR 06-01 provides: "Section 5. Time for Filing of Documentary Stamp Tax Returns and the Payment of Taxes Due Thereon. - xxx (2) For large taxpayers, Section 4(3.6) of Revenue Regulations No. 1-98 is hereby amended to read as follow~

DECISION CTA Case Nos. 7696 & 7728 "Section 4. Filing of Returns and Payment of Taxes. - 3. When to File and Pay 3.6 Large taxpayers shall pay their documentary stamp taxes within five (5) days after the close of the month when the taxable document was made, signed, issued, accepted or transferred by the filing of the documentary stamp tax returns, through purchase or actual affixture or by imprinting the documentary stamps through a documentary stamp tax metering machine." Based from the foregoing, petitioner has five (5) days after the close of the month when the taxable document was made within which to flle its DST Return. In the present case, petitioner's transactions subject to DST, in relation to the 3-year period to assess, are shown as follows: Date ofTransaction Last Day to File Last Day of the 3- Date of Issuance Return year Period ofFLD October 27, 2003 (Exhibit "SSSS") November 5, 2003 November 5, 2006 January 2, 2007 June 16, 2003 July 5, 2003 July 5, 2006 January 2, 2007 (Exhibit "SSSS-9") October 29, 2003 November 5, 2003 November 5, 2006 January 2, 2007 (Exhibit "SSSS-16 ") November 5, 2003 November 5, 2006 January 2, 2007 October 27, 2003 (Exhibit "SSSS-23 ") November 27,2003 December 5, 2003 December 5, 2006 January 2, 2007 (Exhibit "SSSS-30") November 21,2003 December 5, 2003 December 5, 2006 January 2, 2007 (Exhibit "SSSS-38") As discussed earlier, the failure of petitioner to substantiate all its claims against the assessment does not affect the truth or falsity of its returns and does not constitute deviation from truth per se, though the same affects the correctness of the assessment. Thus, the Court shall proceed in determining whether respondent's right to assess deficiency DST had already prescribed and the appurtenant computation of petitioner's deficiency DST. The Court notes that the reckoning date for counting the prescriptive period vis a vis FBDC's DST is not from the date of the Deeds of Sale, but from the date of the respective Contracts to Sell. Section 196 of the NIRC of 1997, as amended, providesy

DECISION CfA Case Nos. 7696 & 7728 "SEC. 196. Stamp Tax on Deeds of Sale and Conveyances of Real Property. - On all conveyances, deeds, instruments, or writings, other than grants, patents or original certificates of adjudication issued by the Government, whereby any land, tenement or other realty sold shall be granted, assigned, transferred, or otherwise conveyed to the purchaser or to any other person or persons designated by such purchaser or purchasers, there shall be collected a documentary stamp tax, at the rates herein below prescribed, based on the consideration contracted to be paid for such realty or on its fair market value determined in accordance with Section 6(E) of this Code, whichever is higher; x x x" In the instant case, FBDC argues that the DST covering its sale of properties becomes due only upon the execution of its respective Deeds of Sale. 84 However, it has been held that "DST is by nature, an excise tax since it is levied on the exercise by persons of privileges conferred by law. These privileges may cover the creation, modification or termination of contractual relationships by executing specific documents like deeds of sale, mortgages, pledges, trust and issuance of shares of stock."85 Considering the foregoing, the Court rules that DST liability attaches upon the execution of FBDC's respective Contracts to Sell, because the same effectively conveyed to its buyer certain rights to the property subject of the contract, although by the very nature of FBDC's Contracts to Sell, the same are subject to the fulfillment of a suspensive condition which is the full payment of the purchase price. Thus, based on the table above, with respect to respondent's period within which to assess, it appears that her right to assess FBDC with respect to the above-illustrated sales transactions of FBDC had already prescribed. To continue, respondent invoked Sections 180, 194 and 196 of the NIRC of 1997, as amended, to subject petitioner's DST to certain transactions entered into by petitioner during the year 2003, which include lease and sale of real properties, transfer of lot to Crescent West Development Corporation (CWDC), management agreements and advances to affiliates. Below is the computation of the deficiency DST assessment: Base Rate DST Due /Y" 84 Exhibits "5555-1", "5555-10", "5555-17", "5555-24", "5555-31" and "5555-39". 85 Fort Bonifacio Development Corporation, G.R. No. 164155 & 175543, February 25, 2013, citing Philippine Home Assurance Corporation v. Court of Appeals, 361 Phil. 368, 372-373 (1999).

DECISION CfA Case Nos. 7696 & 7728 On Leases (Sales per Return) p 186,226,299.00 P3/flrst p 186,225.30 P2000; On Sale of Properties P1/P1000 New Cash Sales 143,238,190.00 P15/P1000 2,148,572.85 471,758,685.45 P15/P1000 7,076,380.28 Other Contracted Agreements Transfer of Lot to CWDC 152,600,000.00 P15/P1000 2,289,000.00 1,106,000.00 P3/flrst Management Agreement w/ P2000; 1,113.00 related parties 29,733,000.00 P1/P1000 P3/flrst 29,734.00 Management Agreement other P2000; 869,616.00 than related parties P1/P1000 p 12,600,641.43 Advances to affiliates per cash 4,825,671.06 flows 579,744,000.00 P0.30/P200 p 7,774,970.37 4,780,009.18 Total Payments p 12,554,979.55 DST Still Due Surcharge Interest 1-05-04 to 1-31-07 Compromise DST Still Due A. Lease Agreements With regard to petitioner's alleged agreements, petitioner asserts that the DST due thereon is for the account of the lessee. However, verification of the records shows that FBDC failed to present any evidence to prove that indeed, the DST imposable upon its lease agreements were, in fact, for the account of the lessee. As such, the Court has no basis to confirm the assertion of FBDC and accordingly, the Court finds the deficiency assessment by the respondent with respect thereto is proper. B. Sale of Properties Evidence forwarded to this Court shows that the deficiency DST assessment on petitioner's sales of properties pertain to the following: Realproperty cash sales86 ,A-' 86 Exhibit "AAAAA'', Annex F.3.

DECISION CTA Case Nos. 7696 & 7728 Lessee Date Per Collections Contract FMV/ Tax DST Date Paid Exhibit Contract per BIR Price Base per 4/1/2003 No. Tecoma return 12/5/2003 Cot}!_. to Sell scheduleS? (Principal) 11/10/2003 "SSSS- 6/4/2003 45" to - "SSSS- 157,763,230.91 157,763,230.91 167,300,000.00 2,509,500.00 48" "SSSS" Robinson's Land Corp. 10/27/2003 210,450,000.00 210,450,000.00 420,900,000.00 6,313,500.00 to "SSSS- FANAL 10/27/2003 43,045,454.55 43,045,454.55 94,700,000.00 1,420,500.00 Holdings, 8" Inc. "SSSS- 23" to Prudentialife "SSSS- Bank 10/29/2003 60,500,000.00 60,500,000.00 110,000,000.00 1,650,000.00 29" 471,758,685.46 471,758,685.46 792,900,000.00 11,893,500.00 "SSSS- 16" to Collections Contract FMV DST "SSSS- per BIR Price 22" schedule89 (Principal) Sub-total Real Property Deferred Sale# ' Date Per ' Contract Exhibit No. Buyer To Sell Date Paid "SSSS- WAFCO 06/16/2003 48,593,440.91 139,760,000.00 174,700,000.00 2,620,500.00 8/2/2003 "S9S"S'S- Trading 11/27/2003 81,495,635.45 132,550,000.00 265,100,000.00 3,976,500.00 1/20/2006 11" to Corp. 11/24/2005 "SSSS- Grand 14" Sequoia "SSSS- Estate DC 30" to "SSSS- Cirtek Land 11/21/2003 13,149,113.64 57,255,000.00 104,100,000.00 1,561,500.00 Corp. 143,238,190.00 329,565,000.00 543,900,000.00 8,158,500.00 37" Sub-total "SSSS- 38" to "SSSS- 44" TOTAL P20,209,957 .00 As stated earlier, the deficiency DST assessment on petitioner's sale of properties to Robinson's Land Corp., FANAL Holdings, Inc., Prudentialife Bank, WAFCO Trading Corp., Grand Sequoia Estate DC and Cirtek Land Corp had already prescribed. As regards petitioner's real property cash sale to Tecoma Corporation, petitioner submitted supporting documents such as Deed of Absolute Sale, Documentary Stamp Tax Declaration/Return (BIR Form No. 2000), BIR Tax Payment Deposit Slip, Certificate Authorizing Registration and Tax Clearance /V 87 CTA Case No. 7696, BIR records, p.416. 88 Exhibit "AAAAA", Annex F.4. 89 CTA Case No. 7696, BIR records, p. 416.

DECISION CTA Case Nos. 7696 & 7728 Certificate. However, the said documents which were provisionally marked as Exhibits "SSSS-45" to "SSSS-49" were denied admission by this Court in the Resolution 90 dated March 18, 2013 for petitioner's failure to submit the originals thereof for comparison and since then petitioner did not include the said set of documents in its Motion for Reconsideration. Since the DST return pertaining to petitioner's sale to Tecoma had been denied admission by the Court, it cannot be determined whether respondent's right to assess petitioner of deficiency DST thereon had already prescribed. However, as to whether or not petitioner had paid the DST due on the said sale, the answer is in the affirmative. Petitioner, in a letter91 dated February 25, 2009 requested from the Chief, Revenue Accounting Division of the BIR, a certification of payment and/or remittance of DST due on certain sales of real properties located within Bonifacio Global City, Taguig City, to certain buyers wherein petitioner was the seller thereof. Included in the mentioned sales transactions was petitioner's sale of real property to Tecoma Corporation for which an amount of P2,509,500.00 DST was allegedly paid. A scrutiny of the Certification92 issued by Ms. Evelyn C. De Guzman, Chief, Revenue Accounting Division of the BIR, shows that the DST of P2,509,500.00 was indeed paid by Tecoma Corporation and that such payment was in fact remitted to the BIR. Since the aforementioned DST payment of P2,509,500.00 is higher than the assessed amount of P2,366,448.46 (P157,763,230.91 x P15/P1,000.00), it follows that petitioner is not liable of any deficiency DST on its real property sale to Tecoma Corporation. C. Transfer of Lot to CWDC The ICPA reported that on November 14, 2003, petitioner entered into a Deed of Transfer with Crescent West Development Corporation (CWDC) for the transfer of TCT No. 29504 under a tax-free transfer scheme that had been approved by the BIR under BIR Ruling No. SN-007-2003 dated 24 January 2003. DST on the said transaction amounting to P3,273,000.00 had been paid by petitioner on 24 November 200393. ~ �9 CTA Case No. 7696, docket, vol. 2, pp. 1125-1127. 91 Exhibit "5555-67". 92 Exhibit "5555-68". 93 Exhibit "AAAAA", p. 17.

DECISION CTA Case Nos. 7696 & 7728 Records reveal that the aforesaid DST payment of P3,273,000.00 formed part of the total amount of P4,825,671.06 DST payments deducted by respondent in arriving at the basic deficiency DST assessment of P7,774,970.37. Below is the breakdown of the P4,825,671.06 DST payment94: Return Period Transaction Date DST Payment I 1/30/2003 2/10/2003 102,553.40 2/24/2003 3/5/2003 4/11/2003 4/11/2003 349,193.64 J 7/8/2003 8/5/2003 8/27/2003 9/5/2003 231,439.42 I 11/14/2003 11/24/2003 234,545.45 11/14/2003 11/24/2003 270,499.24 Total 364,439.91 3,273,000.00 4,825,671.06 - Inasmuch as the respondent herself recognized petitioner's payment of the DST amount of P3,273,000.00, the deficiency DST assessment on the transfer of lot to CWDC shall be cancelled. D. Petitioner's Management Agreements FBDC argues that DST may not be imposed upon its management contracts within the contemplation Section 194 of the NIRC of 1997, as amended, which reads: "SEC. 194. Stamp Tax on Leases and Other Hiring Agreements. - On each lease, agreement, memorandum, or contract for hire, use or rent of any lands or tenements, or portions thereof, there shall be collected a documentary stamp tax of Three pesos (P3.00) for the first Two thousand pesos (P2,000), or fractional part thereof, and an additional One peso (P1.00) for every One thousand pesos (P1 ,000) or fractional part thereof, in excess of the first Two thousand pesos (P2,000) for each year of the term of said contract or agreement." From the foregoing provision of the law, the phrase "contract for hire" was used in reference to "any lands or tenements, or portions thereof'. Verily, the Court agrees with FBDC that it does not apply to any other contract aside from what was contemplated therein. N 94 CTA Case No. 7696, BIR records, p. 354.

DECISION CfA Case Nos. 7696 & 7728 However, verification of the records also shows that FBDC failed to present these alleged management agreements upon which respondent imposed deficiency DST. Hence, the Court cannot ascertain whether FBDC's management agreements were in reference to any of its lands or tenements, or portions thereof, or in reference to any other contract. As such, the Court finds the deficiency assessment by the respondent with respect thereto is proper. E. Petitioner's Advances to Affiliates per Cash Flows In Commissioner of Internal Revenue vs. Pi/invest Development Corporation,95 the Supreme Court ruled that the intercompany loans, which are evidenced by instructional letters and memos, are subject to DST under Section 180 of the NIRC of 1997, as amended, in relation to Section 173 of the same Code, to wit: "On the other hand, insofar as documentary stamp taxes on loan agreements and promissory notes are concerned, Section 180 of the NIRC provides follows: Sec. 180. Stamp tax on all loan agreements, promissory notes, bills of exchange, drafts, instruments and securities issued by the government or any of its instrumentalities, certificates of deposit bearing interest and others not payable on sight or demand. On all loan agreements signed abroad wherein the object of the contract is located or used in the Philippines; bill of exchange (between points within the Philippines), drafts, instruments and securities issued l?J the Government or any of its instrumentalities or certificates of deposits drawing interest, or orders for the pqyment ofany sum ofmonry otherwise than at sight or on demand, or on all promissory notes, whether negotiable or non-negotiable, except bank notes issued for circulation, and on each renewal of any such note, there shall be collected a documentary stamp tax of Thirry centavos (PO.JO) on each two hundred pesos, or fractional part thereof, of the face value of any such agreement, bill of exchange, draft, certificate of deposit or note: Provided, That on!J one documentary stamp tax shall be imposed on either loan agreement, orpromissory notes issued to secure such loan, whichever willyield a higher tax: Provided however, That loan agreements or promissory notes the aggregate of which does not exceed Two hundred fifty thousand pesos (P250,000.00) executed l?J an individualfor his purchase on installmentfor his personal use or that of his fami!J and not for business, resale, barter or hire ofa house, lot, motor vehicle, appliance orfurniture shall be exemptfrom the pqyment ofdocumentary stamp taxprovided under this Section. When read in conjunction with Section 173 of the 1993 NIRC, the foregoing provision concededly applies to "(a)ll loa~ 95 G.R. Nos. 163653 and 167689, July 19, 2011.

