CTA Case No. 5135 (Decision)

M:PUJH.. I C OF Tf.li" I'Jt..ll. I PPII�$ COURT OF' TAk APf')�Af...B f1UFlf:IN (.~lTV WlftF COA'ftNaS nHO IM<S CTA CZASI:t Ml.. 5t 35 PHU..I.PPtt'Ea, l't�:. py.,.........,.... ~ J~qt t t i f:IJH~}''-t 0CT 0 11996 �~ ' COMMUI8 tONftR OF tNllUlNA\.. RE.YENUE 9 ....... .... . ~�-~� .,...................... ~�-~-.-.,,~.. -- . ",_,, U.S!!.. n.. 108&

nr:c 1 ~} 1Ol'�l e:. r ~ n.. cnBF No. !"; t .3~\ On

ltFI.'.lf:tiON �� c. n. l ~ r�.n~'!tF t'-tn. !'li .t :~~ . .��~ "6. The her~in wtthholdlhg t~M on royaltltin ~~ pr~m"JMPd t:t\1 h~v.,.. b'i!Ni p1111hi i!lnd ~~o.l l~t~�t~d ln ~r,;:r~~:'WdJ;)ne�� wHth law !!lind ~~��ttng UlH n_.n,~l~.th�tul un t.hr, .-~tt�rtn"t 1.. Art hd~ �1!4 (b) � (dtH ~nd h:�) f~r.;) uf!. tt��� AP--� W(\"1!ft: (h'H'~Wiimy �r.~~'t4 �rr��~�ty allott5 � .,.,.t.t:~htng t�lll'l t'�l~(HUt of eO~ tu f.h.!rr����IU11 t"'@'Ci'fliiVlng l"Oyidtht'l'fi Pf"�h;lng ht tho Phi Hf~pin�HL, wtun~etflll, n..���t. h:\'l~ ~.~~, f'(hl u H � of tht~ ru:� ��~ us T.1u* 'h"�t�tr dot"" nut ~o r:n��t�'!id@.. U~n<t:�, ;1!1; .~~�b.4�nt of th(' Uni t4'.~d Stll\;~1!1 t.� nR:..t"...._tJ1~.tt.~!l'.d. to thfl' "�o�t fm.vot''~.td tu~�tion�� taM ra~;fl' t)# .10" on Jr'f:tyalty r- 1090

PFC: l f\ liJN r:. r. n. r.~f\(rm� Nn.. ""t :~!"'I t1lCtllle dt.H''iVl'd h��~ut thlll' J~-.�lttpJ'1incHt< fitlY. Hut "t �Pl e )"' .... 1\J!Ion t.hlltit~ th~ r~v�.,.~'t of t.u(':h t�)<' J' tu!.t....�.-�.uu1.~t:::. . .tJ!IJ,.!,II..r:..~t.th:t;tY!I.Lt1!n~".!. ~.. t1 h� ���~ch t. PD c,~,H'IU: of ~~~ft"'- ftH"' ���av.!l\ltifi'IJ b~fng gr"'tlt"fd und~r�� the F!P ,.. w~,t~ t~l9'~.. ���nv �r~" y, �r.:-�~~t fl., "''lf.llQ\\ fWeYhHHily il'!.!tmU;f by Ut~ t"1!!1'f.;Ondf!on'; ~llnwinq th~ �v~����nt of th~ b*n~ftt~ u~ the "�o�t f�vur�d n111tien" ~l~u�� un pav�entw of r~�\~~Hdef!l t,t) r�~~~~~...,J~nt~t~h�~~hhmt of th~ tlnH:II!'d filt~t,f.'\'1! h~Yf' 4llh'@liHt)� h*-!'ll'!n I"~VtilU~d �tff'ctet\'IIQ c;u, Januil!l�''\f J.9\"e f:1\n~numt; ta ReYII1!tHI~ .............ndutt Ch'e:��l�in<" Nth 39��"9~~~ ~. �rh~t fH!!'tHd~n l!l.t~te.W!� m) <:�ttl..- ~f ~t:\ion, th~re h�tnu nu ~llPg~tton ~w tu th~ v~rtu~a d�tet th~ ~~l~g~d wtthholdtng t~" P�Y��nt� ~n r"UY~ll�:lt-:!!i ttta'n;... �u~d~ ~nttf~n�' 41'ff'~~>�~t~d by th� f.~~�.� i. t i at��~�,' �l��u�d l()~ lh~ wlthholdtng t~" p~v�~ntM. on t" 4~ y ~ 1 t i tu. F.::'OVN'It1Q th~ ptH'hHi Jt.~)y 1 1 1~"7�~ \Q f\Hfj\U,.; t 1'1 .l9"~Jt?. ~���"' rm J ("ngtn~ t"(tfundl!l.blt'!', th~ ~~�~� h~1tlQ ~~~~~dy barr�d bv l�teh~~~ tt. Claf�$ ror t~M ref~nd/er~dlt b�lng in th� n~tur~ of ��~�p�tun fro� ~r� ean�tru~d atrtetly th*' v�. ~4~Jih~"'lt. t'!lltilli!U-. ..;If~fi'tHdtUHH'' CfrH~Ullttr LuMber Co. Court of 1-M Rpp~~�~, ~� ���� Jf),. 9tJU\ 1 t 0 J t'thm i l -A f!: J t.!>f::�h�� t. t: Cth v ~. -~~���� ~'!I hHH!H'' u f t�ut cH��n~ 1 fh~~~t~rfHUI!' 11 Or.~t; obtn�� 11?.?.:1 � 9'7!:h ('1.'7 ~~t~nn :�1HH � 1091

