IBMS TECHNOLOGY PHILS. CORPORATION v. THE COMMISSIONER OF INTERNAL REVENUE

t' REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION IBMS TECHNOLOGY PHILS. CTA Case No. 9970 CORPORATION, Petitioner, Members: -versus- DEL ROSARIO, P.J., Chairperson, MANAHAN, and REYES-FAJARDO, JJ. COMMISSIONER OF Promulgated: INTERNAL REVENUE, Respondent. ){- - - - - - - - - - - - - - - - - - - - - - - - - - -- -hf/~IVV, MANAHAN, J .: Before this Court is a Petition for Review, praying that the Formal Assessment Notice (FAN) dated January 5, 20 18, covering deficiency income ta){, value-added ta){ (VAT), e){panded withholding ta){ (EWT), withholding ta){ on compensation (WTC), final withholding ta){ (FWT), documentary stamp t a){ (DST), improperly accumulated earnings ta){ (IAET) , and compromise penalty, in the amounts of P11 ,593,917.38, P618,371.99, P57,838.45, P7,933,580.45, P1,114,602.74, P46,44 1.78, P4,712,177.13, and P80,000 .00, respectively, inclusive of increments, for taxable period 20 14 be cancelled and withdrawn.1 THE PARTIES Petitioner IBMS Technology Phils. Corporation is a corporation duly organized and e){isting under and by virtue of the laws of the Republic of th e Philippines, with principal office address located at Unit 29-C Chatham House Condominium, 11 6 Valero corner V. A. Rufino Streets, Salcedo Village, Makati City.2 1 Prayer, Petition for Review, Docket - Vol. I, p. 17. 2 Parties, Petition for Review, Dock et- Vol. I, p . 11. OM-

~ DECISION CTA Case No. 9970 IBMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue Respondent is the duly appointed Commissioner of Internal Revenue, with principal office address at the 5th Floor, Bureau of Internal Revenue (BIR) National Office Building, Agham Road, Diliman, Quezon City.3 ANTECEDENTS (ADMINISTRATIVE LEVEL) On May 13, 2016, respondent issued Letter of Authority (LOA) No. eLA201200035835 dated May 13, 2016,4 authorizing the examination of petitioner's books of account and other accounting records for deficiency internal revenue taxes, for the period from January 1, 2014 to December 31, 2014. On December 14, 2017, respondent issued Preliminary Assessment Notice (PAN), with Details of Discrepancies, covering deficiency income tax of P11,463,465.42, VAT of P611,604.58, EWT of P57,207.63, WTC of P7,847,051.97 , FWT of P1,104,082.19, DST of P46,003.42, and IAET of !>4,662,333.42, inclusive of interests, for taxable year (TY) 2014.5 On January 12, 2018, petitioner received the FAN (Parts 1 and 2) dated January 5, 2018, covering deficiency income tax of P11,593,917.38, VAT of P618,371.99, EWT of P57,838.45, WTC of P7,933,580.45, FWT of P1,114,602.74, DST of P46,441.78, IAET of P4,712,177.13, and compromise penalty of P80,000.00, inclusive of interests and penalties, for TY 2014.6 On February 12, 2018, petitioner filed a Protest/Request for Reinvestigation against the FAN.7 Within sixty (60) days therefrom or on April 11, 2018, petitioner submitted the documents in support of its protest.s 3 Par. 1, Admitted Facts, Joint Stipulation of Facts and Issues (JSFI), Docket - Vol. I, p. 176. 4 Exhibit "P-1 ", BIR Records, p. 2. sPar. 2, Admitted Facts, JSFI, Docket- Vol. I, p. 176; Exhibit "P- 15", BIR Records, p. 512. 6 Par. 3, Admitted Facts, JSFI, Docket - Vol. I, pp. 176 to 177; Exhibit "P-16", BIR Records, pp. 525 to 538. 7 Par. 4, Admitted Facts, JSFI, Docket - Vol. I, p. 177; Exhibit "P- 17", Docket- Vol. II, pp. 468 to 473. s Exhibit "P- 18", Docket- Vol. II, pp. 474 to 475 . ~