DECISION CTA Case Nos. 7696 & 7728 agreements, whether made or signed in the Philippines, or abroad when the obligation or right arises from Philippine sources or the property or object of the contract is located or used in the Philippines." Correlatively, Section 3 (b) and Section 6 of Revenue Regulations No. 9-94 provide as follows: Section 3. Definition ofTerms. For purposes of these Regulations, the following term shall mean: (b) 'Loan agreement' refers to a contract in writing where one of the parties delivers to another money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid. The term shall include credit facilities, which may be evidenced by credit memo, advice or drawings. The terms 'Loan Agreement" under Section 180 and "Mortgage' under Section 195, both of the Tax Code, as amended, generally refer to distinct and separate instruments. A loan agreement shall be taxed under Section 180, while a deed of mortgage shall be taxed under Section 195." Section 6. Stamp on all Loan Agreements. All loan agreements whether made or signed in the Philippines, or abroad when the obligation or right arises from Philippine sources or the property or object of the contract is located in the Philippines shall be subject to the documentary stamp tax of thirty centavos (P0.30) on each two hundred pesos, or fractional part thereof, of the face value of any such agreements, pursuant to Section 180 in relation to Section 173 of the Tax Code. In cases where no formal agreements or promissory notes have been executed to cover credit facilities, the documentary stamp tax shall be based on the amount of drawings or availment of the facilities, which may be evidenced by credit/debit memo, advice or drawings by any form of check or withdrawal slip, under Section 180 of the Tax Code. Applying the aforesaid provisions to the case at bench, we find that the instructional letters as well as the journal and cash vouchers evidencing the advances FDC extended to its affiliates in 1996 and 1997 qualified as loan agreements upon which documentary stamp taxes may be imposed. In keeping with the caveat attendant to every BIR Ruling to the effect that it is valid /�

DECISION CTA Case Nos. 7696 & 7728 only if the facts claimed by the taxpayer are correct, we find that the CA reversibly erred in utilizing BIR Ruling No. 116-98, dated 30 July 1998 which, strictly speaking, could be invoked only by ASB Development Corporation, the taxpayer who sought the same. In said ruling, the CIR opined that documents like those evidencing the advances FDC extended to its affiliates are not subject to documentary stamp tax, xxx." In the instant case, petitioner failed to present proof to show that it paid DST on its advances to affiliates. Thus, the Court finds no reason to overturn respondent's assessment of deficiency DST on petitioner's advances to its affiliates. In sum, petitioner is liable for basic deficiency DST in the amount of P1 ,086,684.30, as shown in the computation below: On Leases (Sales per Return) Base Rate DSTDue Other Contracted P186,226,299 .00 P3/P2000; p 186,227.30 ' Agreements P1/P1000 1,106,000.00 I Management Agreement w/ 29,733,000.00 P3/P2000; Related Parties 579,744,000.00 P1/P1000 1,107.00 P3/P2000; 29,734.00 Management Agreement other P1/P1000 869,616.00 than Related Parties p 1,086,684.30 Advances to Affiliates per cash P0.30/P200 Flows Basic Deficiency DST Respondent's Period to Assess With Respect to WTC, EWT, FBT and Income Tax Petitioner's WTC With respect to FBDC's deficiency WTC, it alleges that for taxable year 2003, it flied its monthly returns of taxes withheld on compensation on the following dates:96 Period Date Filed Taxable Year 2003 February 13, 2003 January /'}"' 96 Par. 5.07, Petition for Review, CTA Case No. 7696, Vol. I, Docket, p. 15.

DECISION CTA Case Nos. 7696 & 7728 February March 13, 2003 I March April April 15, 2003 May June May 15,2003 July August June 12, 2003 September J u!Y11, 2003 October August 15, 2003 November December September 12, 2003 October 15, 2003 November 14,2003 December 15, 2003 January 20, 2004 On the other hand, respondent asserts that FBDC cannot raise the issue of prescription with respect to FBDC's deficiency WTC assessment since it was made based on the annual method and not on a monthly basis of computing withholding tax liability.97 Sections 7 and 8.1 of RR No. 09-01, as last amended by RR 26-02, prescribes the time of filing and remittance of WTC through the BIR's EFPS, as follows: "Section 7. TIME OF FILING OF RETURN. - For purposes of filing returns under the EFPS, the taxpayers classified under the following business industries shall be required to ftle the Monthly Withholding Tax Returns, except withholding of Value- Added Tax; Monthly VAT Declarations; and Monthly Percentage Tax Returns, on or before the dates prescribed and presented herein-below: BUSINESS MONTHLY MONTHLY VAT INDUSTRY WITHHOLDING DECLARATIONS TAX RETURNS AND MONTHLY EXCEPT PERCENTAGE WITHHOLDING OF TAX RETURNS VALUE ADDED TAX XXX � Thirteen (13) days � Twenty three Group C following end of (23) days XXX the month following end of Real Estate Activities ' -- -- --- --- --- -'------ the month --- ' ----- - - /'/ 97 Par. 13, Answer, CTA Case No. 7696, Vol. I, Docket, p. 80.

DECISION CTA Case Nos. 7696 & 7728 "SECTION 8. Time and Place ofPqyment.- 8.1 Large Taxpayers. - (a) Large Taxpayers who will e- pay shall enroll with any AAB authorized to serve them and who are capable to accept e-payments, until such time that private banks are allowed by the Monetary Board of the BSP to open accounts with the Bureau of Treasury and, provided, that such private banks are e-banking capable. E-payments (when available as provided in Section 4 of these Regulations) shall be made within the day the return was electronically filed following the "pay-as-you-file" principle. (b) For Large Taxpayers who intend to pay their taxes manually, the same shall be made at the AABs servicing the aforesaid taxpayers located at the Ground Floor of the BIR National Office Building with respect to Large Taxpayers registered with the LTS or at the premises of the AABs servicing the said taxpayers located within the respective territorial jurisdiction of the LTDOs with respect to Large Taxpayers registered with the LTDOs. Manual payments shall be made within banking hours of the day when the return was electronically filed following the "pay-as-you-file" principle."(Emphasis supplied) Records show that FBDC availed of the EFPS with respect to its WTC Returns. Applying the provisions of Sections 7 and 8.1 of RR No. 09-01, as last amended by RR 26-02, in relation to Section 203 of the NIRC of 1997, as amended, the 3-year period of limitation to assess FBDC is as follows: Period Date Filed Last Day to File 3-year Period of I Taxable Year Return Limitation to February 13, 2003 Assess 2003 March 14, 2003 February 13, 2003 January (Exhibit April 23, 2003 March 13, 2003 February 13, 2006 May 15,2003 April 13, 2003 "LLLL-1 ") June 12, 2003 May 13,2003 i February (Exhibit July 11, 2003 June 13, 2003 August 15, 2003 July 13, 2003 March 13, 2006 ''I<KKK.-1'') August 13, 2003 1 March (Exhibit April 13, 2006 "IIII-1 ") April (Exhibit I "HHHH-1 ") May (Exhibit May 13,2006 "GGGG-1 ") June (Exhibit June 13,2006 "FFFF'J July 13, 2006 July (Exhibit "EEEE-1 ") August 13, 2006 - - ~

DECISION CTA Case Nos. 7696 & 7728 August (Exhibit September 12, September 13, September 13, I "DDDD-1 ") 2003 2003 2006 September October 15, 2003 October 13, 2003 October 13, 2006 (Exhibit "CCCC- 1") November 14, November 15, November 13, 2003 2003 2006 October (Exhibit "AAAA-1 ") December 15, December 15, December 13, November 2003 2003 2006 (Exhibit "ZZZ- January 20, 2004 January 20, 2004 January 13, 2007 1") December (Exhibit "VVV- 1 ") Based from the foregoing, the respondent's right to assess FBDC for deficiency WTC for the months of January to November 2003 had already prescribed. On the other hand, there is no merit in respondent's position that its right to assess has not yet prescribed because its computation is based on annual method. As clearly set forth, Section 203 of the NIRC of 1997, as amended, provides the reckoning date of the 3-year period which is after the last day prescribed by law for the filing of the return, or from the day the return was filed, as the case may be. Considering the foregoing, the Court declares that the right of the respondent to assess FBDC for deficiency WTC for the period January to November 2003 had already prescribed. Petitioner's EWT With respect to FBDC's deficiency EWT, FBDC alleges that for taxable year 2003, it filed its monthly EWT return on the following dates:98 Period Date Filed J Taxable Year 2003 Februa_!Y 13, 2003 I January February March 14, 2003 March April 15, 2003 April May 12,2003 May June 12, 2003 June July 11, 2003 July August 15, 2003 N 98 Par. 5.10, Petition for Review, CTA Case No. 7696, Vol. I, Docket, p. 16.

DECISION CTA Case Nos. 7696 & 7728 August September 12, 2003 September October 15, 2003 October November 17,2003 November December 15,2003 December January 20, 2004 Similarly, respondent contends that its right to assess FBDC for deficiency EWT has not yet prescribed since it was based on annual method.99 Records show that FBDC availed of the EFPS with respect to its EWT Returns. Applying the provisions of Sections 7 and 8.1 of RR No. 09-01, as last amended by RR 26-02, in relation to Section 203 of the NIRC of 1997, as amended, the 3-year period of limitation to assess FBDC is as follows: Period Date Filed Last Day to File 3-year Period of Taxable Year Return Limitation to February 13, 2003 Assess 2003 (RR 06-01 or Section March 14, 2003 203 of the NIRC of February 13, 2006 January (Exhibit 1997, as amended) "LLLL-1 ") April 22, 2003 March 13, 2006 February 13, 2003 February (Exhibit May 12,2003 April13, 2006 "KKK") March 13, 2003 June 12, 2003 May 13,2006 March (Exhibit April13, 2003 "FFF") July 11, 2003 June 13, 2006 August 15, 2003 May 13,2003 April (Exhibit July 13, 2006 "AAA") September 12, June 13, 2003 2003 August 13, 2006 May (Exhibit July 13, 2003 ''WW'') October 15, 2003 September 13, August 13, 2003 2006 June (Exhibit November 17, "SS") 2003 September 13, October 13, 2006 2003 July (Exhibit December 15, November 13, "PP") 2003 October 13, 2003 2006 August (Exhibit January 20, 2004 November 13, December 13, "MM") 2003 2006 September December 13, January 13, 2007 (Exhibit "HH") 2003 October (Exhibit ~ January 13, 2004 "AA") November (Exhibit ''W'') December (Exhibit "S'} . 99 Par. 16, Answer, CTA Case No. 7696, Vol. I, Docket, pp. 81-82.

DECISION CTA Case Nos. 7696 & 7728 Based from the foregoing, the respondent's right to assess FBDC for deficiency EWT for the months of January to November 2003 had already prescribed. Similar to the above-discussion regarding FBDC's WTC, there is no merit to respondent's position that its right to assess has not yet prescribed because its computation is based on annual method. The reckoning date of the 3-year period is after the last day prescribed by law for the filing of the return, or from the day the return was flied, as the case may be. Considering the foregoing, the Court declares that the right of the respondent to assess FBDC for deficiency EWT for the period January to November 2003 had already prescribed. Petitioner's FBT With respect to FBDC's deficiency FBT, FBDC alleges that for taxable year 2003, it flied its quarterly remittance return of final income taxes withheld on fringe benefits on the following dates: Period Date Filed I Taxable Quarter I (2003) 1st Quarter April15, 2003 2nd Quarter July 11, 2003 3rd Quarter October 15, 2003 4th Quarter January 15, 2004 On this score, Section 5 of RR No. 04-02 provides: "SECTION 5. Time for filing ofQuarter!J Remittance Return of Final Income Taxes Withheld on Fringe Benefits Paid to Emplqyees Other than Rank and File. -The tax imposed under Sec. 33 of the Tax Code shall be treated as a final income tax on the employee that shall be withheld and paid by the employer, whether a large taxpayer or non-large taxpayer, on or before the 1orh day of the month following the calendar quarter in which the fringe benefits were granted, provided, however that with respect to employers, whether Large or Non-Large Taxpayers, enrolled with the Electronic Filing and Payment System (EFPS), the deadline for e- filing the Quarterly Remittance Return of Final Income Taxes Withheld on Fringe Benefit Paid to Employees other than Rank and File (BIR Form No. 1603) and e-paying the tax due thereon shall be five (5) days later than the deadline set herein." ("V

DECISION CTA Case Nos. 7696 & 7728 Applying the above-quoted provision in relation to Section 203 of the NIRC of 1997, as amended, the 3-year period of limitation to assess FBDC is as follows: Taxable Quarter Date Filed Last Day to File Last Day of the (2003) Return 3-year Period to April 23, 2003 1st Quarter100 July 11, 2003 (RR 06-01 or Section Assess 2nd Quarter101 October 15, 2003 203 of the NIRC of 3rd Quarter102 January 15, 2004 1997, as amended) April 15, 2006 4th Quarter103 July 15, 2006 April 15, 2003 October 15, 2006 July 15, 2003 January 15, 2007 October 15, 2003 January 15, 2004 Based from the foregoing, the respondent's right to assess FBDC for deficiency FBT for the 18 2nd and 3rd Quarters of 2003 had already prescribed. \ Thus, there is no merit to respondent's assertion that its right to assess FBDC for deficiency FBT has not yet prescribed because the BIR uses the annual method as basis for computation, for the same reasons stated above. Considering the foregoing, the Court declares that the right of the respondent to assess FBDC for deficiency FBT for the 1s\ 2nd and 3rd Quarters of 2003 had already prescribed. Petitioner's Income Tax Finally, with regard to the reckoning point of the 3-year prescriptive period provided for under the above-quoted Section 203 of the NIRC of 1997, as amended, Section 77 (B) of the same law provides: "SEC. 77. Place and Time of Filing and Payment of Quarterly Corporate Income Tax. - XXX XXX XXX (B) Time of Filing the Income Tax Return. - The corporate quarterly declaration shall be filed within sixty (60) days following the close of each of the first three (3) quarters of the taxable year. The final adjustment return shall be ftled on or before the fifteenth (15th) day of April~ 100 Exhibit "PPPP-1". 101 Exhibit "0000". 102 Exhibit "NNNN-1". 103 Exhibit "MMMM-1".

DECISION CfA Case Nos. 7696 & 7728 or on or before the fifteenth (15th) day of the fourth (4th) month following the close of the fiscal year, as the case may be. x x x" In the instant case, FBDC flied its Annual Income Tax Return on April 15, 2004,104 which is also the last day prescribed by law for filing of the return for the taxable year 2003. Counting the 3-year prescriptive period therefrom, the BIR had until April 15, 2007 to assess FBDC. As earlier stated, the BIR issued its FLD on April13, 2007,105 which is well within the 3-year prescriptive period. In sum, the Court finds that there was no falsity with respect to petitioner's VAT and DST Returns based on the evidence presented by petitioner. Its failure to provide proof to some of its claims is not synonymous to deviating so far from the truth so as to constitute false returns. Rather, that circumstance merely affects the correctness of respondent's assessment. On the other hand, the Court finds that the respondent's right to assess FBDC for the following types of taxes already prescribed: Type ofTax Period for which the Respondent's I Right to Assess had Already VAT Prescribed DST 1sr, 2nd and 3rd Quarters WTC EWT Prescribed with Respect to Sale of FBT Properties January to November 2003 January to November 2003 1sr, 2nd and 3rd Quarters II. Whether or Not the Deficiency Assessment has Factual and Legal Bases Sufficient to Inform FBDC Thereof Considering that not all of the respondent's deficiency tax assessments against FBDC have prescribed, the Court shall proceed to determine whether the same had factual and legal bases sufficient to inform FBDC thereof. A perusal of the FLDs106 issued by respondent to FBDC reveals that it sufficiently explained the bases for the deficiency VAT, DST, WTC, EWT, FBT and Income Tax assessments. In fact, the aforesaid FLDs discussed and .N 104 Exhibit "RRRR-3". 105 Supra., Note 14. 106 Supra., Note 8 and 15.