DFC f $'; l ftf\1 � r� .. T .. n,. c:nf:IE J.tn. ~:�; J :w� '"{ln 'NHl' ~���'H~(H'nt l ~ IIH,t~, \�Jh~thfll'�"' OJ"' f\0\' l~*''i.;intHH' ttun~ld b't- ti.H<itl'd ~tt th~ a'"@thu::�ed ~'�';~ ar tn~ "lthholdjng t~H on roy�ltl�� tn ;!!t'~4:,(H"dam(~� ,�� tt.:h Ar�t. ..-~.t"' Je <t:~} <bt ~'f th"" R.. P�.. UtHrtt thw._~t'V' l~'"' 'h�IH'It!l::~~ IM'td tHlt ~!5~ ~dthhohUng t.~~~ ~n 'f't)y~l.tlft'll'� \UH.I~r A'"t;iel~ l ; l O'!J') .b) <iii) of th~ n.f:l. . . tJ,.q~ .. 'f~M Tt""�~-~~~ 't'hJ\\1 f:'t:Hn-t i!ll t:Jf' H~~ IHH'"ttt.UHti.:;.n thl\\t r~ti~ton�r'" ~-~nd t- cor~~nt �nd coneur~ with th� opinion ~�nd~r~d by thQn Co����~tan~r nf lntern~l ~tl'v~nu~, Blenv�nldo T~n~ f81A Rul~ng thh Jl~f~��8St '>!Hpl'J!Il." Uul\t und~H'' t:+u~ aow.t f!ll!!'H'U"~d "'r n.. u, n~t ion f:Jt~~~:w i ~ton HH� P.. .... 9. T'*�~ 'l'r~~t �t Rr�1: jt~l4!' l3 fHJU�''.rJUt'aph f1 H1� H H l, thfl' t;..~ t.MfH'J!ll~bl,. .:m ���oy~ \ t; t ~!Ill d~���i \~t.rd by � t'f!J :ldo.wt� of th~ th'ti\~.,.d f'l;�bt\nu fr�:~� �u.m��f~I.U t��i.thh' tht"t Phi 1 ipf:.hun 11hal. \ h~ th~ lt�~'llft!!lt, l''�>ttt.~ of Ph~ltpp:\ne- ta~ t;.tui!'lt �il!'f hfll iMJUHUtd uo r"'av�Hh~~ or th~ ~~�� ktnd paid und~~ �lwil~r � c:h�t:~'��~t.:~mt"~� tt� ~ ��~~h1&n~ ~�r thh�d ~J~'t;~attl!?' .. e -- c:lv�\ l~hl' H~, fU!t'"il*Qf'llilf.'h (t)l of Hut P. r:~.. ,_..~!,~!;~ G~r�~ny T~M Tre�ty, prDvld�~ 'h�t roy-ttl�~ f!kt"'illliny in thfl' PhlllJ�PhHJo" illt'fd f.:HI~id tu a P�r��nv re$id~nt 6f w~~t �~v ~l1o bf!' t�M~d tn t;h41' Phl.llt~Jlt.n�~'l b�.tt th~ ~ ..!ut !il.c) duu"'g�d th<~Jll fH~fi. ~n~e~ed )4.)" (d" \;.hf,? QW't'H\\~ il!IIIHHU\t ~f t"nynltttu.. S~id _,,,.�utt,y t~tl~o P~''Ovht<@~ th.;Jjt fm'' ~� h1ng ~Iii th~ tr"~ntf�.,n�� tlf' tec-htUlt.~rn� under Phllippln~ 1~"' t1 �ubj~ct to approv~l, th~ ll�ttattun af th~ t�H r�t� tn ~~~� or roy~ttt�~ fl�n~httnu ht t'h'i!r Pht.Upf-lin�~, ~r,pJy l f th~ nn Qt 'ld r::tn''h'''*C't '"t ~~ tlt) KIUt:-h \~oy~.Hd.4!!-~ htU h~�n ~f!Pt'U'''H:I by Phi UN-, in~ t~o��Mlt\Hmt: ~���th4:n"'l. \~ l f!'~& ... 10~)2