~ DECISION CTA Case No. 9970 IBMS Technology Phl'ls. Corporation vs. Commissioner ofInternal Revenue PROCEEDINGS BEFORE THIS COURT Petitioner filed the present Petition for Review on November 7, 2018.9 On January 7, 2019, respondent filed his Manifestation with Motion to Admit Answer, 1o to which petitioner posted its Comment/ Opposition with Motion on January 22, 20 19.1 1 In the said Motion to Admit, respondent attached his Answer,12 interposing his special and affirmative defenses. In the Resolution dated April 12, 2019 ,13 the Court granted respondent's Manifestation with Motion to Admit Answer and admitted the said Answer, and initially set the case for mediation on May 2 , 20 19. On May 29, 2019, p etitioner filed a Manifestation with Motion, 14 praying that the m ediation be r e scheduled. Thus, in the Resolution dated June 10, 2019 ,15 the m ediat ion proceedings was reset to July 8, 2019. After the said proceedings, on January 14, 2020, the media tor filed her Mediator's Report, stating that the mediation is unsuccessful. 16 The Court initially set the case for Pre-Trial Confer en ce on March 5, 2020, 17 but wa s finally reset to and h eld on August 27, 2020.18 Prior thereto, respondent's Pre-Trial Brief was filed on March 2 , 2 0 20 ,19 while petitioner 's Pre-Trial Brief with Manifestation was submitted on March 3 , 202 0.20 9 Docket- Vol. I, pp. 10 to 19. 1o Docket - Vol. I, pp . 47 to 50. " Docket- Vol. I, pp. 68 to 69. 12 Docket - Vol. I, pp . 5 1 to 55. I3 Docket - Vol. I, pp. 74 to 75 . 14 Docket - Vol. I, pp. 76 to 77. IS Docket - Vol. I, p. 82. I6 Docket - Vol. I, p. 93. 17 Refer to th e Resolution dated J anuary 22, 2020, Docket - Vol. I, p. 104; Notice of Pre- Trial Conference dated January 23, 2020, Docket- Vol. I, pp. 105 to 106. 18 Refer to Notice of Resetting dated Febru ary 26, 2020 and June 30, 2020, Docket - Vol. I, pp. 110 and 158, respectively; Minutes of hea ring held on, and Order dat ed, August 27, 2020, Docket - Vol. I, pp. 164 to 168, and 172 to 175, respectively . 19 Docket- Vol. I, pp. 11 1 to 1 18. 2o Docket- Vol. I, pp. 139 to 1 43.~

DECISION L CfA Case No. 9970 IBMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue Respondent transmitted the BIR Records of the present case [consisting of one (1) folder, five hundred seventy-five (575) pages)] on February 5, 2020.21 On September 11, 2020, the parties filed their Joint Stipulation of Facts and Issues, 22 which was approved in the Resolution dated September 17, 2020,23 thereby terminating the Pre-Trial. The Pre-Trial Order dated December 9, 2020 was then issued by the Court. 24 Trial then ensued. During trial, petitioner presented its documentary and testimonial evidence. It offered the testimonies of the following individuals, namely: (1) Ms. Chervie Rose Janapin,2s petitioner's Finance Clerk; and (2) Revenue Officer (RO) Roland Dela Torre,26 as hostile witness. In the meantime, during the hearing held on July 13, 2021, counsel for respondent manifested that she will dispense with the presentation of RO Dela Torre as her witness, subject to cross examination during RO Dela Torre's presentation as hostile witness of petitioner.27 After presentation of RO Dela Torre as hostile witness during the hearing held on March 1, 2022, the Court granted petitioner a period of fifteen (15) days to file Formal Offer of Evidence, while respondent was granted the same period within which to file comment. Moreover, considering that respondent is no longer presenting any evidence, the Court gave both parties a period of thirty (30) days to file their respective memorandum.28 21 Compliance dated February 5, 2020, Docket- Vol. I, p. 107. 22 Docket- Vol. I, pp. 176 to 178. 23 Docket- Vol. I, p. 200. 24 Docket- Vol. I, pp. 255 to 270 . 25 Exhibit "P-207", Dock et - Vol. I, pp. 144 to 155; Minutes of hea ring held on, and Order dated, March 2 , 2021, Docket- Vol. I, pp. 333 to 337. 26 Minutes of hearing held on, and Or der dated, March 1, 2022, Docket - Vol. II, pp. 427 to 427-A, and 428 to 428-A, respectively. 27 Minutes of the hea ring h eld on, a nd Order dated, March 1, 2021, Docket- Vol. I, pp. 384 to 388. 28 Minutes of hearing h eld on, and Order d ated , Marc h 1, 2022, Docket- Vol. II, pp. 427 to 427-A and 428 to 428-A, respectively . ~