DECISION CTA Case Nos. 7696 & 7728 explained piecemeal the respective deficiency tax assessments against FBDC. Thus, the Court declares that there is no transgression of FBDC's right to be informed of the factual and legal bases of the respondent's assessment. III. Whether or Not Respondent CIR is Correct in Assessing FBDC for Deficiency WTC, EWT, FBT And Income Tax In this regard, the Court has already determined the correctness of respondent's assessments with respect to petitioner's deficiency VAT and DST, in relation to the discussion on whether or not petitioner filed false returns. Hence, the Court shall now proceed to determine the correctness of respondent's assessment with regard to FBDC's deficiency WTC, EWT, FBT and Income Taxes that did not prescribe. Withholding Tax on Compensation - P29,546,442.74 FBDC maintains that the separation pay it paid to its separated employees due to redundancy are not subject to withholding tax on compensation pursuant to Section 32(B)(6)(b) of the NIRC of 1997, as amended, which provides as follows: "SEC. 32. Gross Income. - XXX XXX XXX (B) Exclusions from Gross Income. - XXX XXX XXX (6) Retirement Benefits, pensions, Gratuities, etc. - XXX XXX XXX (a) Any amount received by an official or employee or by his heirs from the employer as a consequence of separation of such official or employee from the service of the employer because of death, sickness or other physical disability or for any cause beyond the control of the said official or employee. x x x" ~

DECISION CfA Case Nos. 7696 & 7728 Section 32(B)(6)(c) of the NIRC of 1997, as amended, provides that any amount received by an employee as a consequence of his separation from employment for any cause beyond his control, i.e., retrenchment, is excluded from the gross income of the taxpayer-employee. Accordingly, since the same is excluded from the employee's gross income, the employer is not mandated to withhold the taxes therefrom. However, Revenue Regulation No. 2-98 (RR 2-98) provides that the cash equivalent of vacation leaves exceeding 10 days, monetized sick leave credits, separated employee's salaries, 13th month pay and other benefits in excess of P30,000.00 are not excluded from the exemption and hence, subject to tax. In the instant case, Respondent arrived at the deficiency WTC in the amount ofP29,546,442.74 as follows: Total Expenses subject to withholding tax - compensation p 82,164,831.35 J Less: Exempt transactions: Non-taxable 13th month I SSS, GSIS, Pag-Ibig p 684,179.16 1,065,386.51 ' Total transactions subject tow/tax 381,207.35 Less transactions subjected to w/tax 1 P23,863,323.51 Taxable Salaries 519,118.17 p 81,099,444.84 I Taxable 13th Month Transactions not subjected tow/tax- p 705,224.01 ' compensation Rate p 175,912.00 24,382,441.68 165,112.00 Withholding tax still due p 56,717,003.16 i Add: Other findings - 32% Late filing of March 03 return P11, 186,804.33 p 18,149,441.01 Base - Surcharge 176,306.00 Interest 8 days 3,091.39 Com_2romise Professional Fees received by 20,000.00 JMKLim Per 1601C p 569,100.00 Per 1601E 90,000.00 Taxable Income p 659,100.00 Tax Withheld per 1601 C p 147,112.00 10,800.00 Tax Withheldper 1601E 18,000.00 p 18,359,638.41 Amount still due 11 '186,804.33 Surcharge p 29,546,442.74 Interest 1-15-04 to 1-31-07 Compromise Deficiency W/T Compensation ff The deficiency WTC assessment resulted from the following:

DECISION CTA Case Nos. 7696 & 7728 A. Transactions not subjected to WTC P56,717 ,003.16 199,397.39 B. Increments for late filing of March 2003 return 10,800.00 c. Underwithheld tax on professional fees received by JMKLim Discrepancies in withholding tax on compensation were arrived at after an analysis of petitioner's general ledger. The examiners closely identified items which have an impact in the computation of its withholding taxes then matched the figure total with the amount declared per alphabetical listing form 1604CF. The total transactions not subjected to withholding tax on compensation amounted to P56,717,003.16 or deficiency exposure of P18,149,441.01 107. In disagreeing with the deficiency WTC assessment, petitioner contends that the figures and computation made by the respondent to support her assessment findings are not accurate and do not have factual bases. Specifically, petitioner raised the following arguments: (a) Certain items included in the assessment findings of the respondent are not subject to withholding tax, such as separation pay received by retrenched employees of the petitioner, pursuant to Section 32(B)(c) of the 1997 Tax Code, as amended. Petitioner submitted before the Court its various Notices 108 of Employment Termination due to Redundancy to several of its employees. A reading of the said Notices similarly shows the following terms: "1. You will be paid your salary up to _ _ _ __ 2. You will be paid a redundancy pay of one (1) month basic monthly pay per year of service, with a fraction of six or more month treated as 1 year, as and by way of separation pay. 3. You will be paid the 100% company contribution to the FBDC Retirement Plan including gains/losses. 4. All unused vacation and sick leaves shall be commuted to cash. 5. Pro rata 13th and 14th month based on the number of months served for the year 2003 shall be paid." ;v 107 Respondent's Answer, CTA Case No. 7696, docket, val. one, p. 76; Exhibit "13", CTA Case No. 7696, BIR records, p. 537. 108 Exhibits "TTTT-2.3", "TTTT-2.5", "TTTT-2.6", "TTTT-2.7", "TTTT-2.8", "TTTT-2.10", "TTTT-2.11", "TTTT- 2.13", "TTTT-2.15", "TTTT-2.17", "TTTT-2.19", "TTTT-2.21", "TTTT-2.22", "TTTT-2.24", "TTTT-2.26", "TTTT-2.28", "TTTT-2.30", "TTTT-2.32", "TTTT-2.34", "TTTT-2.36", TTTT-2.38", TTTT-2.40", "TTTT-2.42", "TTTT-2.44", "TTTT-2.47", "TTTT-2.49", "TTTT-2.51", "TTTT-2.52", "TTTT-2.54", "TTTT-2.56", "TTTT- 2.57", "TTTT-2.59","TTTT-2.61", "TTTT-2.63" and "TTTT-2.64".

DECISION CTA Case Nos. 7696 & 7728 Applying the provisions of Section 32(B)(6)(c) of the NIRC of 1997, as amended, in relation toRR 2-98, the Court declares that FBDC is not liable for WTC with respect to its separated employees, except for their respective cash equivalent of vacation leaves exceeding 10 days, monetized sick leave credits, separated employee's salaries, 13th month pay and other benefits in excess of P30,000.00 which are taxable under RR 2-98. Likewise, from the above statements in the Notices of Employment Termination, numbers 1, 4, and 5 are taxable, with the unused vacation leaves exempted up to the first 10 days, while numbers 2 and 3 are exempt from WTC. The amount of total separation pay as verified by the ICPA 1s P15,051,979.63, which is summarized under Annex "B-1" of the report109. From the aforesaid summary, it appears that the ICPA correctly distinguished the tax-exempt items, which are the redundancy pay, the retirement pay (the reimbursement of retirement contributions shouldered by the former employees to the tax-exempt fund, which will be discussed in the deficiency income tax assessment portion), and the monetized amount of VL credits not exceeding 10 days. However, the Court cannot ascertain the correctness of the amounts indicated in the ICPA-prepared summary because the same do not tie-up with those reflected in the Quit Claims110. Thus, the Court finds that the ICPA summary as well as the Quit Claim forms and/or Termination letters are insufficient to prove the truthfulness of the amounts of non-taxable redundancy pay, retirement pay and exempt VL credits. The Court simply cannot rely on the ICPA's report, without the presentation of the actual basis of the amounts. Petitioner could have provided the Court with the actual final pay computations where the proper breakdown of the amounts could be found, and the check payments to prove the actual amounts paid out to the terminated employees that tie up with the Quit Claims. Considering the foregoing, the Court finds that petitioner failed to substantiate the amounts of non-taxable redundancy pay, retirement pay, and exempt VL credits in the alleged amount of P15,051,979.63. Thus, respondent's assessment should be upheld with regard thereto. t� 109 Exhibit "AAAAA". 110 Exhibits "TTTI-2.2" "TTTI-2.4" "TTTI-2.6" "TTTI-2.9" "TTTI-2.10" "TTTI-2.12" "TTTI-2.14" "TTTI- 2.16" "TTTI-2.18" "TTTI-2.20" "TTTI-2.21" "TITI-2.23" "TTTI-2.25" "TTTI-2.27" "TTTI-2.29" "TTTI- 2.31" "TTTI-2.33" "TTTI-2.35" "TTTI-2.37" "TTTI-2.39" "TTTI-2.41" "TTTI-2.43" "TTTI-2.45" "TTTI- 2.46" "TTTI-2.48" "TTTI-2.50" "TTTI-2.53" "TTTI-2.55" "TTTI-2.56" "TTTI-2.58" "TTTI-2.60".

DECISION CTA Case Nos. 7696 & 7728 (b) The respondent's indiscriminate imposition of the 32% withholding tax rate is unjustified inasmuch as the applicable rate of withholding depends on the payment of taxable compensation less allowable exemption to each individual employees of petitioner. The Court agrees with petitioner. Following the ICPA's computation of the reasonable withholding tax rate that respondent should have applied instead of the maximum rate of 32%, the Court has determined the average WTC rate for taxable year 2003 to be 21.068090%, as computed below: Alphalist Taxable Tax Withheld Compensation No previous employer (Exh. 'VUU4'} p 519,118.17 p 3,254,413.39 13th month & other benefits 12,918,378.42 Salaries and other forms of compensation Terminated before December 31,2003 (Exh. - 1,864,233.90 'VUU-3') 13th month & other benefits 10,631 '128.03 Salaries and other forms of compensation With more than one (1) employer within 2003 - 117,956.89 (Exh. "UUU-5'') 13th month & other benefits 786,994.43 Salaries and other forms of compensation Total p 24,855,619.05 p 5,236,604.18 Average WTC Rate 21.068090% This is contrary to the computation of the ICPA resulting to 20.45%111 , since the figures used by the ICPA in the report, which allegedly were from BIR Form No. 1604-CF, do not coincide with the amended BIR Form No. 1604-CF filed on March 19, 2004112. The ICPA also failed to include in the computation, amounts attributable to compensation of employees with more than one (1) employer within the same taxable year. In addition to the above arguments, the ICPA pointed out additional errors on the part of respondent, as narrated in the Supplemental Judicial Affidavit of the ICPA113~ 111 Exhibit "AAAAA", p. 11. 112 Exhibit "UUU" to "UUU-5". 113 Exhibit "DDDDD", p. 2.

DECISION CTA Case Nos. 7696 & 7728 (3) "Q: What was the basis of your findings for that particular item? A: We noted that the BIR examiners in computing for the alleged 2003 deficiency tax liability for withholding tax on compensation of FBDC, deducted from their findings of alleged total expenses subject to withholding the non- taxable items: 1) on alphalist of employees terminated before December 31, 2003 - the amount of SSS, Phil. Health, and Pag-ibig contributions of employees amounting to P150,657.35; (2) on the alphalist of employees with no previous employer within the year - the amount of the amount of SSS, Phil. Health, and Pag-ibig contributions of employees amounting to P218,950.00 and the amount of 13th month pay and other benefits amounting to P658,670.82; (3) on the alphalist of employees with previous employee(s) within the year- the amount of SSS, Phil. Health, and Pag-ibig contributions of FBDC employees amounting to P11 ,600.00 and the amount of 13th month pay and other benefits amounting to P25,508.34, were all deducted. However, BIR examiners may have overlooked and thus failed to consider on the alphalist of employees terminated before December 31, 2003, the amount of 13th month pay and other benefits the amount of P495,407.40, which was reflected in the said alphalist as other forms of non-taxable compensan.on. " Upon scrutiny of the alphalist114 attached to the amended BIR Form No. 1604-CF115, The Court agrees with the findings of the ICPA. The amount of P495,407.40 was the total of Column S(c) entitled in the alphalist as Non- Taxable Salaries and Other Forms of Compensation. Thus, this amount of P495,407.40 shall be excluded from the compensation subject to withholding tax. In addition, the Court notes that the total amount of P82,164,831.35 compensation subject to withholding tax as found by respondent included employer's contributions for SSS/Medicare premiums in the amount of P487,862.65 and Pag-ibig contributions in the amount of P44,000.00, as shown below 116 ~ 114 Exhibits "UUU-2" to "UUU-3". 115 Exhibit "UUU". 116 Exhibit "FFFFF-1".

DECISION CTA Case Nos. 7696 & 7728 Salaries p 21,661,914.49 Overtime 138,978.88 Office Subsidy Fund (OSF) 3,614,3 70.50 Allowances 1,971,409.14 Bonuses 1'140,324.27 Leave pay 1,027,357.21 SSS premiums Medicare 487,862.65 Pag-ibig contributions 44,000.00 Medical and Dental 725,764.03 Hospital/Medical Insurance 1'187,528.89 Accident Insurance 39,504.70 i Gratuity and Separation Pay 48,604,751.59 Parties and Gifts 938,500.00 Meal Subsidy 579,390.00 Other Employees Welfare 3,175.00 Total p 82,164,831.35 . I ---- -�--- --- ---- Pursuant to Section 32(B)(7)(f) of the NIRC of 1997, as amended, the said SSS/Medicare premiums and Pag-ibig contributions should be excluded from taxable compensation. A. Increments for Late Filing of WTC Return for March 2003- P199,397 .39 For the belated filing of its WTC return for March 2003, petitioner was assessed deficiency increments in the amount of P199,397.39, as computed below, pursuant to Sections 248 and 249 of the NIRC of 1997, as amended: Tax base p 705,224.01 I Surcharge p 176,306.00 Interest Compromise 3,091.39 Total 20,000.00 p 199,397.39 y - ---

DECISION CTA Case Nos. 7696 & 7728 According to petitioner, it was able to manually file its WTC return for March 2003 and remitted the corresponding withholding tax due thereon with notice to and approval of the BIR Large Taxpayers Assistance Division. Records reveal that Exhibit '']]]]" with sub-markings served as proof of the manual filing and payment of the March 2003 WTC tax due, which were both made on April 15, 2003. On the other hand, Exhibit "IIII" with sub- markings was presented to show that petitioner e-flled its WTC return on April 23, 2003. However, the Court rules that taxpayers who are enrolled in the Electronic Filing System (EFPS) are covered by the rules and regulations of EFPS, and therefore, the e-filed return prevails over the manual return. Moreover, the relevant EFPS rules provide that manual filing is allowed only if there has been a crash in the system on the deadline of filing. Proof of this circumstance was not alleged nor presented by petitioner to the Court. In relation to Sections 7 and 8.1 of RR No. 09-01, as last amended by RR 26-02 as quoted above, petitioner should have e-flled the WTC return for March 2003 and paid the corresponding WTC on April 14, 2003 (April 13, 2003 being a Sunday) instead of April 23, 2003. Thus, petitioner's WTC return for March 2003 was filed nine (9) days late and the corresponding WTC taxes were paid one (1) day late. Consequently, petitioner ought to pay the surcharge and interest related to the late filing of return and remittance of WTC for March 2003 as provided for under Sections 248 and 249 of the NIRC of the 1997, as amended, computed as follows: Tax base p 705,224.01 Surcharge p 176,306.00 Interest (P705,224.01 x 20% x 10/365 days) Total increments for late filing of 3,864.24 return/remittance of WTC for March 2003 p 180,170.24 Meanwhile, the assessment portion pertaining to the compromise penalty of P20,000.00 should be cancelled. Pursuant to Revenue Memorandum Order (RMO) No. 01-90, as amended by RMO No. 19-07, compromise penalties are only suggested in settlement of criminal liability, and may not be imposed or exacted on the taxpayer in the event that a taxpayer refuses to pay the same. Clearly, the compromise penalty implies a mutual agreement between the parties in respect of the thing or subject matter which is so compromised. The imposition of the compromise penalty without the conformity of the taxpayer is illegal and unauthorized. In this case, there was nothing in the records which would show that petitioner consented to the compromise penalty. Consequently, the compromise penalty should not be imposed and must be cancelled/"Y'

DECISION CTA Case Nos. 7696 & 7728 B. Underwithheld Tax on Professional Fees Received by JMK Lim-P10,800.00 The deficiency WTC assessment included one of petitioner's employees receiving both compensation and professional income with different application of withholding taxes. The said employee's compensation was subjected to graduated rates per Section 24 of the NIRC of 1997 and professional income using expanded withholding taxes. Both sources of income were treated as part of the employee's compensation as clearly defined in Section 32 of the NIRC of 1997. Petitioner did not refute the examiner's finding on this assessment item. Section 2.57.2 of RR No. 02-98, as last amended by Section 2 of RR No. 30-03, states: "Sec. 2.57.2. Income pqyments subJect to creditable withholding tax and rates prescribed thereon. - xxx (A) Professional fees, talent fees, etc., for seroices rendered lry individuals. - xxx XXX XXX XXX Notwithstanding the foregoing, if an individual recipient receives professional fees/talent fees/ directors fees in addition to salaries from the same payor, the said fees shall be considered as supplemental compensation and, thus be subject to the withholding tax on compensation. (Emphasis supplied) Based therefrom, both the compensation and professional fees paid by petitioner to JMK Lim shall be treated as compensation subject to WTC. Consequently, the assessed deficiency WTC in the amount of P1 0,800.00 shall be upheld. In sum, petitioner failed to prove that it properly withheld and remitted the taxes on the amount of P55,730,198.12 employees' compensation for the year 2003, computed as follows: Total Compensation p 82,164,831.35 Less: Exempt transactions (Exhibits "UUU-2" to "UUU-5" and N

DECISION CfA Case Nos. 7696 & 7728 "FFFFF-1 '') p 1,179,586.56 I Non-taxable 13th month 381,207.35 I SSS, GSIS, Pag-lbig 487,862.65 SSS premiums Medicare (employer's share) 44,000.00 2,092,656.56 Pag-ibig Contributions (employer's share) p 80,072,174.79 Total Compensation subject to withholding tax P23,863,323.51 24,382,441.68 Less: Transactions subjected to withholding tax 519,118.17 p 55,689,733.11 (Exhibits "UUU-2" to "UUU-5") 40,465.01 Taxable Salaries P55,730,198.12 Taxable 13th Month Compensation not subjected to withholding tax Add: Other findings Compensation related to the P10,800.00 underwithheld taxes fromJMK Lim (P10,800.00-:- 26.6897284%*) *Tax Due-:- Total Taxable Income P175,912.00-:- P659,100.00 = 26.6897284% Total Compensation~ot subjected t?withholding !ax Since prescription had already set-in for the months of January to November 2003, respondent's deficiency assessment for late filing of petitioner's WTC return for the month of March 2003 shall be cancelled. With regard to the under-withheld taxes from JMK Lim, the related compensation in the amount of P40,465.01 shall be considered to have been paid in December 2003 because no details were provided as to date of recording and/or payment thereof. Thus, only the following compensation items in the total amount of P2,840,015.00, which were included in respondent's assessment but pertaining only to the month of December 2003, shall be considered in determining petitioner's deficiency WTC liability: Account Title GLDate Amount Account No. 12/31/2003 512,315.00 Salaries 117 75101 12/31/2003 569,960.00 Sub-total 75101 12/31/2003 144,395.00 75101 1,226,670.00 12/31/2003 Overtime 118 1,713.00 ~ 75103 117 Exhibit "FFFFF-2". 118 Exhibit "FFFFF-3".