or: r : I r~ 1 tn�.� c. r., n,. r�.nsr I' Ill, �., ~ ::m F� ... b�h��"""'* 'fluJII!, ht.-�UIIlt�d�� ~ !11. th.w Agr�~~�,mt; l�h.n�ltf 'h"�-1'1td~ ~nd IBM r;i>hfl.m,. ""' fJ'U11l as th~ 11Ql"'f.UUum11 b..-hnffHHl U\M ~nd .U.\M Phi lw ~ tu~d b~4tn ~f'fn�,,:;.vv.od by th49 C�mh��l!ll lhmk t:tf t;h~ flfdl.�!pp:lnf\t'll 1 t'~;~yaJtir:~' l3t'i!.IJ�tntl tn ttu~ Phll ipf>huu .~nd r~l111~~,~f.dfl' tt.l Wor�ld fl'".tl!tdtt 1.111 �*~11 ,,f H�" ~!li f;n JUM by Il\t4 Phi 1111. mtHJUld b~ fHUI~d ~t thfl t'��at.e� bt!l'CIAV'U'@ �~hi t''il!ltct t � iodJ.-::�t~d ln th~ R-P~ - W�~t BPr��nr T~M l~~�ty ~nd pur~u�nt t.o f.ly�fdcle 1;1, r:�~���~U""~f1h ~ (b) U:lU, f.�f t;tu~ R., P. �� US 'T'i!Hf 'ff"rt~t: y,. �' of tt I~ ~~����d by th� ~��rond~nt that thi~ (::;-~.,.~H'�t �rf'ed t �~ gv�f.mt i t1g the t"�ttfuttd � t Ju:::~ .\9' f)(,)>.; �~;1�:HHH' t'l~~� !)tttlt~)~d ">il tht!> 't~t\1,!4:; f"'V('Wfld .. <Mutt~n, c::~1� o .. t~~ r�#Jit�� on t''1~y~ltt@~.� n~r.:nn:h<, p., -~�'\~�;; lh~ ~r~pHr.�l9bl~ pr�n�l9d~m (~f th(!l ft.P .. U.B. T�" Tr-~ty prev'd~lt "A\''t. JJ ~G~Hb) HUL. H'I'!Jt ('f')h~ t�" i�pn�@d hy th~t ath�r Cuntreetlng 9t~t~ �hltll l'tt\.; l!!<~lt,'(:H!!d th& lf:)W~!Jlt t"t'ltb�? t!f' f!,hl l lf~pin~ 't'~H thl'llt Wflll}' b'l1' ur i.lll!fl~l~~-t!d un r�t~y~Hd~� th~ �~�� kind . t~.~j.;;l_�. !J..n.4;t~.t:_Jt. t~ Ll:~.x:..;~d.!'::f1i::.M!!.lfL~~f:~.U;:;.!U.. to ~ rr�$td~nt of ~ ~tMt�~" third Htmf!Wl"'~H:ct:~or� f ng ~uppt l~;~d ~ Re�pond�nt �dvane~d hi~ �rgu~�nt ~.m t;h~ p.-�~�1 ~H~ th-t thfl' ft. fl,. "" 9fl'r'�lfilil.ftY Til!)!, �rr�.Htt:y�

ftFC l H JtiN � C. l . (.l, Cf\HF. NO.. �~�1 3;~) whh:>h f.':t�"o;;tid~~~~ fr.t" ,. HJ'' t:1.ut em i'"i.)Y~~~tlt i ~"�� doG!~! nut apply tn thn ~�~m under con~lrle~ation. H~ .!U'Q�.u10d Uud r nr "thld~r th~ """ provi�iun~ th~ B�r�~n T~~ lr~aty, th�r� i~ ~ '�~tr~hing er�..,d'lt' in (ihH''�~ny of 1&11. 4U'td 2t)'1t,. A l'�tuu�tdun ~f ~1~�1� t?J. ( flfl> l l � f fr-a~ ~~tb t ~ T �Jn~ .t11 \�. t ~ti a f' t lu~ P,. P .. � ~-� U.. S. "f <1\'l't 1�~,��t: Y), t.bJt_U~l.!L.. 'l.9.. !LY:S::ll..-liUL..t:.!:.tftllt.. � ~ that t t h � t Df\4 t.IORL f) lROl~ eOIU'<lRA'Ttf.lN AND JN'f'fiitl.t#rfJt~IAl. Dt~lNITH Mflt:i.tHN,JH!'~ CUnNlflf\1' JON :ewtt1 nu\~ ~ntitl~d tu th� '�fi�t f~vur~d n~tlon� t~~AM t"at@ on \''Or�~l': i.~Ht HQ""\ h~Jt:~HIJ!" th ... i r p~r�~nt of �h~ t~M i� nut qnd~r 'I!~.JttliU:~.""~t';.tt:~~�!f'!ll.t.l'!,l,m~:.~Jt i .. n .. , t h t!' r� fl< l. ,. '""''a::hi�-.a i n et~,f:'Ht;' a~nr��t~llnt'f (~(11t f(;y. r�ov.-ltrffft�, whtJp tt-..~,��~ �~ no .u�c:1h t.~n�HHt tn the tJ-tl. wtnt." t,Mntlon, f.~.�r.A~ fl~H�a�w�th,. p .. ~"''�~� g-...,t~d h"lnw �~ th~ pffrtl"~"' provl~lon� of �Nt., ft .. P .. .,. (ihl'r'Jitt~~h)' �r~11 'Tn~mty ��.thir.~h ,~...,;luh' 1.. 'fllfl~( 1lhf!II<J.1 bl'!!' d.,..t~r��hu~d tn th� e~~~ of ~ r�~id~nt of th� Fwrl~ral R�publfe ~f G~r�~ny . , fallow~� b) SubJ�ct tu the proyimton� of fJ"'v�tW4Ul f:.Q-M li1'~�f I''~Qo\Wdin~J (1t'edtt f'tW ftH'"4l?fQn t:~)!:, th~-,��~ !d1.all b-.. ,allowtl'd ~~ A ~rudit ~QMlnRt &~~-~ftY lnen�~ ~nd eorpor�t�on ta~ pay~bl~ in r~ur�~t at thP fallowing tt~�� of tnno�~ ~rl~tng in �h� R~publtc ~� th~ Phi. f.pf)i 1'Ull'll't ttu~ taM r~~~~>id (0'\dt~tr� th~ l ~w!'! of th~ '"hi J i pphtt~HJ and l" mt�~c�+W'd4\nt::t:t wl th tht ~~& l~grll!tt�~nt oru