"' ' DECISION CTA case No. 9970 IBMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue Petitioner filed its Formal Offer of Evidence on March 17, 2022.29 Respondent posted his Comment and Opposition (To Petitioner}s Formal Offer of Evidence dated March 15} 2022) with Manifestation on March 31, 2022.30 Respondent also posted a Motion for Leave of Court to File Demurrer to Evidence, with attached Demurrer to Evidence, on March 31, 2022 .31 Petitioner later filed its Comment/ Opposition with Motion on April 12, 2022,32 praying that the Motion for Leave be denied, and that RO Dela Torres' Judicial Affidavit dated February 28, 2020, and all attachrpents thereto, be expunged from the records of the case. In the Resolution dated June 14, 2022,33 the Court denied respondent's Motion for Leave of Court to File Demurrer to Evidence, but gave petitioner the opportunity to comment on petitioner's Motion incorporated in its Comment/ Opposition. In the same Resolution, the Court admitted petitioner's offered exhibits, except for the following: 1. Exhibits "P-9", "P-11" and "P-248", for failure to identify; 2. Exhibits "P-10", "P-11-a", "P-19", "P- 19-a", "P-23", "P-25", "P-36", "P-40 to P-41", "P-46", "P-193 to P-195", "P-197 to P-200", "P-232 to P-233", "P-238", "P-293 to P-293-a", "P- 297-b to P-297-c", "P-30 1", "P-305", "P-313", "P-338" and "P-339", for failure to present originals for comparison; 3 . Exhibits "P-20", "P-20-a", "P-76", "P-77" and "P-78", for failure to submit duly marked exhibits; 4. Exhibits "P-109", "P-110", "P-111", "P - 112", "P-113", "P- 248-a", "P-251", "P-251-a" and "P-251-b", for failure to present originals for comparison and for failure to identify; and 5. Exhibits "P-207", "P-217", "P-253" and "P-253-a", for not being found in the records of the case. On July 22, 2022, petitioner filed a Motion for Leave to Admit with Tender of Excluded Evidence and Manifestation. 34 29 Doc ket - Vol. II, pp. 429 to 439. 30 Docket- Vol. II, pp. 995 to 1000. 31 Docket- Vol. II, pp. 983 to 992. 32 Docket- Vol. II, pp. 1004 to 1006. 33 Docket- Vol. II, pp. 1009 to 1015. 34 Docket- Vol. II, pp. 1017 to 1020. ~

DECISION CTA Case No. 9970 IBMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue Respondent, on the other hand, posted his Comment/ Opposition (To Petitioner's Motion for Leave to Admit with Tender ofExcluded Evidence and Manifestation) on August 18, 2022.35 Respondent's Memorandum was posted on July 20, 2022,36 while petitioner filed its Memorandum on July 22, 2 0 2 2 . 37 In the Resolution dated August 18, 2022,38 the Court granted petitioner's Motion to Expunge the Judicial Affidavit of Revenue Officer Roland S. Dela Torre dated February 28, 2020, and ordered the Judicial Affidavit of RO Dela Torre dated February 28, 2020 expunged from the records of this case. On October 20, 2022, the Court issued a Resolution,39 denying petitioner's Motion for Leave to Admit, while noting its Tender of Excluded Evidence and Manifestation. Accordingly, the Court made part of the records of the case Exhibits "P-9", "2P3-"1,0""P'-"2P5-"1'1""P' -"3P6-"1'1"-Pa"-4' 0"Pt-o1 9P"-'4"1P"-' 1"9P--a4"6' ""'P"-P2-07"6' ""'P"-P2-07-7a"" ' "P- "P- ' 7189"5'" aa'"""P"a''P-n1"-"dP01P9-9-22"7"5'9P1t7"-o"P3-'b-3P1"9-P12t"o-.002"05P'"1-"'I2-PnPa9-"-172'1t-3hc"12P"e"'-'t2o""s5PPa1P--m-31-a201e"321'3"""R"''P'e""-s"PP2oP-5-l1-31u210-t33b5i8o""""n''' ',""""PPPPt---h-1232e99143338"C"tt''ooo""uPPPPr----t 248- 293- 338" submitted the present case for decision. THE ISSUES The parties stipulated the following issues for this Court's resolution, to wit: " 1. Whether the Letter of Authority (LOA) is valid for lack of revalidation on or before the expiration of the 180-day period. 35 Doc ket- Vol. II, pp. 1057 to 10 59. 36 Docket- Vol. II, pp. 1033 to 1047 . 37 Docket - Vol. II, pp. 1022 to 1032. 38 Docket - Vol. II, p . 1056. 39 Docket - Vol. II, p . 1066 to 1070 . o.---

DECISION erA case No. 9970 IBMS Technology Ph!'ls. Corporation vs. Commissioner ofInternal Revenue 2. Whether Petitioner is liable for deficiency Income Tax (IT) of Php11,593 ,917.38, Value-Added Tax (VAT) of Php618,371.99, Expanded Withholding Tax (EWT) of Php57,838.45, Withholding Tax on Compensation (WTC) of Php7,933,580.45, Final Withholding Tax (FWT) of Php1,114,602.74, Documentary Stamp Tax (DST) of Php46,441.78, Improperly Accumulated Earnings Tax (IAET) of Php4,712,177.13, and Compromise Penalty (MC) of Php80,000.00, inclusive of interests and penalties, for TY 2014, as indicated in the FAN dated 05 January 2018. 3. Whether Petitioner made an overpayment."40 Petitioner's arguments: Petitioner argues that the LOA is invalid for lack of revalidation on or before the expiration of the 180-day period; and that even granting, for the sake of argument, that the LOA is valid, p etitioner is not liable for the deficiency taxes as enumerated in the FAN. Respondent's counter-arguments: Respondent contends that failure to revalidate petitioner's LOA does not affect its validity nor the assessment made pursuant to the same; that the requirement on the issuance of Notice of Informal Conference was deleted under Revenue Regulations (RR) No. 18-2013 dated November 28, 2013, which amended RR No. 12-99; that respondent has fully complied with the due process requirement under Section 228 of the Tax Code, as amended, and RR No. 12-99, as amended by RR No. 18-20 13; that petitioner is liable for the deficiency income tax, VAT, EWT, WTC, FWT, DST, IAET and compromise penalty; and that the necessity of proving that the tax assessment is invalid lies with the party assailing the validity of the assessment. 40 Statement of Issues, JSFI, Docket - Vol. I, p. 177 . ~