DECISION CTA Case Nos. 7696 & 7728 75103 12/31/2003 31,737.00 75103 12/31/2003 2,298.00 35,748.00 Sub-total 12/31/2003 12/31/2003 52,200.00 Office Subsidy Fund119 12,000.00 75104 12/31/2003 64,200.00 75104 12/31/2003 12/31/2003 14,100.00 Sub-total 12,400.00 12/31/2003 3,100.00 Allowances120 75105 12/31/2003 29,600.00 1 Sub-total 75105 12/31/2003 75105 161,296.00 12/31/2003 177,052.00 B o n u s e s 121 75106 12/31/2003 60,833.00 Sub-total 75106 12/31/2003 237,885.00 75106 12/31/2003 9,575.00 SSS Premiums122 12/31/2003 16,550.00 75201 12/31/2003 4,180.00 75201 30,305.00 75201 12/31/2003 12/31/2003 Sub-total 12/31/2003 12/31/2003 Pag-ibig 12/31/2003 800.00 Contributions 123 12/31/2003 1,700.00 12/31/2003 75202 12/31/2003 400.00 75202 2,900.00 75202 Sub-total Medical and Dental124 2,699.00 75203 75203 6,929.00 75203 75203 805.00 75203 75203 14,703.00 75203 75203 34,451.00 26,869.00 10,778.00 -- ------ 88,774.QO ?r 119 Exhibit "FFFFF-4". 120 Exhibit "FFFFF-5". 121 Exhibit "FFFFF-6". 122 Exhibit "FFFFF-8". 123 Exhibit "FFFFF-9". 124 Exhibit "FFFFF-10".

DECISION CfA Case Nos. 7696 & 7728 75203 12/31/2003 340.00 75203 12/31/2003 12,646.00 75203 12/31/2003 21,397.00 75203 12/31/2003 2,712.00 75203 12/31/2003 6,013.00 Sub-total 229,116.00 Hospital/Medical125 12/16/2003 19,015.00 75204 12/16/2003 11,387.00 75204 30,402.00 Sub-total Accident126 75206 12/22/2003 (583.00) Sub-total 75206 12/22/2003 (188.00) _(771.001 Meal Subsidy127 75212 12/31/2003 12,000.00 Sub-total 75212 12/31/2003 18,000.00 75212 12/31/2003 3,000.00 33,000.00 Parties & Gifts128 75211 12/31/2003 888,500.00 12/15/2003 75211 12/15/2003 8,000.00 12/15/2003 75211 12/18/2003 11,000.00 12/18/2003 75211 12/22/2003 1,000.00 12/22/2003 75211 12/22/2003 3,345.00 12/22/2003 75211 6,355.00 75211 507.00 75211 880.00 75211 556.00 75211 817.00 Sub-total 920,960.00 TOTAL --- --- - 2,840,015.00 -- ------ -----�� --- _ L _ _ ____ -- - From the above total amount of P2,840,015.00, the tax-exempt items, namely, SSS premiums Medicare in the amount of P30,305.00 and Pag-ibig Contributions in the amount P2,900.00, shall be excluded. On the other hand, the compensation of P40,465.01 related to the under-withheld taxes from JMK Lim shall be added. The resulting amount of P2,847,275.01 when compared with that subjected to WTC per petitioner's amended Monthly Remittance IV 125 Exhibit "FFFFF-11". 126 Exhibit "FFFFF-12". 127 Exhibit "FFFFF-15". 128 Exhibit "FFFFF-14".

DECISION CTA Case Nos. 7696 & 7728 Return of Income Taxes Withheld on Compensation (BIR Form No. 1601-C) in the amount of !>5,626,784.30, shows that petitioner has no deficiency WTC liability for the month of December 2003, as computed below: Total Compensation p 2,840,015.00 Compensation related to JMK Lim 40,465.01 Total Compensation Less: Exempt transactions p 2,880,480.01 SSS premiums Medicare (employer's share) p 30,305.00 Pag-ibig Contributions (employer's share) Total Compensation subject to withholding tax 2,900.00 33,205.00 Less: Compensation subjected to withholding tax129 Difference p 2,847,275.01 5,626,784.30 p (2,779,509.29) Deficiency Expanded Withholding Tax - P38,869,403.69 Respondent's computation of the deficiency EWT is shown below: EWT due on Actual Expenses subject to withholding p 30,021,558.86 EWT due on expenses subjected to withholding 13,646,035.55 EWT still due based on expenses not subjected to withholding tax p 16,375,523.31 Add: Other audit fmdings 7,126,786.67 b. Alphalist vs. SLP discrepancy 119,898.65 c. Discrepancy in taxpayer's Alphalist 473,291.82 (erroneous computation) 7,261.46 d. Late filin_g_ of the 1601E March 03 25,000.00 25,000.00 Basic P1,893,167.26 p 24,152,761.91 Surcharg_e 14,716,641.78 Interest 7 days p 38,869,403.69 ff Compromise e. Late filing of 1604E 2003 Amount still due Surcharge Interest p 14,716,641.78 Compromise Deficiency EWT 129 Exhibit 11WWW=l".

DECISION CTA Case Nos. 7696 & 7728 A. EWT Still Due Based on Expenses Not Subjected to Withholding Tax- P16,375,523.31 Records reveal that respondent listed down all the expense accounts/income payments subject to EWT as found in the Annual Income Tax Return (AITR), Trial Balance (TB) and Audited Financial Statements (AFS) of petitioner for the taxable year 2003, and imposed a specific EWT rate based on the nature of the expense/income payment130. Petitioner alleged that respondent made a mistake in applying the correct tax rates which were based on the nature of the accounts in the books of petitioner. Moreover, petitioner argued that respondent failed to differentiate those expenses which are actually not subject to EWT, such as payments to general professional partnerships, non-resident foreign corporations on services performed outside the Philippines, payments to tax-exempt entities or other entities enjoying tax incentives, among others. On the other hand, the ICPA noted that professional fees paid to general professional partnerships which are exempted from EWT amounted to P1,650,848.65, with EWT equivalent of P165,084.87. Said expenses were properly booked and supported by statements of accounts and/or petitioner's checks that cleared through the respective depositary banks131 � Section 22(B) of the NIRC of 1997, as amended, defines general professional partnerships (GPPs) as partnerships formed by persons for the sole purpose of exercising their common profession, no part of the income of which is derived from engaging in any trade or business. Corollary thereto, Section 26 of the said law provides that a general professional partnership shall not be subject to income tax. Its partners are the ones liable in their individual capacity for the payment of income tax. In relation thereto, Section 2.57.5 of RR No. 2-98, as amended by RR No. 14-02, states: "Sec. 2.57.5. Exemption from Withholding.- The withholding of creditable withholding tax prescribed in these Regulations shall not apply to income payments made to the following: XXX XXX XXX /'(' �13 CTA Case No. 7696, BIR records, pp. 391-393. 131 Exhibit "AAAAA", p. 12; Exhibits "UUUU-1" to "UUUU-17".

DECISION CTA Case Nos. 7696 & 7728 (B) Persons enjoying exemption from payment of income taxes pursuant to the provisions of any law, general or special, such as but not limited to the following: (4) General professional partnerships XXX XXX xxx" Petitioner has satisfactorily shown that it made payments to GPPs in the amount of P1 ,650,848.65, hence the related EWT of P165,084.87 must be deducted from the assessed amount. The ICPA also observed that upon arriving at the assessment, respondent doubly subjected to EWT certain expenses amounting to P2,025,992.22, with EWT equivalent of P86,691.08. According to the ICPA, these items were included both in the per account basis and the comparison between SLP and 1604-CF, as follows 132 : Per SLP vs. Alphalist Per FBDC account basis Purchases Input VAT Withholding Additional Account Amount EWT Assessments by Equivalem BIR 10% 518,681.00 51,868.10 51,868.10 Professional 480,000.00 48,000.0( Abello Fees 3,000.00 60.0( Concepcion 2,122.27 21.2: Regala 2% 35,891,975.50 3,589,197.55 717,839.51 Professional 17.77 Fees 90,000.00 900.0( Banco De Oro 1% 1,777.30 177.73 Rep.& 25,975.32 519.51 200.00 Entertainment 36,580.63 731.61 Citibank Visa 1% 20,000.00 2,000.00 209.04 Professional 250,840.00 25,084.0( Fees 476,177.00 De Borja 2% 10,451.90 1,045.19 Rep.& 4,761.7~ Mediaidea Entertainment Equitable Card Networks, Inc. 2% 487,045.60 48,704.56 9,740.91 Various Fort Bonifacio Dev't. Corp. 10% 200,000.00 20,000.00 20,000.00 Professional Lim Ocampo & Fees Candelaria Mannasoft 1% 2,336,550.00 233,655.00 23,365.50 Professional Techonolgy Fees Corp. Nera Philippines, 1% 661,290.90 66,129.09 6,612.91 Building 661,297.00 6,612.9~ Inc. 40,127,772.20 4,012,777.22 829,853.74 2,025,992.22 TOTAL 86,69t.m However, the ICPA failed to illustrate how the amounts and corresponding payees and expense classifications were arrived at. No /Y 132 Exhibit "AAAAA", p.12 and Annexes C.3 and C.4; Exhibit "EEEEE", p. 2.

DECISION CTA Case Nos. 7696 & 7728 documentary evidence was presented to show that these specific amounts were indeed included in both computations and subjected twice by respondent to EWT. At any rate, based on the Supplemental Judicial Affidavit133 of Ms. Anna Lisa P. Mesina, Tax Accountant of petitioner, respondent doubly subjected two accounts to deficiency EWT - Communication, Light and Water; and Director's Fees/Management Fees, based on respondent's working pa pers 134 � i. Communication, Light and Water (P112,437,313.00) According to Ms. Mesina, respondent used the same expense item of Communication, Light and Water perFS in the amount of P112,437,313.00 to the respondent's per account basis of finding EWT discrepancies twice135� From respondent's computation136, it can be gleaned that for the line item 'Utilities and water subsidy', the amount ofP110,141,000.00 under the per FS column was assessed, while for the line item entitled 'Communication', the amount of P112,437,313.00 under the per ITR column was assessed, upon comparison with the amount of P2,296,000.00 under the per FS column. According to petitioner, if the amount of Utilities and Water per FS is added to Communication per FS, the total amount would also be P112,437,000.00. Evidently, both P110,141,000.00 and P112,437,313.00 were considered by respondent in arriving at the EWT due on Actual Expenses subject to Withholding. Upon this Court's verification, the figures mentioned in the affidavit can be found under Note 14 of the AFS 137 and AITR 138 for the year 2003 of petitioner. Moreover, petitioner presented a GL run that bear the descriptions 'Electricity and Power' with account no. 75402 and payee of Manila Electric Co., 'Water' with account no. 75403 and payee of Bonifacio Water Corp. and 'Telephone and Fax' with account no. 75506 and payees Smart Communications, Inc. and Philippine Long Distance Tel Co 139 which sum up , to P112,437 ,761.00. As such, the Court finds that there was double imposition of deficiency EWT by responden~ 133 Exhibit "EEEEE-3". 134 CTA Case No. 7696, BIR records, pp. 391-393. 135 Exhibit "EEEEE-3", pp. 9-12. 136 CTA Case No. 7696, BIR records, pp. 391-393. 137 Exhibit "RRRR-5", FBDC's Notes to Parent Company Financial Statements, p. 16. 138 Exhibit "RRRR-3", Section D, line 98. 139 Exhibit "KKKKK".

DECISION CTA Case Nos. 7696 & 7728 The question that remains, however, is whether "Communication, Light & Water" in the amount of P112,437,313.00 was indeed subjected to EWT. Upon verification of this Court, petitioner failed to present evidence to show that the corresponding EWT was already withheld from the billing statement, or that income payments relating to such expenses were reported. Thus, the Court was unable to ascertain if the entire expense attributable to "Communication, Light & Water" was indeed subjected to EWT. Considering the foregoing, the assessment should be decreased by P2,202,820.00 (computed as P110,141,000.00 x 2% EWT). ii. Director'sfees (?30,839, 104.00) Another account that was allegedly subjected twice to EWT per respondent's audit pertains to management fees/ director's fees in the amount ofP30,839,104.00 per AITR. Portion of the witness' testimony reads as follows 140: (36) "Q: What other items have you determined to have been subjected twice to the expanded withholding tax based on the computation and assessment findings of the BIR?" A: We have noted that the amount of P30,839,000.00 for management fees taken from the 2003 audited F /S of FBDC and the same amount of P30,839,104.00 taken from the amended ITR of FBDC under the expense item "Director's Fees" which the difference of P1 04.00 due to the rounding off of the figures in the audited F /S to the nearest thousands relate or pertain to the same transaction and therefore, by imposing or subjecting the same to expanded withholding tax, although at different rates, effectively subjected the said expense item to tax twice. (37) Q: How could these items, which are management fees on one hand and director's fees on the other, although having the same amount except for a minimal difference, refer to the same item or transactionsj./ 140 Exhibit "EEEEE-3", p. 13.

DECISION CTA Case Nos. 7696 & 7728 A: Based on the assessment findings of the BIR examiners, the figures or amount of P30,839,000.00 refer to management fees subjected by the BIR examiners to 10% expanded withholding tax on professional fees were taken from the 2003 audited F/S of FBDC, particularly on page 16, Note 14 of the Notes to F /S, which is part of the items comprising general and administrative account. And the figures or amount of P30,839,104.00 referring to director's fees, which were subjected by the BIR examiners to 20% expanded withholding tax, were taken from the amended ITR of FBDC, particularly on Section D on deductions under item no. 79. We verified the breakdown of these two account and we have determined that actually the amounts or the accounts for both were comprised of director's fees with GL account no. 75804 and estate management fees with GL account No. 63015." In this regard, Ms. Anna Lisa Mesina provided the Court with the GL extractions of account Nos. 75804 and 63015, representing Director's fees (P3,300,000.00) and estate management fees (P27,539,099.00) which, when added together, total to P30,839,104.00. The same was marked as Exhibit "LLLLL". In the same Affidavit141 , Ms. Mesina proceeded to explain to the Court the nature of the estate management fees. According to her, estate management fees are being paid to Bonifacio Estate Services Corporation (BESC) for development control functions that BESC performs on petitioner's owned or controlled areas, and to Bonifacio Global City Estate Association (BGCEA), Inc. for the estate or association dues. In this regard, petitioner alleged that development control fees and association dues paid to BESC and BGCEA, respectively, are not subject to expanded withholding tax, invoking BIR Ruling No. DA-008-200 dated January 5, 2000 wherein it was ruled that assessments or charges collected by BGCEA from its members to be used for administrative expenses, utilities and amenities for public use, and maintenance do not form part of the gross income of BGCEA and not subject to income tax and consequently to expanded withholding tax. Consequently, this Court has ruled that "association/condominium dues, membership fees and other assessment/charges collected from the members, which are merely held in trust and which are to be used solely for administrative expenses in implementing their purpose(s), vi=\;, to protect and safeguard the welfare of the owners, lessees and occupants; provide utilities an~ 141 Exhibit "EEEEE-3", pp. 15-16.