pf:::T 'I 'i: l fll�f r.. f'. Nn. f~. r:m~,~ ~' ~~,, ��frH t''OV~ J t t ~~, ~Ui d~f' hUtd J n p~t'�agt��,.ph 3 ~4t't: J17l t11 12t ~;::t r~m�� Uu~ ptn"po'lllfl!l ot' crttrl.lt ~��et'twrnt1 to in �~ubp<tt'iifQ'i''�f.'lh fb) ., t~~ f''h:tllpr�inl't l:,.,H 'llh.mtl be dfHltll!tH'f tp bill' f..!'C' 't h1 thf:~ r.:tiUHil iJ f t'OY;Illfl :i �~ f'r.lf' ,,~hi~h ttuw t:,.,( �'" r�fltd,tt:JJffd to lO Ot" or tot�� .1!5i ''""'t"tC:lfot. ��:~":~ordtng to r.�.ar'~Ur"�!l*r~� 2 ao t:'tf'tr 1�:) 1, 1~, f14tl'"r.!&n t u f' nr�n,.ff. o\'t'�<tJ<~mt of ~Hmh r�t)y~tt�~~Jtl! �. 'f T~ ��ttl~ �new ~nd for ~11 th~ t~g~J �~~ut~~ invDIYPd in thJ~ ~Qt�� tht� Cou;�t d~~�$ tt wt~~ t: o d~c :J d� Oft th~ Pt'tlfhH'' 1nfHu�pr�et ~t1 t ~�n of t'J't"' pt���r~!ftll!' 01 plltd ondat� !\! h11ll11n'� c.f t''C!ttMt~tamt~~~fJ .. ,. n�.HHI Uut pht'IRUH~ n'!�f~r �:ft t.,.M f:HMld a~ c.htt � .,d by ~��dv���e�d r�,pund�nt or doP� it ref�~ to roy�ltl�~ p~ld by p~ttt�an~r? �ur�� n l:;t.w~~���~, Jl�~'t'"t,Hti!!!l of Mu~ pt~t.nd l!lion ��~e~> th!� Court to wlth thm pgtt�tqn~r'' int.~~..�~n"l!!�t;mt;fn.n~ lh(* r,~u,~!~ ""rJ-.'l*hf .,,.,thH'' �htiln.t� t!h�~�.�llf't#.l*.rtit!f!'l" tw f'olll.'tW@d hy thf.! pht''"'~� ��t;Q � r��ld�nt o r . thfrd ��~t~." ���t:e rt �~ ct~�r th�t tf!if�utff t � ~~~fd tn A )''f!r'fl id~nt of :11 thtt�d 111 t y t'fty~,,J ~fid fHlt; f.: fur~ P~t, i ~; ion~~.-� v 1!1 �.��:'~: :f, nr"t l r:n�~ fn i.t.ll uop~ot. t f. on t..-.. M~~~ ton f'tH'' "~fi~~~m~ hhH�fllt 'J>n"' th~\: !# "R��pQndent *' tn _,,~et i1Ui14H'U:Hng th~ f\NW\t,iUf\ 4)f tit:,~ R.. P ..... U. t:j.. t.~H \T�~H~lsv.. Ar�t ielfll l3(4~) (t,~ �itl) ilp.,�t�\41 ot' .:..r.'.�.Y..al.tlt.l. ~f $;hf!! ~~-~ ktnd f>;ii;fd �.n:U~f"��'' 1Wh~:f.l~t' cireu��tane�� t~ � r@~t~�At �f �hlt~J ~f;~tl~'., f\J~;;~,,.u,,tr�fll' do~~fi t ~ r.~r:u?.-h!t . wf'� .. th�t~ tJJ!Iftt"�?(UI .ftt'' j �pt fi ~dt 'If' U~ f".. .. p~ f d H1�tffl'r' @ l$ :1. I IW t:': � t�t" ft� �1 t ~,~tne��~ .. f'tl!ll'lf~onr.hmt i 11 ...,,.ding tnt" th"" A. U~ ~.. LWlt~ tt�,.,.~l':v l'!l~Hu.~thtng U.�Att t � cl�3rly n9t th�r�. 1085