DECISION CTA Case No. 9970 ISMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue THE COURT'S RULING The present Petition for Review is partially granted. The lapse of the audit period does not render the subject LOA invalid and will not have the effect of revoking the authority given thereunder to the concerned RO. Petitioner avers that the LOA is invalid because under Revenue Mem orandum Order (RMO) No. 19-2015, the report of investigation/verification of cases covered by electronic Letters of Authority (eLAs) shall be submitted by the RO within one hundred eighty (180) calendar days only. Petitioner further alleges that under CTA Case No. 8837 dated March 19, 2018, the non-compliance of the concerned RO within the prescribed period and the required procedure of surrendering the LOA for revalidation would inevitably render th e LOA invalid. Petitioner claims that in the present case, respondent issued the LOA on May 13, 20 16, which was received by petitioner on May 20, 20 16. The PAN was issu ed on December 14, 20 17, while the FAN was issued on January 5, 20 18 which was received by petitioner on January 12, 20 18. The p eriod from the time the LOA was received by the petitioner on May 20, 20 16 to th e time when the PAN and FAN were issued on December 14, 20 17 and January 5, 20 18, respectively, is already more than eighteen (1 8 ) months, which is clearly beyond the six (6) months or 180-day prescribed period. Petitioner further maintains that after the lapse of the 180-day prescribed period, respondent did not also comply with the required procedure of surrendering the LOA for revalidation. This fact was admitted by RO DelaTorre himself during direct-examination on March 1, 2022 as according to him4 1 ''There is no use of revalidating ofthe Letter ofAuthority". 4 ' Transcript of Stenographic Note s (TSN), Ma rch 1, 2022, p .35. ~

"' DECISION CTA Case No. 9970 ISMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue Petitioner further contends that the non-compliance within the one hundred eighty (180) calendar days to submit the investigation/verification of the case covered by the LOA, and the required procedure for surrendering the LOA for revalidation rendered the LOA invalid. Consequently, this also renders the PAN and FAN invalid. Thus, the PAN and FAN are void and ineffectual and bear no valid fruit. This Court disagrees with petitioner. Admittedly, under RMO No. 19-201542 , there is indeed a 180-day period for regional cases within which to submit a report of investigation. However, nothing therein states that in case the 180-day period to submit the said report of investigation is not observed, the LOA issued will be a nullity. In fact, in the same issuance, it was clearly stated that the failure to render a report of investigation/verification within the time frame shall not nullify the eLA. The pertinent portion of RMO No. 19-2015 reads: "28. Failure on the part of the RO to render a report of investigation/verification within the time frame prescribed above shall not nullify the eLA. The eLA is enforceable even if it remains outstanding beyond the time frame for submission of report of investigation/verification by the RO assigned to the case, subject to the period of limitation under Sections 203 and 222 of the Tax Code of 1997, as amended. However, the RO who fails to submit the report investigation/verification shall be subject to anv applicable administrative sanction." (Emphases and underscoring added) In this regard, it must also be noted that the requirement of revalidation of LAs for failure to complete audit was already withdrawn beginning June 1, 2010, pursuant to RMO No. 44- 201043, the pertinent portion of which reads: "8. Beginning June 1, 2010, the rule on the need for revalidation of LAs for failure of the revenue officials to complete the audit within the prescribed period shall be withdrawn. Accordingly, there is no need for 42 SUBJECT: BIR Audit Program. 43 SUBJECT: Electronic Issu a n ce of Letters of Authority. ~