DECISION CTA Case Nos. 7696 & 7728 amenities for their members, and from which the corporation could not realize any gain or profit as a result of their receipt thereof, must not be included in said corporation's gross income. This means that the same are not subject to income tax and to withholding tax". 142 To prove that its income payments to BESC and BGCEA are indeed association dues and development control fees, petitioner provided official receipts which are summarized as follows: Payee OR No. OR Date Amount Exhibit No. Bonifacio Estate Services p 200,000.00 "05" Cot:poration 3400 08/01/2003 400,000.00 "05-1" Bonifacio Estate Services Corporation 3526 10/24/2003 Bonifacio Global City Estate Association 0952 11/28/2003 10,980,701.99 "G6-2" Total - --- ----- ---- -- -- p 11,580,701.99 -- -- The Court traced the above amounts to the general ledger and found that these were booked under "Estate Management Fees" account. Moreover, it was noted that the amount of maintenance dues paid to BGCEA per books totals P10,992,148.00, which leaves a discrepancy of P11,446.01. Nonetheless, what will be taken into account is the amount per OR No. 0952. Based on these supporting documents, the Court is not convinced that the account "Director's Fees" per petitioner's AITR actually pertains to maintenance fees and development control fees that qualify for exemption from income tax, and consequently, to EWT, save for the substantiated amount ofP11,580,701.99. As to whether petitioner is correct in alleging the double taxation on these director's/management fees, the Court is convinced that "Director's Fees" per AITR and "Management Fees" per AFS refer to one and the same set of expenses. Considering the foregoing, the Court declares that the 10% EWT assessment, imposed on "Management Fees" per BIR computation, should be cancelled completely on the ground of double taxation. On the other hand, the 20% deficiency EWT imposed on Director's Fees should likewise be cancelled, but only up to the extent of the related expense for which substantiation was presented in the amount of P11,580,701.99 with an EWT equivalent of P2,316,140.40~ 142 Officemetro Philippines, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 8382, dated June 3, 2014.

DECISION CTA Case Nos. 7696 & 7728 In sum, the Court rules that respondent's assessment on the EWT due on Actual Expenses subject to withholding should be reduced by a total amount ofP7,767,955.66, broken down as follows: Professional fees paid to GPPs Expense EWT Rate EWTDue Expenses doubly subjected to Amount 10% p 165,084.87 EWT by respondent: p 1,650,848.65 Utilities & Water Subsidy 110,141,000.00 2% 2,202,820.00 Management fees 3,083,910.40 Association Dues and 30,839,104.00 10% Development Control Fees included in the "Director's 11,580,701.99 20% 2,316,140.40 Fees" account p 7,767,955.66 p 154,211,654.64 L__ B. Alphalist vs. SLP Discrepancy - P7 ,126, 786.67 Upon scrutiny, the Court finds that respondent arrived at the discrepancy by taking the input VAT reported per SLP, and grossing up the input tax by 10%, in order to get the tax base which respondent then subjected to the EWT rate based on the Alphanumeric Tax Code (ATC) assigned to the income payee per alphalist. With respect thereto, the ICPA reported that a certain P23,019.36 (representing deficiency tax assessed on total expenses in the amount of Pl ,865,802.00) pertains to EWT on income payments already declared in the 2003 alphalist. The summary is presented in the ICPA Report143 as Annex "C2", as follows: Income payee ATC Expenses not withheld per BIR Per FBDC Alphalist Canon Marketing Phils. Amount Rate Withholding Amount Rate Withholding Inc. E-Plus Stationery, Inc. WC158 321,078.70 1% 3,210.79 3,600.00 1% 36.00 Elizabeth B. Ancaja WC158 466,165.80 1% 4,661.66 40,972.00 1% 409.72 WI120 11,493.80 10% 1,149.38 14,210.00 2% 284.20 Elizabeth B. Ancaja WC158 4,391.00 1% 43.91 WC158 1,380,705.20 1% 13,807.05 Gracepark International WC120 2,336,550.00 1% - 4,355.45 Mannasoft Technology WC160 1,404,087.50 2% 2,699.28 Corporation 13,807.05 1,380,705.00 1% Manpower Outsourcing ~ 23,365.50 217,772.50 2% 28,081.75 134,964.00 2% ---- 143 Exhibit "AAAAA".

DECISION CTA Case Nos. 7696 & 7728 Services, Inc. Super Fix Auto Concept WC120 790,627.50 2% 15,812.55 69,187.50 2% 1,383.75 90,088.68 1,865,802.00 23,019.36 TOTAL 6,710,708.50 The contested amounts are found at the latter part144 of respondent's EWT working papers. Relative thereto, it can be observed that income payments found therein were only subjected to VAT and reported through the SLP, and not subjected to EWT. Hence, the discrepancies. The Court find for petitioner. The Court observes that the procedure of respondent in considering all expenses of petitioner for the year 2003 in the ITR or FS, or both, in the computation of deficiency EWT, is already all-encompassing. Therefore, it would be prejudicial to the petitioner if the assessment of deficiency tax is allowed based merely on the discrepancies in reporting. C. Discrepancy in Taxpayer's Alphalist (erroneous computation) - P119,898.65 Again, the Court observes that the assessment on erroneous computation has no effect because the procedure wherein all expenses in the FS and ITR of petitioner were subjected to EWT has already covered any mistake in reporting in the Alphalist. Hence, the Court finds that this assessment should be canceled. D. Late Filing of 1601-E March 2003 and Late filing of 1604-E for CY 2003 Petitioner argued that it was able to manually file the EWT return for March 2003 and pay the corresponding tax due for the said period on April 15, 2003, with notice to and approval of the BIR Large Taxpayers Assistance Division (LTAD). The Annual Information Return of Creditable Income Taxes Withheld145 (1604-E) was likewise manually flied with the BIR on March 1, 2004, which is within the deadline provided by existing regulations. Upon scrutiny of the pieces of evidence presented, petitioner manually flied the 1601-E for March 2003 with the Large Taxpayers Division146 and ~ 144 CTA Case No. 7696, BIR records, pp. 361-363. 145 Exhibits "N" and "0". 146 Exhibit "HHH".

DECISION CTA Case Nos. 7696 & 7728 subsequently manually paid the tax due on April 15, 2003 147 � There was a notation on the face of the manually filed return stating "for e-filing up to 4/30/03". However, the Court cannot ascertain if the notation was indeed from the LTAD, as there was no signature, name and position title of the person from LTAD who indicated such notation. Consequently, taxpayers who are enrolled in the Electronic Filing and Payment System (eFPS) of the BIR are covered by the rules and regulations of eFPS. Therefore, thee-filed return prevails over the manual return. Moreover, the eFPS rules provide that manual filing is allowed only if there has been a crash in the system on the deadline of filing. Proof of this circumstance was not alleged nor presented by petitioner to the Court. Nevertheless, the Court disagrees with respect to the amounts assessed by respondent for late filing. The portion pertaining to the compromise penalty of P25,000.00 should not be included, as previously discussed. Also, pursuant to Sections 7 and 8.1 of RR No. 09-01, as last amended by RR No. 26-02, petitioner should have e-filed the EWT return for March 2003 on April 14, 2003 (April 13, 2003 being a Sunday) instead of April 22, 2003 and paid the corresponding EWT on the same date of April 14, 2003 instead of April 15, 2003. Hence, petitioner should pay the surcharge and interest related to the late filing of EWT return for March 2003, as follows: Tax base p 1,893,167.26 Surcharge p 473,291.82 Interest ~1,893,167.26 x 20% x 9/365 days) 9,336.17 Total increments for late filing of return/remittance of EWT for March 2003 p 482,627.98 On the other hand, petitioner's 1604-E was manually filed on March 1, 2003, and electronically filed on March 2, 2003 Oate), as discussed above. However, the compromise penalty in the amount of P25,000.00 imposed on the late filing should be cancelled. In sum, petitioner failed to prove that it properly withheld and remitted the EWT due on the amount of P303,527,056.86 expenses subject to withholding: Actual Expenses not subjected to withholding as found p 1,650,848.65 p 457,738,711.50 by respondent /V Less: Adjustments P~fessional fees paid to GPPs 147 Exhibit "GGG".

DECISION CTA Case Nos. 7696 & 7728 Expenses doubly subjected to EWT by respondent 110,141,000.00 154,211,654.64 30,839,104.00 P303,527 ,056.86 Utilities & Water Subsidy Management fees 11,580,701.99 Association Dues and Development Control Fees included in the "Director's Fees" account Actual expenses not subjected to withholding Since prescription had set in, respondent's right to assess petitioner of deficiency EWT shall only be limited to December 2003. Thus, after taking into account all the December expense transactions for which petitioner provided detailed breakdown per general ledger (GL), petitioner is liable for deficiency EWT in the amount ofP6,815,989.95, broken down as follows: Income Payments EWT Rate EWTDue Purchases of Goods 1% Purchases of Services 2�/o p 54,182.02 Professional Fees 10% Director's Fees 20% 3,138,194.53 Rentals 5% Total 400,141.70 3,050,551.40 172,920.30 p 6,815,989.95 148 Deficiency FBT - P6,399,723.81 Respondent found that there were expense items, i.e., representation and entertainment, transportation and travel and membership fees, which petitioner failed to subject to FBT pursuant to Section 33 of the NIRC of 1997, RR 2-98 and RR-38. Hence, respondent assessed petitioner of the corresponding deficiency FBT in the amount ofP6,399,723.81, computed as follows 149: Representation and Entertainment p 5,734,965.00 Transportation and Travel 350,399.00 Membership Fees 2,653,534.00 Grossed up value p 8,738,898.00 Rate Fringe benefits tax due 0.68 FBT payments p 12,851,320.59 Amount still due Surcharge 0.32 p 4,112,422.59 174,026.94 p 3,938,395.64 ---�-- -- - /�' 148 See details per Annex A. 149 Exhibit "13", CTA Case No. 7696, BIR records, pp. 536 and 538.

DECISION CTA Case Nos. 7696 & 7728 Interest 1-15-04 to 1-31-07 p 2,399,723.81 Compromise 2,399,723.81 p 6,399,723.81 Deficiency Final Withholding Tax - Fringe Benefits Petitioner, on the other hand, maintains that the deficiency FBT assessment was computed on erroneous presumptions, citing Collector ofInternal Revenue v. Benipqyo 150 as basis. Particularly, petitioner raised the following arguments: (a) The treatment by the respondent of the representation and entertainment expense of the petitioner as fringe benefits granted to its employees other than rank and file is erroneous and unjustified. These expenses, included expenses for transportation and travel, are incurred by the petitioner in connection with the conduct of its trade or business. Also according to petitioner, the nature of its business as a real estate developer, which deals with not only prospective buyers and tenants but also with brokers, agents and contractors among others, will necessitate actual representation expenses. Petitioner cited Section 33(A) of the NIRC of 1997 in relation to Section 2.33 of RR No. 03-98, which prescribe the following conditions in order that fringe benefits shall not be subject to FBT: (1) The fringe benefit is required by the nature of or necessary to the trade or business of the employer; (2) The fringe benefit is for the convenience or advantage of the employer. (b) With regard to the deficiency FBT imposed on the alleged membership fees and dues, the same allegedly pertain to condominium dues paid by petitioner on the condominium units it held for sale. No employee or officer of the petitioner ever benefitted from these condominium units as these units were intended for sale to third party buyers. As such, the payment of said dues is not subject to FBT/'1' 150 4 SCRA 182, "As assessment fixes and determines the tax liability of a taxpayer. As soon as it is served, an obligation arises on the part of the taxpayer concerned to pay the amount assessed and demanded. Hence, assessments should not be based on mere presumptions no matter how reasonable or logical said presumptions may be. The assessment must be based on actual facts. The presumption of correctness of assessment being a mere presumption cannot be made to rest on another presumption."

DECISION CTA Case Nos. 7696 & 7728 As to the allegation that respondent's assessment was only based on erroneous presumptions, the Supreme Court, in the case of Commissioner of Internal Revenue vs. Hantex Trading Corporation, 151 ruled: "We agree with the contention of the petitioner that, as a general rule, tax assessments by tax examiners are presumed correct and made in good faith. All presumptions are in favour of the correctness of a tax assessment. It is to be presumed, however, that such assessment was based on sufficient evidence. Upon the introduction of the assessment in evidence, a prima facie case of liability on the part of the taxpayer is made. If a taxpayer flies a petition for review in the CTA and assails the assessment, the prima facie presumption is that the assessment made by the BIR is correct, and that in preparing the same, the BIR personnel regularly performed their duties. This rule for tax initiated suits is premised on several factors other than the normal evidentiary rule imposing proof obligation on the petitioner- taxpayer: the presumption of administrative regularity; the likelihood that the taxpayer will have access to the relevant information; and the desirability of bolstering the record-keeping requirements of the NIRC. However, the prima facie correctness of a tax assessment does not apply upon proof that an assessment is utterly without foundation, meaning it is arbitrary and capricious. Where the BIR has come out with a "naked assessment," i.e., without any foundation character, the determination of the tax due is without rational basis. 152 In such a situation, the U.S. Court of Appeals ruled that the determination of the Commissioner contained in a deficiency notice disappears. Hence, the determination l?J the CTA must rest on all the evidence introduced and its ultimate determination must find support in credible evidence." In view of the above discussion, the Court shall scrutinize the pieces of evidence submitted by petitioner. A. Representation and Entertainment (P5,734,965.00) According to petitioner's witness, Ms. Anna Lisa P. Mesina, Representation and Entertainment expense is comprised of three accounts per books: (1) "meetings", with GL account no. 75603; (2) "parties and gifts" with /V' 151 G.R. No. 136975, March 31, 2005. 152 ld., citing United States v. Janis, 49 L. Ed. 2d 1046 (1976); 428 US 433 (1976).

DECISION CTA Case Nos. 7696 & 7728 GL account no. 75211; and (3) "representation and entertainment" with GL account no. 75602 153 . The said schedule was presented as Exhibit "HHHHH". The GL entries under the individual accounts were congruent with the account titles, although some entries were for petty cash fund (PCF) replenishment, while other entries had no descriptions on them. However, petitioner did not present any other proof besides the above- mentioned schedule which was supposedly extracted from the actual general ledger. Thus, the Court finds this document insufficient to prove that representation and entertainment account is composed of expenses that are not supposed to be subject to FBT, since the schedule was internally produced by petitioner and therefore, highly self-serving. Considering the foregoing, the Court finds that the deficiency FBT imposed on representation and entertainment account should be sustained, save for the deficiency FBT pertaining to the amount of P938,500.00 154 classified under general ledger account "Parties and Gifts", which was already subjected to deficiency WTC by respondent. B. Transportation and Travel (P350,399.00) Transportation and Travel is comprised of the following GL accounts: (1) "fare-local travel" with GL account no. 75701; (2) "other travel expenses" with GL account no. 75704; (3) "registration of vehicles" with GL account no. 75904; and (4) "tires batteries and accessories" with GL account no. 75903 155 � The said schedule was presented as Exhibit "IIIII". However, For the same reasons cited in the immediately preceding discussion, the Court finds that the deficiency assessment imposed on transportation and travel account also be upheld. C. Membership Dues (P2,653,534.00) According to petitioner, membership dues are booked into two (2) different accounts, which are "membership dues" with GL account no. 75301 and "subscriptions" with GL account no. 75303156� Petitioner provided Exhibit "JJJJJ" which is the GL schedules for both account~ 153 Exhibit "E5-2", Q&A no. (63), p. 19. 154 Exhibit "E5-2", Q&A 70-73, pp. 20-21; Exhibits "FFFFF-14" and "HHHHH". 155 Exhibit "E5-2", Q&A no. (64), p. 19. 156 Exhibit "E5-2", Q&A no. (65), p. 19.