HECJSlON � c.r.n. cneF ��1� 511~ lh~ r�q~lr���nt of �~tell~r e�reu��t-neel 1 i8 \n r�J~tlon to the f'~liliVM~nt ~,,r eJH!.itll..r:~ n.,t �'~Y�.,.nt ~f th,~ t<!illn.. Th~u, f~�:n"� i.n!!llt'IIH1t'~fl', th& r"'''!l'lllllt~' h�' ttt~f!'!ll.~d.�m fl!lltl.d �;n a U.. 9 .. t"fHI 'lfhHI t; h'l!' fl!i'! -t,� it; i tHHW' ~ Hh i ~h t ll nlll'l\\h~v� St.U��TII!'Qt.'f!.t;nr�ll!!d �nt~r�rn"l$~ nor ~nu~tP:>d h't ~ rn��c-f~.n . r�f>d��r\hm~~~� ~ctl~lty) i t not p~ld under ~��ttar elreu�~tanc�Q �� ~ r~y�lty p�Jd ta ~ nf OfP.t\Nin�tt 4)t'' ':1w4'1td~t\ tn t">~w!ll. htrmt ~nd �o-' l''\'H'~�fH1~~t �!II �'-�*�"'�" t~f)*ilt uf ltn�� pif:"'ln.wq f"i ham not paht \md~t' f:!h�eu~ww,t.ll),~(';'tH!I ~t! t:h@' f'!ioV411H;}� hU't"~:ln P�ld by P~'tttnn�r tn lt� U.S* \ l ~�~(11�1 ~If> I''' I!!.~ C J QllH' l '/ 1 HHl ptH''��it ~ t'!! ' 1t h i l l ill!l'' t:: h"et,,ll lit t ~Hr.'; to !ll 'I i I, WIU!td l n t'~ft!<l���~�slr.f.l. tl) .,~h"' r~~V'�Pnt ~~f �t.h4ll' �m, t"0'\1'~.\ t y, ��u:t ~l!lt. r~f~r-~rur.:~ to th'l' fH1VliUH1fl nf' t; Jt>f,, ff (OpptHI.t t.l c~ T" A .. fh~:t.~ ot�d JR:, Pfh :l'(:i. :;~ "" ~f,.ij ) � L . ., � Ill """''~~~ \llli!!IY'j! t;h.~tl: the.t�~ b'-:" NUl �O�"flllllfltttnf:: on" � t~m���fa�.;;tc:t t1f��~*"~JbV th~~t r~y~l t !~!lll fi'�'-'ld ta~ t:h~ U.~~ >11r!gtr1;;tbrr ft't:HI Hl@' U!IUt of'� fW th4"' t�'ighlr t:~"' ��~~ !ll!Wt "~~~ut, b�'ifi(.ht81.\'H''''' d~(;lt~!H o;�� IIOdP.J, p\~n., 'IHH~t"~t ftn''�Ul~ ~H'' f-lt"Of.1'PI~, ttt" f���tH!t th~ U'UI�, m� t:h~ t"'ight: f';t:t ~-~~, ht�:ftt'!Jt:r�'f.~J., t:'fl'fltlllf.l't''Cf111rl r.tt" '!'!(:":1f!H){dffc !llHif'H'!t'l"lHlf,":'._,f ~nd 4?,., lhfl' t:UU\h'�II:U:;<fr: ti!H'' ~fWfHUUHtt.. Mm! f:; b~ th.d }� ~f�f'l�t'''tJVf!'d by f:.tlil1pphl~ crtllf.Htt:~nt >'JU.f.ttaor:ltl~~ .. HI~-- P�� L31\l' l!.fl!.!iiJ,lJ!..t!Jlfl. in CTA c,~~u,. l"lu.. t'Hitl, ,.J���dln~ J)i!kvlCJol'*, �. ne.. Jilirtf:t Mortcli<lhyt:IJ!' f':u�p~ny, o v� . IH.v.tslt.H\ of A11111t~d 1mh~lt:ri.\~'J:l,. Jf\.:.~ .. 'ill Cu.��l i 6tUH'" ()f h�~ f!'t'�rtllll ""~-'lHHHl'i! .., flr't'���d g!!ll't:�d ~.-. Af:tl'' j ' ' t!3, l'ltft;:JGA )

tH:SI.' JSf fiN ��� c. l. n. cnsr~ I'�IO.. ~"* �;!''! �.. lO~Y/

DFCIHlON t��.� r * n. CH!i'E NfJ. ~H ]~'i ot' � day 1086

OFT l El fUN c . l .. n. c.nm;:: t��tn. "'H ~5~~ J etJNt:uno ~Q.~~ Efn'>IFlJfU D.. f'.)(~Ot;ITH nu t"'~"P�~ idi -~�Jdt.F'�

rw:r; 1 r<:~ ' Ul\1 � r, Ln... t'fiSE NO. ~' ::�~'."i ~\!{,~ l�fttll9Ttl 1),. ACOaTA nn fh� I'~ '!f. I d 1 Tlldt]9. f' f1 IJ; .. t n f T ,., '!'. Aprw ~ l \1: 110(J