DECISION CTA Case No. 9970 IBMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue revalidation of the LA even if the prescribed audit period has been exceeded. However, the failure of the RO to complete the audit within the prescribed period shall be subject to the applicable administrative sanctions." (Emphasis and underscoring added) Moreover, the above provision was reiterated in RMO No. 19-2015, the relevant portion of which reads: "29. As stated in Item Number IV.8 of RMO No. 44-2010, it is reiterated that pending eLAs as of the effectivity of the said Order shall no longer be revalidated. In case the report of investigation cannot be rendered within the prescribed period, the concerned RO shall prepare a monthly progress report starting from the time such audit report should have been rendered stating therein the reason for the delay in the submission of the report of investigation duly noted by his GS and approved by the RDO / LTD/LTAD. The said progress report/s shall be attached to the docket of the case." (Emphasis added) Clearly, the revalidation of LOAs which should be done "for failure of the revenue officials to complete the audit within the prescribed period)), has been withdrawn beginning on June 1, 2010. The effect of such failure is merely to subject the concerned RO(s) to applicable administrative sanctions, not to render null the issued LOA. More significantly, the lapse of the said period of audit would not have the effect of revoking the authority given to the concerned RO(s) . Thus, as correctly argued by respondent, the lapse of the 180-day period under RMO No. 19-2015, and the failure to revalidate the LOA, are of no moment; and thus, the same will not have the effect of nullifying the subject tax assessments. The assessments are partially upheld. In the FAN, the aggregate amount of P26, 156,929.92, inclusive of surcharges and interests was found to be deficient for taxable year 2014, summarized as follows:~

DECISION CTA Case No. 9970 IBMS Technology Ph1'ls. Corporation vs. Commissioner ofInternal Revenue Tax Typ e Basic Deficiency Surcharge Inte rest Total Tax t' 1'4,154,079.40 t�11,593,917.38 Income tax t' 7,439,837.98 150,000.00 232,4 18.20 618,37 1.99 Value-Added Tax (VAT) 385,953.79 6,250.00 21,861.9 1 Expanded Withholdin g 57,838 .45 35,976.54 7 10,662.20 2,998,752.80 Tax (EWT) 364,602.74 7,933,580.45 Withholding Tax on 4,934,827.65 15,191.78 1,114,602.74 Compensation (WTC) 600,000.00 1,158,866. 14 46,441.78 Final Withholding Tax 4,712,177. 13 25,000.00 P8,945 ,772.97 (FWT) 2,842,648.79 80,000.00 Documentary Stamp P2 6 , 156,929.92 P16,264,244.75 P866,912.20 Tax (DST) IAET Compromise penalty TOTAL I. Income Tax Respondent assessed petitioner for d eficien cy incom e t ax forTY 2014 amounting t o P 11,593,9 17 .38 , with details a s follo ws: 44 Taxable Income (Loss) per return p 7,749,577.00 Add: Adjustments/disallowances p 247,988.31 20,362,146.36 Disallowed Expenses due to non-withholding 20,114,158.05 p 28, 111,723.36 (Schedule 1) Salaries and Wages not subjected to withholding tax (Schedule 2) Adjusted Taxable Income Basic Income Tax Due p 8,433,5 17.01 Less: Tax credits/payments: p 673,794.00 Prior Year's Excess Credits Creditable withholding tax 1'1 ,278,092.00 319,885.03 993,679.03 Less: Disallowed Creditable 958,206.97 p 7,439,837.98 Withholding Tax 4,154 079.40 P 1 1 , 5 9 3 ,9 1 7.3 8 Basic Deficiency Income Tax Add: Interest (04. 16.15- 0 1.29.18) TOTAL AMOUNT DUE The following items comprised the d eficien cy Income tax assessm ent: A. Disallowed Expenses due to non-withholding p 247,988.31 B. Salaries and Wages not subjected to withholding tax 20,114, 158.05 C. Disallowed Creditable Withholdin g Tax 958,206.97 44 Exhibit "P- 16", BIR Records, p. 538. ~

DECISION CTA Case No. 9970 IBMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue A. Disallowed Expenses due to non-withholding Respondent's examiner found that the following expenses or deductions claimed by petitioner were not su bjected to withholding tax, thus disallowed as deduction from gross income pursuant to Section 34(K) of the NIRC of 1997, as amended:45 Sch edule 1: Per ITR Per alphalist/ Disallowed Rate EWTDue p 1,166,935.00 160 1-E Expenses 5% p 1,409.05 Expense/ p 28,180.95 10% Income Payments 510,370.00 p 1,138,754.05 21,980 .74 Rent P1,677,305.00 219,807.36 P23,389.79 Professional fees 290,562.64 TOTAL P247,988.31 P1,429,316.69 Petitioner avers that it "religiously withheld and remitted the withholding taxes for rental and professional fees inclusive in the total of Pl ,736,412.84 as evidenced by BIR Form 1604- E 46"_47 However, the Court notes that the total amount of P1,736,412.84 includes all of petitioner's income payments/ expenses for taxable year 20 14 and does not solely pertain to withholding tax on rental and professional fees. Meanwhile, respondent disallowed only a portion of petitioner's rental and professional fees that were not subjected to withholding, as shown above. Petitioner submitted its monthly remittances for the year 2014.48 However, other than the foregoing documents, petitioner did not explain or substantiate the discrepancy between the amounts of rental and professional fees per ITR and the amounts as shown per remittance returns. Hence, the disallowance of rental and professional fees expenses for the year 20 14 amounting to P247,988.31 should rem8ln. 45 Exhibit "P- 16", BIR Records, p. 536. 46 Exhibits "P-250" and "P-250-a", Docket - Vol. II, pp. 743 to 744. 47 Paragraph 9(a), III. Discussion/Arguments, Memorandum for Petition er, Docket - Vol. II, pp. 1025 to 1026. 48 Exhibits "P-67", "P-70", "P-73", "P- 132", "P-1 34", "P- 136", "P-138", "P- 140", "P- 142", "P- 144", and "P- 146", Docket - Vol. II, pp. 542 to 544 and 607 to 631. ,.,...-