DECISION CfA Case Nos. 7696 & 7728 The Court notes that the entries made in the "membership dues" account were mostly sports and country club membership fees, some are named after management officers of petitioner, as evidenced by some official receipts in the table above. In her Supplemental Judicial Affidavit,157 petitioner's witness, Ms. Anna Lisa P. Mesina, mentioned the last three entries in the GL run for account no. 75301, which reflects the amounts recorded on November 30, 2003 as follows: P479,347.00, P525,194.00 and P737,054.00. According to her, these expenses represent association dues paid to Regent Parkway Corporation, where petitioner owns several condominium units. Meanwhile, Ms. Mesina clarified that these units are part of the inventory of real properties for sale of petitioner, and that none of petitioner's officers or employees lived in these condo units. In support thereof, petitioner provided several Deeds of Sale between petitioner and third-party buyers to prove that units in Regent Parkway Condominium are part of their inventory, and not for use of their employees. The same were presented as Exhibits "WWWWW" to "WWWWW-16". However, the Court finds that these documents do not prove the veracity of petitioner's claim that the payments actually pertain to association dues. It bears stressing that basic is the rule that mere testimonies are self- serving if they are not supported by documentary evidence within his reach, and it is the settled rule that the presumption is always and inevitably against a litigant who fails to furnish evidence within his reach, and it is stronger when documents, writings, etc., would be conclusive in establishing his case.158 On the other hand, in the "subscriptions" account, Ms. Mesina pointed out GL record made on 02/18/03 in the amount of P248,167.00, which pertains to petitioner's payment to J.D. Edwards computerized accounting system adopted and used by the company at the time. However, petitioner failed to present supporting documents to prove that a transaction transpired between petitioner and J.D. Edwards, and payment was made in consideration therefore. Hence, the Court is unable to ascertain the truthfulness thereof. The same holds true with the alleged subscription fees paid to Bloomberg in the amount of P272,420.00, as petitioner failed to substantiate such payment./"" 157 Exhibit "EEEEE-3", p. 4. 158 Republic vs. Sandiganbayan, G.R. No. 112708-09, March 29, 1996.

DECISION erA Case Nos. 7696 & 7728 Again, the Court cannot simply give credence to the testimonies of Ms. Mesina without presenting supporting evidence, as above-discussed. Therefore, respondent's assessment on membership dues should be upheld. According to the Court-commissioned ICPA, she obtained BIR Form No. 1604-CF that petitioner ftled for taxable year 2003 to verify if the fringe benefits furnished to managerial and supervisory employees declared and recorded in the books of accounts were subjected to FBT159. Furthermore, the ICPA stated that out of the protested amount, her verification revealed that expenses amounting to P55,477.67 are supported by official receipts proving that expenses relating to the said amount should not be subject to FBT160. The same is summarized under Annex "D" of the ICPA Report. Below is the summary of the exhibits presented, with modifications deviating from the Annex "D" prepared by the ICPA based on verification of this Court: Supplier Amount Date Supporting Doc. No. Exhibit Alabang County Club, document No. Inc. Statement of Capitol Hills Golf & p 22,000.00 January 2003 Account None "XXX:X-1" Country Club Personnel Management 1,227.67 16-Feb-03 Official Receipt 261382 '':XXX:X-2'' Association Sta. Elena Golf Club, 5,500.00 02-Apr-03 Official Receipt 54266 "XX)L"'{-6" Inc. Sta. Elena Golf Club, 3,000.00 26-Mar-03 Official Receipt 79471 ''XXX:X-7'' Inc. 6,000.00 06-Mar-03 Official Receipt 79472 ":X...,'OO{-8" Ana Maria G. Bondoc Official Receipt 30064 ''XXX:X- 11,250.00 19-Dec-03 Official Receipt 73790 Nature's Touch Official Receipt 77154 11" 1,500.00 21-Mar-03 Official Receipt "XXX:X- Nature's Touch 596 Henry L. Yap 4,000.00 22-Dec-03 ----- - 15" TOTAL 2,000.00 18-Feb-03 ''XXX:X- p 56,471�67 18" None The Court notes that most supporting documents were issued in the name of petitioner, except for the following: Statement of Account from Alabang Country Club, Inc. in the amount of P22,000.00 which was issued in the name of Mr. Mariano Galicia Jr.; OR from Capitol Hills Golf & Country Club in the amount ofP1,227.67 which was issued in the name of Atty. Luis B. Pangilinan, petitioner's Assistant Corporate Secretary; and OR from Sta. Elena fr 159 Exhibit 11AAAAA11, p. 6. 160 Exhibit 11AAAAA", p. 13.

DECISION CTA Case Nos. 7696 & 7728 Golf Club, Inc. in the amount of P3,000.00 which was issued in the name of Vicente C. Tinsay, petitioner's SVP for Commercial Operations. The Court further notes that some of the expenses as described in the payment request attached, were incurred for celebrations such as petitioner's office blessing and Bonifacio Day decorations. Specifically, payment to RRL Nature's Touch in the amount of P4,000.00 was for a wreath displayed during Bonifacio Day, and payment to Ana Maria Bondoc in the amount of P11 ,250.00 was for the catering services rendered during the office blessing. Finally, the Court likewise observes that Exhibit ":XXXX-6" and supporting document to the payment to Henry L. Yap are not in the records. In sum, petitioner failed to prove that it properly withheld and remitted the FBT due on the following expenses totaling P7,777,648.00: Representation and Entertainment p 5,734,965.00 Transportation and Travel 350,399.00 Membership Fees 2,653,534.00 Total Fringe Benefits Per Assessment p 8,738,898.00 Less: Adjustments 938,500.00 "Parties and Gifts" under the "Representation and Entertainment" account had already been subjected 22,750.00 to deficiency WTC by respondent p 7'777,648.00 Duly supported expenses not subject to FBT161 Total Fringe Benefits as Adjusted To reiterate, however, respondent's right to assess petitioner for deficiency FBT had already prescribed for the first three quarters of taxable year 2003, pursuant to Section 5 of RR No. 04-02, in relation to Section 203 of the 1997 NIRC, as amended. Hence the Court determined the amount of Representation and Entertainment, Travel and Transportation, and Membership expenses recorded in the last quarter of 2003, and compared the same to the expenses subjected to FBT per BIR Form No. 1603 for the fourth quarter of 2003, as follows: October November December Total /Y' 161 Exhibits "XXXX-8", "XXXX-11", "XXXX-15" and "XXXX-18".

DECISION CTA Case Nos. 7696 & 7728 Representation and P19,064.00 p 12,845.00 P2,616,042.00 p 2,647,951.00 Entertainmene 62 Transportation and 3,225.00 2,670.00 244,432.00 250,327.00 Travel163 - 1,742,665.00 - 1,742,665.00 Membership Dues164 p 4,640,943.00 Total 4th quarter expenses subject to FBT 3,900.00 P4,637 ,043.00 Expense amount subjected to FBT by petitioner in the 4th Q uarter 165 Difference Since prescription had already set in, out of the valid supporting documents in the amount of P22,750.00 166 only the amount of P15,250.00167 , pertaining to the un-prescribed fourth quarter will be considered in the Court's computation. Considering the above discussions, petitioner is liable for basic deficiency FBT in the amount ofP2,173,126.12, computed as follows: Representation and Entertainment October November December Total Transportation and Travel P19,064.00 p 12,845.00 P2,616,042.00 p 2,647,951.00 3,225.00 2,670.00 244,432.00 250,327.00 Membership Dues 1,742,665.00 - 1,742,665.00 ! Total 4th quarter expenses subject to - i FBT Less: Expense amount subjected to p 4,640,943.00 FBT by petitioner in the 4th 3,900.00 Quarter Difference p 4,637,043.00 Less: Duly supported expenses not 15,250.00 subject to FBT Unsupported expenses subject to FBT p 4,621,793.00 p 6,796,754.41 Gross Up Value (68%) p 2,174,961.41 Deficiency FBT per this Court's 1,835.29 verification (32%) Less: FBT payment in the 4th Quarter ?/ 162 Exhibit "HHHHH", net of the amount of P888,500.00 recorded under the account "Parties and Gifts" which was subjected also to deficiency WTC by respondent. 163 Exhibit "IIIII". 164 Exhibit ""JJJJJ". 165 Exhibit "MMMM-1-a". 166 Exhibits "XXXX-8", "XXXX-11", "XXXX-15" and "XXXX-18". 167 Exhibits "XXXX-11" and "XXXX-18".

DECISION P2,173,126.12 CTA case Nos. 7696 & 7728 ~ Basic deficiency FBT still due Deficiency Income Tax- P77 ,257,890.36 Finally, Respondent computed the deficiency income tax assessment as follows 168 : Revenues Per ITR Realized revenue on sale of real estate P1,205,596,247.00 Lease of Properties Interest on installment contracts 186,226,299.00 I Sales Non-operating & other income 450,000,000.00 Dividend from foreign subsidiary 75,558,726.00 Interest in installment sales 3,804,675.00 Development control fees 17,274,198.00 Realized forex gain 1,280,048.00 Marketing & management fees 830,652.00 Gain on sale of property 394,209.00 Miscellaneous P1 ,940,965,054.00 Cost and expenses Cost of real estate sold 938,062,042.00 Total General and Administrative Expenses 805,039,304.00 Marketing and Selling 37,961,444.00 Commissions 5,625,871.00 Others/(Advertising per ITR) P1, 786,688,661.00 INCOME FROM OPERATIONS p 154,276,393.00 Tax Due Less: Unexpired Payment MCIT p 49,368,445.76 a. Disallowed expenses not subjected to withholding tax 49,368,445.76 On Compensation On Expanded Withholding Tax -- On Fringe Benefits Tax (Expense) p 56,717,003.16 168 Exhibit "23", CTA Case No. 7728, BIR records, pp.l81-182. 16,375,523.31 8,738,898.00 /'Y

DECISION CTA Case Nos. 7696 & 7728 b. Discrepancy in interest income on installment contract per FS P7 6,150,000.00 591,274.00 vs. ITR 75,558,726.00 2,376,382.00 Per F/S Per ITR P3,3 79,382.00 3,661,380.03 1,003,000.00 c. Over-claimed Retirement expense-per monthly trial balance flnal Retirement expenses disallowed (debits to 9,861,790.74 retirement plan expense) 2,927,553.26 Retirement cost added back to taxable mcome per recon 592,264.48 13,381,608.48 d. Interest Arbitrage Computation (Non- 16,727,010.60 deductible expense) Interest Income subject to fmal tax 0.38 Interest inc. - ST Investment TB taken 6,356,264.03 from worksheet aud. 2,694,884.00 Interest inc. - ST Investment TB taken from worksheet aud. Interest Inc. - Bank Deposits TOTAL Grossed Up value at 80% Rate Interest Deduction Claimed as non-deductible interest exp. Discrepancy - Additional non-deductible portion of interest expense e. Debit to Miscellaneous Income (Batch 62,485,550.46 108747) Reduction of income account while reducing the advances-metro paciflc (asset) account Total P150,946,01 0. 96 Rate 32% Still Due Surcharge P48,302, 723.51 Interest (April 16, 2004 to April 15, 2007 Compromise P28,955,166.86 Deficiency Income Tax P77 ,257,890.36 Based on the above computation, it could be gleaned that the assessment arose from the following findings of respondent: A. Disallowed Expenses Not Subject to Withholding Tax on: (a) Compensation; (b) Expanded Withholding Tax and; (c) Fringe Benefits Tax - P81,831,424.4Y

DECISION CTA Case Nos. 7696 & 7728 Based on the computation of deficiency income tax reflected in the FLD, The Court finds that respondent erred in the amount she considered as disallowable expenses not subjected to EWT, because the amount of P16,375,523.31 is the EWT still due, not the related expenses. However, this error results in the disallowable expenses being exponentially greater than what has been assessed. Considering that the power to assess is lodged in the respondent and is not within the province of this Court, the Court is constrained to limit its findings based on respondent's assessment, albeit the erroneous computation per FLD. Furthermore and as previously discussed, the following discrepancies as to expenses not subject to tax should be upheld for the other taxes, as follows: a. WTC- P 55,730,198.12 b. FBT- P 7,777,648.00 Under Section 34(K), expenses could be deducted from taxable income only if the corresponding withholding has been imposed and remitted therefrom, to wit: "SEC. 34. Deductions from Gross Income. - Except for taxpayers earning compensation income arising from personal services rendered under an employer-employee relationship where no deductions shall be allowed under this Section other than under subsection (M) hereof , in computing taxable income subject to income tax under Sections 24(A); 25(A); 26; 27(A), (B) and (C); and 28(A), there shall be allowed the following deductions from gross mcome: (A) Expenses. - (1) Ordinary and Necessary Trade, Business or Professional Expenses.- XXX XXX XXX (K) Additional Requirements for Deductibility of Certain Payments. - Any amount paid or payable which is otherwise deductible from, or taken into account in computing gross income or for which depreciation or amortization may be allowed under this Sect ion, shall be allowed as a deduct io~

DECISION CfA Case Nos. 7696 & 7728 only if it is shown that the tax required to be deducted and withheld therefrom has been paid to the Bureau of Internal Revenue in accordance with this Section, Sections 58 and 81 of this Code." Considering that petitioner did not refute this finding of respondent and it likewise failed to substantiate its claim, the Court rules that the assessment with regard thereto should be upheld. B. Discrepancy in Interest Income on Installment Contract perFS vs. ITR- P591,274.00 Based on the records, the discrepancy computed by respondent was as follows: PerFS p 76,150,000.00 Per ITR 75,558,726.00 p 591,274.00 Basing from the Protest Letter dated May 9, 2007,169 petitioner stated that it has yet to verify the amount and submit supporting documents. However, petitioner failed to do the same. Moreover, the ICPA also made no mention of this assessment item170� Considering that respondent's bases for the amounts in the computation were accurate, the Court rules that the same be upheld. C. Over Claimed Retirement Expense - per Monthly Trial Balance - P2,376,382.00 According to respondent, the retirement expense was disallowed because there was no BIR letter of approval of the retirement plan provided by taxpayer in line with the compliance requirements of R.A. 4917. Retirement expenses charges to income amounting to P2,376,382.00 were disallowed - net of retirement cost added back by petitioner per FS-ITR reconciliation171 � The ICPA noted that petitioner's contribution to the retirement fund is actually exempt from tax under Republic Act No. 4917, as it is supported by BIR Ruling No. ERP-013-98 dated March 27, 1998 ~ 172 169 Exhibit "C", p. 3. 170 Exhibit "AAAAA", pp. 8-10. 171 CTA Case No. 7728, BIR Records, p. 180. 172 Exhibit "DDDDD".