DECISION CTA Case No. 9970 ISMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue B. Salaries and Wages not subjected to withholding tax Respondent likewise compared the amount of salaries and wages claimed by petitioner as deduction in its income tax return with the total compensation reported in its monthly remittance returns for the year 20 14. The discrepancy of P20, 114,158.05 1s disallowed for failure to withhold the corresponding tax on compensation, thus:49 Schedule 2: , 1,209,036.44 p 25,405,954.00 p 4,927,985.28 5,291,795.95 Salaries and Wages Per FS/ITR Less: Salaries and Wages per 1601C p 20,114,158.05 Salaries & wages not subjected to withholding tax 24.5341% Multiplied by p 4,934,827.65 Basic Deficiency Withholding Tax Based on records, respondent's total salaries and wages per FS/ITR in the amount of P25,405,954.00 consists of the following: Cost of services - Direct labor f> 15,996,777.0050 Operating expenses - Salaries, wages and employee benefits 9,409, 177 .0051 Total Salaries & wages per BIR audit p 25,405,954.00 Petitioner accounted and explained the foregoing discrepancy as follows:52 Salaries & wages not subjected to withholding tax p 20,114,158.05 Less: Reconciling items f> 2,690,120.53 594 ,139.61 1. Total compensation per BIR Form 1604-CF f> 7,981,916.48 12,440,005.03 Less: Per FAN 5,291,795.95 p 15,724,265.17 2. Non-taxable fringe benefits p 4,389,892.88 3. Payments to subcontractors and/or independent contractors Total Unaccounted Balance 49 Exhibit "P-16", BIR Records, p . 536. so Schedule 2C, Line 20, Exhibit "P-13", BIR Records, p. 280. See also BIR Records, p. 269. s1 Schedule 4, Line 29, Exhibit "P-13", BIR Records, p. 279. See also BIR Records, p. 268. . s2 Paragraph 9(b), III. Discussion/ Arguments, Memorandum for Petitioner, Docket- Vol. II, pp. 1026 to 1028. ~

DECISION CTA Case No. 9970 IBMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue First, petitioner argues that respondent's basis on the BIR Forms 160 1-C is incorrect because it refers only to remittances of withholding taxes on compensation and are incomplete. 53 Petitioner's monthly remittances of withholding taxes on compensation for the year 2014 is summarized as follows: Exhibit Month Total Compensation Taxable Tax Amount P-55 (2014) p Compensation Remitted P-58 P-61 Jan 552,222.36 p p 79,691.78 P-64 Feb 1, 166,0 12. 15 81,904. 13 P-114 Mar 466,136.10 68,836.60 P-1 16 Apr 585,048.24 1, 11 6,879.04 75,903.40 P- 1 18 May 577,245.03 78,776.9 1 P- 12 0 Jun 582,672.2 1 562,241.83 P-122 Jul 593,783.04 554,438.62 266,079.64 P-1 24 Aug 582,672.21 510,710.04 81,893.38 P- 126 Sep 652,140.71 557,053.43 90,259.94 P- 130 Oct p 5,291,795.95 54 0,710.04 91,159.90 Nov 619,816.18 85,92 1.55 Dec p 4,927,985.28 9 1,159.90 117,449.31 TOTAL p 1,209,036.44 As shown above, petitioner did not report the amounts of total compensation and total taxable compensation for the months of January to April2014. Nonetheless, petitioner avers that in its Annual Information Return (BIR Form No. 1604- CF), total compensation for the year 2014 amounts to P7 ,981,916.48. Unfortunately, the said document was denied admission as evidence by the Court for petitioner's failure to present originals for comparison and for failure to identify.54 As such, it cannot be used to support petitioner's assertion. Next, petitioner avers that the amount P594,139.6155 pertains to either non-taxable fringe benefits or expenses for entertainment, amusement and recreation, which are recorded 53 Paragr a ph 9 (b) , III. Discu ssion/Argum en ts, Me morandum for Petition er, Docket - Vol. II, p. 1026. 54 Resolution d a ted J une 14, 2022 , Dock et - Vol. II, p. 10 13. 55 Paragraph 9 (b), III. Discussion / Arguments, Memorandum for Petitioner, Docket - Vol. II, p. 1026. See also Annex B of Formal Offer of Evidence, Docket- Vol. II, p. 980. ~