DECISION CTA Case Nos. 7696 & 7728 Considering that petitioner was able to prove that it was actually able to secure a BIR letter of approval certifying the validity of its retirement plan, the Court rules that the amount ofP2,376,382.00 assessed should be cancelled. D. Additional Non-Deductible Portion of Interest Expense- P3,661,380.03 Based on the FLD, respondent made the assessment on this item because petitioner's Interest Income subject to final tax were verified to be understated, which was used as the basis for computing the non-deductible portion of interest expense as covered by the underlying provisions of Sections 34(B) of the 1997 NIRC, as amended and as applicable to the year 2003, to wit: "(B) Interest.- (1) In GeneraL - The amount of interest paid or incurred within a taxable year on indebtedness in connection with the taxpayer's profession, trade or business shall be allowed as deduction from gross income: Provided, however, That the taxpayer's otherwise allowable deduction for interest expense shall be reduced by an amount equal to the following percentages of the interest income subjected to final tax: Forty-one percent (41 %) beginning January 1, 1998; Thirty-nine percent (39%) beginning January 1, 1999; and Thirty-eight percent (38�/o) beginning January 1, 2000; (2) Exceptions. - No deduction shall be allowed in respect of interest under the succeeding subparagraphs: (a) If within the taxable year an individual taxpayer reporting income on the cash basis incurs an indebtedness on which an interest is paid in advance through discount or otherwise: Provided, That such interest shall be allowed a deduction in the year the indebtedness is paid: Provided, further, that if the indebtedness is payable in periodic amortizations, the amount of interest which corresponds to the amount of the principal amortized or paid during the year shall be allowed as deduction in such taxable year;/""

DECISION CTA Case Nos. 7696 & 7728 (b) If both the taxpayer and the person to whom the payment has been made or is to be made are persons specified under Section 36(B); or (c) If the indebtedness is incurred to finance petroleum exploration. (3) Optional Treatment of Interest Expense. - At the option of the taxpayer, interest incurred to acquire property used in trade business or exercise of a profession may be allowed as a deduct ion or treated as a capital expenditure." (Emphasis supplied) BIR records173 reveal that respondent computed for the discrepancy in the following manner: Interest Income Amount Interest inc. - ST Investment TB taken from worksheet aud. p 9,861,790.84174 Interest inc. - ST Investment TB taken from worksheet aud. 2,927,553.26175 Interest Inc. - Bank Deposits 592,264.48176 TOTAL 13,381,608.58 Grossed up value at 80% 16,727,010.60 Rate 38% Interest deduction 6,356,264.03 Claimed as non-deductible interest expense 2,694,884.00 Discrepancy- additional non-deductible portion of interest exp p 3,661,380.03 The Court compared the trial balance amounts to the FS-ITR reconciliation to check whether these were not indeed included in the interest income subject to final tax per ITR. Based on the Reconciliation of Net Loss per books versus taxable income attached to the Annual Income Tax Return, the Court found that petitioner treated as non-taxable income, Interest income subject to final tax only in the amount ofP2,741,168.00 and non-deductible interest expense in the amount of P2,694,884.00. In its protest letter, petitioner asserted that the said finding is incorrect and has no basis. However, it should be noted that the amounts in respondent's computation were simply taken from petitioner's trial balance/ 173 CTA Case No. 7728, BIR records, p. 133 174 CTA Case No. 7728, BIR records, p. 89, Trial Balance account no. 100.8101. 175 CTA Case No. 7728, BIR records, p. 87, Trial Balance account no. 200.8101. 176 CTA Case No. 7728, BIR records, p. 89, Trial Balance account no. 100.81011.

DECISION CTA case Nos. 7696 & 7728 Consequently, petitioner failed to provide supporting documents to refute the finding. On the other hand, the ICPA reported that petitioner failed to provide the necessary bank documents and related papers such as bank statement, vouchers and other related documents in order for the ICPA to thoroughly verify that the additional items of interest income was indeed subjected to final withholding tax177. Considering the foregoing, the Court rules that the additional non- deductible interest expense in the amount ofP3,661,380.03 be upheld. E. Debit to Miscellaneous Income (Batch 108747) - Reduction of Income Account while Reducing the Advances-Metro Pacific (asset) Account- P62,485,550.46 Based on the FLD, respondent found an unjustified reduction to miscellaneous income account with a corresponding decrease to their advances (asset) account which understated the income subject to income tax. Moreover, scrutiny of petitioner's trial balance for 2003 submitted to respondent on February 1, 2007, reveals that the amount debited to Miscellaneous Income account is P 62,526,902.00. However, since this revised amount is greater, the Court is constrained to uphold the original assessed amount of P62,485,550.46. Examination by the ICPA of petitioner's AFS and AITR for taxable year 2003 shows that during the year, petitioner made an adjustment to miscellaneous income which in effect reduced taxable income by P62,485,550.46. According to the ICPA, this relates to the sale of Block 6 Lot 1 to Metro Pacific Corporation (MPC). Sometime in 2002, petitioner's Board of Directors resolved to approve the return of the lot by MPC and effectively refund the amount to MPC178. In its protest letter dated May 9, 2007179, petitioner states that the sale was not consummated and that the property is still in the name of FBDC. Therefore, petitioner believes that there was sufficient basis for the reversal of income previously reported and subjected to tax~ 177 Exhibit "AAAAA", p. 10. 178 Exhibit "AAAAA", p. 10. 179 CTA Case No. 7728, BIR records, p. 206.

DECISION CTA Case Nos. 7696 & 7728 In support of its contention, petitioner provided two journal vouchers, voucher numbers 0202-004 180 and 0202-0034 181 dated February 28, 2002, to prove that the journal entry made in the books of petitioner was an adjustment to miscellaneous income due to sales return and refund of paid amortizations by Metro Pacific Corporation (MPC) for the purchase of Lot 6-1 in BGC. Moreover, petitioner presented the Minutes of FBDC Special Meeting of the Board of Directors held on January 25, 2002182 to prove that the return of the lot by MPC was approved by petitioner's Board of Directors. However, upon scrutiny of the said documents, it was found that the journal vouchers did not actually reflect the amount of P62,485,550.46 debit to miscellaneous income. The journal entries recorded were as follows: Particulars Debit Credit 46,430,619.14 ICR-MPC 24,972,585.00 46,430,618.18 46,430,619.14 A/R- Others 21,458,034.14 Cash in Bank- PDCP C/A #To record return ofMPC 04/07/01 amort on Lot 6-1STperOR 3526 ICR- MPC 25,596,899.00 A/R- Others 20,833,719.18 Cash in Bank - PDCP C/A #To record return ojMPC 04/07/01 amort on Lot 6-1STper OR 3824 ICR- MPC 26,236,822.00 A/R- Others 20,193,797.14 Cash in Bank - PDCP C/A #To record return ofMPC 04/07/01 amort on Lot 6-1ST per OR 4196 We put emphasis on the three debits to the account "A/R- Others" as this actually corresponds to the total amount in question. However, the account in question is not "A/R - Others" made in 2002, but the adjustment (debit) to miscellaneous income in the year 2003. Moreover, while there is evidence of approval through the minutes of the BOD meeting, there was no proof of actual refund that will justify the cancellation of income. Thus, the Court finds that the assessment of respondent pertaining to the unexplained debit to Miscellaneous Income account in the amount of P62,485,550.46 should be sustained, for lack of proper substantiation on the part of petitioner. F. Excess Unexpired MCIT as of CY 2002 in the Amount of P17,199,081.00 was not Considered as Deduction from the Assessment. r' 180 Exhibit "WWWW-1". 181 Exhibit "WWWW-2". 182 Exhibit "WWWW-3".

DECISION CTA Case Nos. 7696 & 7728 Based on the 2003 Annual Income Tax Return183, petitioner has excess MCIT amounting to P66,567,526. Since for the taxable year 2003, it incurred Regular Corporate Income Tax Liability (RCIT) of P49,368,445.00, petitioner applied the MCIT to the extent of its RCIT due, leaving the amount of P17,199,081.00 at the end of 2003. On this score, petitioner asserts that this should be deducted from deficiency income tax due. Section 27 (E) (2) of the 1997 NIRC, as amended, provides the treatment for the excess MCIT from previous years, to wit: "(E) Minimum Corporate Income Tax on Domestic Corporation.- XXX (2) Carry Fonvard ofExcess Minimum Tax.- Any excess of the minimum corporate income tax over the normal income tax as computed in Subsection(A) of this Section shall be carried forward and credited against the normal income tax for the three (3) immediately succeeding taxable years." Considering that the unexpired MCIT arose from taxable year 2002 and that respondent offered no justification as to why there was no deduction made to account for the said excess MCIT, this Court deems it fair to deduct the same from the basic deficiency income tax due of petitioner. To conclude, petitioner is liable for basic deficiency income tax for taxable year 2003 in the amount ofP29,719,822.65, computed as follows: a. Disallowed expenses not subjected to withholding p 55,730,198.12 tax 16,375,523.31 On Compensation 7,777,648.00 On Expanded Withholding Tax On Fringe Benefits Tax (Expense) b. Discrepancy in interest income on installment P76,150,000.00 591,274.00 contract per FS vs. ITR 75,558,726.00 Per F/S /�' Per ITR 9,861,790.74 c. Interest Arbitrage Computation (non-deductible expense) Interest Income subject to final tax Interest inc. - ST Investment TB taken from 183 Computation of Minimum Corporate Income Tax of Previous Year, Exhibit "RRRR-3", p.2

DECISION 2,927,553.26 CTA Case Nos. 7696 & 7728 Page 97 of 100 592,264.48 13,381,608.48 worksheet aud. 16,727,010.60 Interest inc. - ST Investment TB taken from worksheet aud. 0.38 Interest Inc. - Bank Deposits 6,356,264.03 Total 2,694,884.00 Grossed Up value at 80% Rate 3,661,380.03 Interest Deduction Claimed as non-deductible interest expense 62,485,550.46 Discrepancy - Additional non-deductible portion of interest expense p 146,621,573.92 32% d. Debit to Miscellaneous Income (Batch 108747) Reduction of income account while reducing the p 46,918,903.65 advances-metro pacific (asset) account 17,199,081.00 Total P29, 719,822.65 Income Tax Rate Income Tax Due Less: Excess MCIT from CY 2002 Basic Deficiency Income Tax WHEREFORE, premises considered, the assessment issued by respondent against petitioner for taxable year 2003 covering deficiency Withholding Tax on Compensation in the amount of P29,546,442.74 is hereby CANCELLED. However, the assessments issued by respondent against petitioner for taxable year 2003 covering deficiency VAT, Expanded Withholding Tax, Documentary Stamp Tax, Fringe Benefit Tax and Income Tax are hereby AFFIRMED but with modifications. Accordingly, petitioner is hereby ORDERED TO PAY respondent the amount of EIGHTY FIVE MILLION EIGHT FIFTY SIX THOUSAND TWO HUNDRED THIRTY SEVEN PESOS AND EIGHTY NINE CENTAVOS (P85,856,237.89) representing basic deficiency Value-Added Tax, Expanded Withholding Tax, Documentary Stamp Tax, Fringe Benefits Tax and Income Tax and the 25% surcharge imposed under Section 248(3) of the NIRC of 1997, as amended, computed as follows: Type ofTax Basic Tax due 25�/o Surcharge Total Value-Added Tax Expanded Withholding p 28,889,366.59 p 7,222,341.65 p 36,111,708.24 Tax 6,815,989.95 1,703,997.49 8,519,987.44 Documentary Stamp 1,086,685.00 271,671.25 1,358,356.25 ~

DECISION CTA Case Nos. 7696 & 7728 Tax 2,173,126.12 543,281.53 2,716,407.65 Fringe Benefits Tax 29,719,822.65 Income Tax p 68,684,990.31 7,429,955.66 37,149,778.32 Total p 17,171,247.58 P85,856,237.89 In addition, petitioner is hereby ORDERED to PAY: a) Deficiency interest at the rate of twenty percent (20%) per annum on the basic deficiency Value-Added Tax, Expanded Withholding Tax, Documentary Stamp Tax, Fringe Benefits Tax and Income Tax computed from the dates indicated below until full payment thereof pursuant to Section 249(B) of the NIRC of 1997, as amended: Tax Type Basic Tax Deficiency interest computed from Value-Added Tax p 28,889,366.59 January 25, 2004 Expanded Withholding Tax 6,815,989.95 January 13, 2004 Documentary Stamp Tax 1,086,685.00 January 5, 2004 Fringe Benefits Tax 2,173,126.12 January 15, 2004 Income Tax April15, 2004 29,719,822.65 b) Delinquency interest at the rate of twenty percent (20%) per annum on the deficiency interest which have accrued on the deficiency Value-Added Tax, Expanded Withholding Tax, Documentary Stamp Tax and Fringe Benefits Tax as aforestated in (a) computed from January 2, 2007 until full payment thereof pursuant to Section 249(C) of the NIRC of 1997, as amended; c) Delinquency interest at the rate of twenty percent (20%) per annum on the deficiency interest which have accrued on the deficiency Income Tax as aforestated in (a) computed from April 13, 2007 until full payment thereof pursuant to Section 249(C) of the NIRC of 1997, as amended; d) Delinquency interest at the rate of twenty percent (20%) per annum on the following amounts computed from the dates indicated below until full payment thereof pursuant to Section 249(C) of the NIRC of 1997, as amende~

DECISION CTA Case Nos. 7696 & 7728 Type ofTax Total Amount Due Delinquency Interest Computed from Value-Added Tax p 36,111,708.24 Expanded Withholding Tax 8,519,987.44 January 2, 2007 Documentary Stamp Tax 1,358,356.25 Fringe Benefits Tax 2,716,407.65 Income Tax 29,719,822.65 April 13, 2007 SO ORDERED. ~. ~ ~,'-.' MA. BELEN M. RINGPIS-LIBAN Assotiate Justit'e WE CONCUR: LOVE~ISTA Associate Justice \ ESPE

DECISION CTA Case Nos. 7696 & 7728 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. LO~TISTA Asso~iate ]ustz(:e Chairperson CERTIFICATION Pursuant to Section 13 of Article VIII 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's Division. Presiding Justice

ANNEXA FORT BONIFACIO DEVELOPMENT CORPORATION -versus- COMMISSIONER OF INTERNAL REVENUE CTA CASE NOS. 7696 81. 7728 COMPUTATION OF DEFICIENCY EXPANDED WITHHOLDING TAX FOR TAXABLE YEAR 2003 Purchases of Purchases of Professional Director's fees FeeslO% PeriTR Per Trial Balance PerFS Purchases Goodsl% services 2% 20% Rentals5% 60,571,246.00 Additions to PPE 7,395,000.00 Buildings 8,570.00 Office Equipment 857,000.00 * 20,000.00 Transpo Equipment 2,000,000.00 * Machinery 1,810.00 181,000.00 * Advertising 2,939,612.00 58,792.24 Commissions 13,812,720.00 Rental 3,458,406.00 1,381,272.00 172,920.30 Professional fees 173,758.00 1,737,580.00 Audit Fees Consultancy Fees 15,252,757.00 3,050,551.40 Consultancy Fees 698,430.00 Other Professional Fees 30,542.29 * 3,278.09 13,968.60 Estate Management Fees 28,932,560.00 512,870.36 * 305.42 578,651.20 Director's fees 714,712.00 37,800.00 * Security Services 723,331.00 5,128.70 14,294.24 327,809.00 8,836.37 * 378.00 14,466.62 Janitorial & Messengerial Services 136,452.83 * 88.36 Repairs & Maintenance Labor 1,108,437.00 * 71,323.04 * 790.09 Repairs & Maintence Supplies 103,202.42 * 1,364.53 100.00 713.23 5,142.70 Rep & Maint Bldg 3,840.00 * 23,750.58 Rep & Maint Software 35,248.73 * 1,032.02 25,229.42 Rep & Maint Bldg 3,840.00 * 38.40 Rep & Maint Bldg 39,504.70 * 352.49 Rep & Maint Vehicle 5,000.00 * 38.40 Rep & Maint Vehicle 257,134.85 * Rep & Maint Vehicle 1,187,528.89 * 11,084.37 Sanitation 1,261,470.79 * Sanitation Expense Sanitation Services Office Supplies Accident Insurance Group Life Insurance Group Life Insurance Hospital/Medical Insurance Ins. Directors/Officers Ins. Gen Liability

ANNEXA FORT BONIFACIO DEVELOPMENT CORPORATION -versus- COMMISSIONER OF INTERNAL REVENUE CTA CASE NOS. 7696 8t 7728 COMPUTATION OF DEFICIENCY EXPANDED WITHHOLDING TAX FOR TAXABLE YEAR 2003 Purchases of Purchases of Professional Director's fees Goods1% services 2% PeriTR Per Trial Balance PerFS Purchases Fees 10% 20% Rentals5% 54,182.02 2,768.79 Insurance Property 66,219.00 138,439.69 * 5,734,000.00 * 54,182.02 215.25 Insurance Vehicle 2,653,534.00 10,762.66 * Bank charges 112,437,313.00 * 2,296,000.00 1,324.38 Membership fees * Total EWT Due 53,070.68 Entertainment, amusement and recreation * Less: Per Alphalist 114,680.00 Communication Difference 2,248,746.26 3,155,991.05 17,796.52 1,555,030.00 3,050,551.40 172,920.30 3,138,194.53 1,154,888.30 3,050,551.40 172,920.30 400,141.70 *Amounts as indicated in the assessment; no detailed GL entries provided by Summary: EWTRate EWTDue Income Payments 1% 54,182.02 Purchases of Goods 2% Purchases of Services 10% 3,138,194.53 Professional Fees 20% 400,141.70 Director's Fees 5% Rentals 3,050,551.40 Total 172,920.30 6,815,989.95