DECISION ' CTA Case No. 9970 ISMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue as part of the salaries and wages account as evidenced by various payment vouchers , official receipts (ORs) or invoices.56 Examination of the foregoing documents shows that they are indeed expenses for entertainment, amusement, and recreation for petitioner's employees, which compnse of employees' uniform, expenses for birthday celebrations, anniversary, and Christmas party expenses and giveaways for the year 2014. However, only the amount of P135,835.60 is duly substantiated and is not subject to withholding tax, thus, deductible. The rest in the amount of P458,304.0 1 shall be disallowed as deductions from gross income for the reasons detailed as follows: Properly substantiated and deductible expenses OR/ Exhibit Date Inv. No. Su~~lier Amount p 2 ,148.21 P-257-b 04/ 08/ 2014 413903 Amber Golden Chain of Restaurants Ordofood Enterprises, Inc. 270.54 P-259 04 / 10/2014 0012715 7-Eleven Pesuena Enterprises 17.86 P-261 04/24/ 2014 12 1424 Chicke n 's R Us, Inc. P-262 04 / 24/2014 13700 Goldilocks Bakeshop Inc. 2,449. 11 P-267 05/ 29/2014 06100 Clicc, Inc. 379.46 P-268 05/29 /2014 4630 Chicken's R Us, Inc. P-270 06/19 / 20 14 14446 1,585.71 P-27 1 06/19/2014 001 -395961 Pan de Mia. Food Co. Inc. 918.75 P-272 05/29/2014 429396 160 .7 1 Amber Golden Ch ain of Restaurants P-274 06/24/2014 123 16 1,808.93 P-276-b 07/21/ 2014 0851 National Book Store Inc. P-278 08f 08f2014 Gain Tailoring Shop OR# 085 1 356.92 P-279 08/08/2014 5053 Clicc, Inc. 30,566.25 P-280 08/ 08/2014 LSS Fastfood Makati P-284-b 08/18/20 14 4 1636 The Sweet Life by Ange , Co. 1,644.65 P-286 09/ 15/2014 6147 Gain Tailoring Shop 6 0 0 .0 0 P-287 -b 09/15/2014 0853 Clicc, Inc. P-287-c 09/15/2014 5302 Soundway Entertainment Inc. 1,400.00 P-288-b 13377 Soundway Entertainment Inc. 30,566.25 P- 289-b undated 13378 Gain Tailoring Shop 10/ 10/20 14 0854 Gain Tailoring Shop 2,812.50 P-295 12/06 /2 014 0856 One Pix Photo Booth 13 ,3 9 2 . 8 5 Subtotal 00002 2,372.90 18 ,750 .00 18,000.00 5,634.00 P135,835.60 56 It is noted that in its protest to th e FAN, petitioner avers tha t the amount P744,408.60 pertains to either non-taxable fringe benefits or expenses for entertainment, amusement and recreation. Exhibit "P-17", Docket - Vol. II, pp. 469 OM..,/' to 470.

DECISION CTA Case No. 9970 IBMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue Supported by documents other than official receipts or invoices P-255-b 04114120 14 Email :li~eposit Banco de Oro p 15,000.00 P-26 0 -b 0 4 129/20 14 Dep osit Slip Banco de Oro 12,000.00 P-298-b 121 1612014 Statement of Sodexo Benefits and Rewards Services 150,000.00 Phils., Inc. Pl77,000.00 Subtotal Account Supported by ORs or invoices but NOT issued in the name of the company P-28 1 08108/2014 453767 Amber Golden Chain of Restaurants p 1,800.00 P-282 08/09/2014 06226 Gold ilocks Bakeshop Inc. 1,397.00 9 9 .0 0 P-2 8 3 08/ 09/20 14 06227 Gold ilocks Bakeshop Inc. P 3,296.00 Subtotal Supported by payment vouchers and cash voucher only Exh. Date Voucher No. Particulars Amount p 3,569.20 P-256 0 4/ 10/2014 14 00593 Payment Voucher 15,000.00 P-263 0 4 / 30/2014 14 00660 Payment Voucher 3,247.35 P-264 0 5/08/2014 14 007 10 Payment Voucher 6 6 4 .0 0 3,959. 10 P-265 0 5/06 /2014 LMF 140048 Cash Vouch er 1 , 0 9 8 .7 5 P-266 06/04/2014 14 00828 Payment Voucher 356.92 P-269 0 6123/20 14 14 009 16 Paymen t Voucher 1,230.00 5,567.42 P-273 0 710 3120 14 14 0096 1 Paymen t Voucher 3,80 1.03 7,357 .23 P-275 071 10/2014 14 00982 Paym en t Voucher 2,575.00 5,000.00 P-277 08/ 11 12014 14 0 109 1 Payment Voucher 3, 175.00 100,000.00 P-285 09( 17/20 14 14 0 1284 Paym ent Voucher P156,601.00 P-290 10/ 16/2014 14 0 14 12 Payment Vou cher p 303.00 P-29 1 11 /26/2014 14 01620 Payment Vou cher 2,743.00 P-292 11 /24/2014 14 0 1568 Payment Voucher p 3,046.00 P-294 12/09/201 4 140 1696 Payment Voucher P-296 12/03/20 14 14 0 1686 Payment Vouch er Subtotal Claimed twice per Annex B (including VAT portion) P-259 04/10/20 14 00 127 15 Ordofood Enterprises, Inc. P-262 04124/2014 13700 Chicken's R Us, Inc. Subtotal Supported by documents which are denied admission as evidence P-293 12/03/20 14 14 01676 Payment Voucher p 5 ,000.00 110,063.85 P-297-b 12/03/201 4 107201 Shopwise Pll5,063.85 Subtotal VAT Portion of the expenses OR/ Invoice Net of VAT Input Tax Amount p p 25 1.79 P-257-b Amber Golden Chain of Restaurants p 2,400.00 2, 148.21 4 5 .5 4 P-267 Goldilocks Bakesh op Inc. 425.00 379.46 P-268 Clicc, Inc. 1 90 .2 9~ 1,776.00 1,58 5 .7 1