ANNEXA FORT BONIFACIO DEVELOPMENT CORPORATION -versus- COMMISSIONER OF INTERNAL REVENUE CTA CASE NOS. 7696 8r.. 7728 DETAILED GL ENTRIES FOR DECEMBER 2003 Traced to Alphalist Account Title GLDate Amount Supplier Exhibit 1�/o 2% 10% 20% 5�/o Advertising 12/11/2003 50,000.00 Kilusang Diwa ng Taguig Foundation "U5" Advertising Advertising 12/13/2003 7,272.00 Arturo T. Regala "U'" Advertising Advertising 12/13/2003 52,033.00 Strategic Edge Incorporated "U'" 1,040.66 Advertising 1,200.00 Advertising 12/18/2003 60,000.00 Stingray Advertising "U5" Total 12/22/2003 45,000.00 EP Marfori Business Communications "U~n 12/31/2003 1,834,307.00 Boni Ridge "U'" 891,000.00 BBDO Guerero "U5" 2,939,612.00 Commissions 12/16/2003 1,956 611.00 Ayala Land Sales Inc "V5" 195,661.10 956,590.90 Commissions 12/31/2003 2,290,200.00 Accrual (Cirtek) "V'" Commissions 12/31/2003 9,565,909.00 Robinson's Land Inc. Total 13,812,720.00 Insurance General Liability - ''r" Interest Expense 12/9/2003 1,521,500.00 Banco de Oro "IIIIII" Interest Expense 12/11/2003 750,975.00 Deutsche Bank AG "IIIIII" Interest Expense 12/11/2003 346,275.00 Deutsche Bank AG "IIIIII" Interest Expense 12/13/2003 60,000.00 HSBC Trust Department "IIIIII" Interest Expense 12/13/2003 "IIIIII" Interest Expense 12/13/2003 2,144,420.00 Wise capital Investment and Trust Corp "IIIIII" Interest Expense 12/13/2003 847,279.00 Wise capital Investment and Trust Corp "IIIIII" Interest Expense 12/13/2003 682,860.00 Wise capital Investment and Trust Corp "IIIliI" Interest Expense 12/13/2003 405,172.00 Wise capital Investment and Trust Corp "IIIIII" Interest Expense 12/13/2003 33,997.00 Wise capital Investment and Trust Corp "IIIIII" Interest Expense 12/13/2003 33,437.00 Wise capital Investment and Trust Corp "IIIIII" Interest Expense 12/13/2003 33,172.00 Wise capital Investment and Trust Corp "IIIIII" Interest Expense 12/13/2003 32,817.00 Wise capital Investment and Trust Corp "IIIIII" Interest Expense 12/13/2003 27,638.00 Wise capital Investment and Trust Corp "IIIIII" Interest Expense 12/13/2003 27,409.00 Wise capital Investment and Trust Corp "IIIIII" Interest Expense 12/13/2003 26,875.00 Wise capital Investment and Trust Corp "IIIIII" Interest Expense 12/15/2003 16,111.00 Wise capital Investment and Trust Corp "IIIIII" Interest Expense 12/15/2003 927,194.00 HSBC Trust Department "IIIIII" Interest Expense 12/19/2003 152,757.00 HSBC Trust Department "IIIIII" 22,500.00 Caterpillar Financial Services Phil Inc.

ANNEXA FORT BONIFACIO DEVELOPMENT CORPORATION -versus- COMMISSIONER OF INTERNAL REVENUE CTA CASE NOS. 7696 It 7728 DETAILED GL ENTRIES FOR DECEMBER 2003 Traced to Alphalist Account Title GL Date Amount Supplier Exhibit 1% 2�/o 10% 20% 5�/o Interest Expense 12/31/2003 19,559,025.00 "IIIIII" Interest Expense 12/31/2003 1,281,147.00 "IIIIII" Total 28,932,560.00 Janitorial & Messengerial Sen 12/2/2003 (5,250.00) "R5" Janitorial & Messengerial Sen 12/8/2003 Janitorial & Messengerial Sen 12/10/2003 (10,000.00) "R'" Janitorial & Messengerial Sen 12/15/2003 Janitorial & Messengerial Sen 12/15/2003 63,386.00 Joubert Construction Inc. "R'" 1,267.72 Janitorial & Messengerial Sen 12/15/2003 1,582.30 Janitorial & Messengerial Sen 12/15/2003 79,115.00 Professional Maintenance Group Inc. "R5" Janitorial & Messengerial Sen 12/15/2003 201.42 Janitorial & Messengerial Sen 12/15/2003 10,071.00 Professional Maintenance Group Inc. "R'" 1,062.12 Janitorial & Messengerial Sen 12/15/2003 Janitorial & Messengerial Sen 12/15/2003 53,106.00 Professional Maintenance Group Inc. "R'" 112.06 Janitorial & Messengerial Sen 12/15/2003 466.60 Janitorial & Messengerial Sen 12/15/2003 5,603.00 Professional Maintenance Group Inc. "R'" Janitorial & Messengerial Sen 12/15/2003 48.08 Janitorial & Messengerial Sen 12/15/2003 23,330.00 Professional Maintenance Group Inc. "R5" 466.60 Janitorial & Messengerial Sen 12/15/2003 48.08 Janitorial & Messengerial Sen 12/18/2003 2,404.00 Professional Maintenance Group Inc. "R5" 163.62 Janitorial & Messengerial Sen 12/22/2003 442.14 Janitorial & Messengerial Sen 12/22/2003 23,330.00 Professional Maintenance Group Inc. "R'" 700.00 Janitorial & Messengerial Sen 12/22/2003 280.00 Janitorial & Messengerial Sen 12/22/2003 2,404.00 Professional Maintenance Group Inc. "R'" 163.62 Janitorial & Messengerial Sen 12/22/2003 Janitorial & Messengerial Sen 12/22/2003 8,181.00 Professional Maintenance Group Inc. "R'" 27.26 Janitorial & Messengerial Sen 12/31/2003 1,753.72 Janitorial & Messengerial Sen 12/31/2003 22,107.00 Professional Maintenance Group Inc. "R5" Janitorial & Messengerial Sen 12/31/2003 68.40 Janitorial & Messengerial Sen 12/31/2003 35,000.00 Professional Maintenance Group Inc. uR:>u 23.16 Janitorial & Messengerial Sen 12/31/2003 49.86 Janitorial & Messengerial Sen 12/31/2003 14,000.00 Professional Maintenance Group Inc. "R'" 555.94 181.80 8,181.00 Professional Maintenance Group Inc. "R'" 1,363.00 Environment and General Services Inc. "R5" 87,686.00 Professional Maintenance Group Inc. "R'" 3,420.00 Professional Maintenance Group Inc. "R'" 1,158.00 Professional Maintenance Group Inc. "R5" 2,493.00 Professional Maintenance Group Inc. "R'" 27,797.00 Professional Maintenance Group Inc. "R'" 9,090.00 Professional Maintenance Group Inc. "R5" 85,286.00 "R5" 63,089.00 "R'" 27,717.00 "R'" 27,717.00 "R'" 3,840.00 "R5" 28,376.00 "R5"

ANNEXA FORT BONIFACIO DEVELOPMENT CORPORATION -versus- COMMISSIONER OF INTERNAL REVENUE CTA CASE NOS. 7696 8t 7728 DETAILED GL ENTRIES FOR DECEMBER 2003 Traced to Alphalist Account Title GLDate Amount Supplier Exhibit 1% 2% 10% 20% 5% Janitorial & Messengerial Sen 12/31/2003 6,872.00 "R~" Janitorial & Messengerial Sen 12/31/2003 3,840.00 "Rs" Total 714,712.00 Professional Fees 12/10/2003 3,636.00 Cuervo Appraisers Inc. "Ji'" 363.60 Professional Fees 12/10/2003 2,272.70 Professional Fees 12/10/2003 8,181.00 Domingo Ignacio & Co. CPAs "p!'" Professional Fees 12/10/2003 Professional Fees 12/13/2003 22,727.00 IFCA Consulting Phils. Inc. np!'n Professional Fees 12/18/2003 Professional Fees 12/18/2003 43,636.00 Mannasoft Technology Corporation np=�n Professional Fees 12/18/2003 Professional Fees 12/22/2003 150,000.00 Lim Ocampo Law Offices np:�n Professional Fees 12/23/2003 Professional Fees 12/23/2003 20,000.00 cayetano Sebastian Dado & Cruz Law Offi "P~,., Professional Fees 12/23/2003 Professional Fees 12/23/2003 50,000.00 Full Circle Communications "p!�" Professional Fees 12/23/2003 Professional Fees 12/23/2003 150,000.00 Miguel C. caisip npSn Professional Fees 12/31/2003 Professional Fees 12/31/2003 26,133.00 IFCA Consulting Phils. Inc. "Ji'" Professional Fees 12/31/2003 Professional Fees 12/31/2003 450,000.00 Abello Concepcion Regala & Cruz Law np=>n Professional Fees 12/31/2003 Professional Fees 12/31/2003 20,000.00 Cayetano Sebastian Dado & Cruz Law Offi 11~11 Professional Fees 12/31/2003 Less: Payments to GPPs 350.00 Puyat Jacinto & Santos npSn Professional Fees 12/10/2003 Professional Fees 12/13/2003 45,762.00 Puyat Jacinto & Santos np=>n Professional Fees 12/18/2003 Professional Fees 12/23/2003 1,440.00 Puyat Jacinto & Santos lip!' II Professional Fees 12/23/2003 Professional Fees 12/23/2003 500.00 Puyat Jacinto & Santos "Ji'll 419,100.00 B. Barsabal npSn 42,350.00 Balane, Chiong np=�n 480 000.00 llp!'ll 166,666.00 npSn 166,666.00 "Ji'll 83,333.00 "Ji'" 83,333.00 npSn (8,181.00' Domingo Ignacio & Co. CPAs "P'" (150,000.00' Lim Ocampo Law Offices "~' (20,000.00' Cayetano Sebastian Dado & Cruz Law Offi "~' (450,000.00' Abello Concepcion Regala & Cruz Law "p5' (20,000.00' cayetano Sebastian Dado & Cruz Law Offi "p5' (350.00' Puyat Jacinto & Santos "~'

ANNEXA FORT BONIFACIO DEVELOPMENT CORPORATION -versus- COMMISSIONER OF INTERNAL REVENUE CTA CASE NOS. 7696 &. 7728 DETAILED GL ENTRIES FOR DECEMBER 2003 Traced to Alphalist Account Title GL Date Amount Supplier Exhibit 1�/o 2�/o 10% 20% 5% Professional Fees 12/23/2003 (45,762.00' Puyat Jacinto & Santos npSn ! (1,440.00' Puyat Jacinto & Santos Up=' II Professional Fees 12/23/2003 (500.00' Puyat Jacinto & Santos 11~11 Professional Fees 12/23/2003 1,737,580.00 Total (net of payments to GPPs) Rental 12/11/2003 9,844.00 Hewlett Packard Phils Corp "5~" Rental 12/11/2003 Rental 12/11/2003 9,844.00 Hewlett Packard Phils Corp "55" Rental 12/11/2003 Rental 12/11/2003 9,844.00 Hewlett Packard Phils Corp "5~" Rental 12/11/2003 Rental 12/21/2003 9,844.00 Hewlett Packard Phils Corp "5~" Rental 12/21/2003 Rental 12/21/2003 9,844.00 Hewlett Packard Phils Corp "55" Rental 12/21/2003 Rental 12/21/2003 454.00 Hewlett Packard Phils Corp "55" Rental 12/21/2003 Total 568,122.00 ePLDT Inc. "5'" 568,122.00 ePLDT Inc. "5'" 568,122.00 ePLDT Inc. "5~" 568,122.00 ePLDT Inc. "55" 568,122.00 ePLDT Inc. "5'" 568,122.00 ePLDT Inc. "5'" 3,458,406.00 Repairs & Maintenance - Labc 12/10/2003 10,000.00 Tri-Point 2000 Engineering "Q!:�n Repairs & Maintenance - Labc 12/15/2003 Repairs & Maintenance - Labc 12/15/2003 5,200.00 Professional Maintenance Group Inc. "Q!>n 104.00 Repairs & Maintenance - Labc 12/15/2003 20.00 Repairs & Maintenance - Labc 12/15/2003 1,000.00 Professional Maintenance Group Inc. IIQ~II 127.26 Repairs & Maintenance - Labc 12/18/2003 20.00 Repairs & Maintenance - Labc 12/18/2003 6,363.00 Professional Maintenance Group Inc. "Q!:�n Repairs & Maintenance - Labc 12/18/2003 Repairs & Maintenance - Labc 12/22/2003 1,000.00 Professional Maintenance Group Inc. "Q":Ju Repairs & Maintenance - Lab< 12/22/2003 Repairs & Maintenance - Lab< 12/31/2003 504,210.00 J.D. Edwards (Asia Pacific) pte Ltd IIQ~II Repairs & Maintenance - Lab< 12/31/2003 Repairs & Maintenance - Lab< 12/31/2003 3,400.00 N.C. General Merchandising Group Inc. "Q!:�u Repairs & Maintenance - Lab< 12/31/2003 1,800.00 Robust Inc. "Q":Jn 3,000.00 International Elevator & Equipment Inc. "QSu 6,980.00 5ummex Trading Corp "Q!>n 21,705.00 "Q!:�u 8,836.00 nQ":Jn 37,800.00 uQ5n 8,836.00 nQ:>n

ANNEXA FORT BONIFACIO DEVELOPMENT CORPORATION -versus- COMMISSIONER OF INTERNAL REVENUE CTA CASE NOS. 7696 &. 7728 DETAILED GL ENTRIES FOR DECEMBER 2003 Traced to Alphalist Account Title GLDate Amount Supplier Exhibit 1�/o 2% I 10% I 20% 5�/o Repairs & Maintenance - Lab 12/31/2003 35,135.00 nqSn Repairs & Maintenance - Lab 12/31/2003 20,288.00 "QSn Repairs & Maintenance - La-b< 12/31/2003 11,713.00 "Q---r;r. Repairs & Maintenance - Lab< 12/31/2003 12,185.00 "QSn Repairs & Maintenance - Lab 12/31/2003 23,880.00 "QSn Total 723,331.00 Estate Management Fees 12/16/2003 200,000.00 "LLLLL" Director's Fees 12/31/2003 45,000.00 "LLLLL" Director's Fees 12/31/2003 720,000.00 "LLLLL" Estate Management Fees 12/31/2003 4,181,157.00 "LLLLL" Estate Management Fees 12/31/2003 (4,181,157.00 "LLLLL" Estate Management Fees 12/31/2003 10,106,600.00 "LLLLL" Estate Management Fees 12/31/2003 4,181,157.00 "LLLLL" Total 15,252,757.oo Security Services 12/10/2003 33,803.00 ISpeedwatch Security & Allied Services "HHHHHH" 676.06 Security Services 12/11/2003 "HHHHHH" 1,506.24 Security Services 12/13/2003 (10,100.00) "HHHHHH" Security Services 12/13/2003 "HHHHHH" 769.88 Security Services 12/22/2003 75,312.00 IBonifacio Security Services Inc. "HHHHHH" 1,726.52 Security Services 12/22/2003 38,494.00 IBonifacio Security Services Inc. "HHHHHH" Security Services 12/22/2003 86,326.00 IBonifacio Security Services Inc. "HHHHHH" 470.70 Security Services 12/22/2003 23.535.00 IBonifacio Security Services Inc. "HHHHHH" 470.70 Security Services 12/31/2003 23,535.00 IBonifacio Security Services Inc. "HHHHHH" Security Services 12/31/2003 "HHHHHH" 17,796.52 I 1,154,888.30 Security Services 12/31/2003 199,957.00 "HHHHHH" Total 107.192.00 60,188.00 60,188.00 698,430.00