DECISION CTA case No. 9970 IBMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue ----------------------------------------------------- P-270 Chicken's R Us, Inc. 1,029.00 918.75 110.25 P-271 Pan de Mia. Food Co. Inc. 180.00 160.71 19.29 P-272 Amber Golden Chain of Restaurants 1,808.93 P-274 National Book Store Inc. 2,020.00 356.92 2 11.07 P-278 Clicc, Inc. 399.75 1,644.65 42.83 P-286 Clicc, Inc. 2,812.50 197.35 P-287-b Soundway Entertainment Inc. 1,842.00 13,392.85 P-287-c Soundway Entertainment Inc. 3,150.00 2,372.90 337.50 15,000.00 1,607.15 Sub total 2,657.00 TOTAL 284.10 P30,878.75 P27,581.59 p 3!297.16 P594, 139.61 Thus, out of the amount of !>594,139.61, only !>135,835.60 can be allowed as deductions from gross income and the remaining !>458,304.01 should be disallowed for petitioner's failure to properly substantiate and show that the same should not be subjected to withholding tax. Finally, petitioner argues that the amount of P12,440,005.0357 recorded under salaries and wages are payments to sub-contractors and/or independent contractors.58 The said expenses were allegedly subjected to 2o/o withholding tax, which were remitted as part of its total remittances for the taxable year 2014 of !> 1,736,412.84.59 Further, petitioner maintains that these were recorded as Direct Labor and reported under Cost of Services in its Income Statement. Petitioner submitted the official receipts and invoices6o to support its argument. However, the best document to prove that the foregoing expenses were indeed already subjected to withholding taxes would be the alphalist that is a required attachment to the monthly remittance returns. Petitioner did not submit as evidence such alphalists; thus, the Court cannot ascertain whether the corresponding income payments of the subject expenses are indeed included 1n the remittances. 57 It is noted that in its protest to the FAN, petitioner avers that the amount P15,996,777.00 pertains to payments to Third Generation Network Solutions Corp. (TGNSC}, a company sub-contractor, and other sub-contractors and/ or independent contractors. Exhibit "P- 17", Docket - Vol. II, pp. 470 to 471. 58 Paragraph 9{b), III. Discussion/ Arguments, Memorandum for Petitioner, Docket - Vol. II, pp. 1027 to 1028. See a lso Annex C of Formal Offer of Evidence, Docket - Vol. II, p. 98 1. 59 Exhibits "P-250" and "P-250-a", Docket- Vol. II , p.743. 60 Exhibits "P-299" to "P-346-b", Docket - Vol. II , pp. 813 to 963.~

DECISION CTA Case No. 9970 IBMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue In fine, the disallowed salaries and wages expense is adju sted to th e amou nt of P19,978,322.45, computed as follows: Salaries & wages not subjected to withholding tax p 20,114,158.05 Less: Non-taxable fringe benefits 135,835.60 Unaccou n t e d Ba lance p 19,978,322.45 C. Disallowed Creditable Withholding Tax Respondent's examiner found that of the claimed creditable withholding taxes for the year 2014 of P1,278,092.00, the amount of P958,206.97 should be disallowed for being unsupported.51 Petitioner counters that it actually supported the creditable withholding tax of P1,278,092.00 as evidenced by BIR Form No. 230762 issued by its various clients. However, upon scrutiny, only the amount of P835,490.29 is duly su pported by certificates of withholding (BIR Forms No. 2307), to wit: Ex h. Payor Income Payment CWT P-21 STI Educational System p 2,863,375.87 P-22 Datalec Technology Corp. 11 ,267.01 p 57,267.52 P-24 5,1 12 ,500.00 121.60 P-26 IBM Philippines, Inc. 38,483. 11 P-27 794,642.86 102,250.00 P-28 Business Process Outsourcing Int'l. 1' 170,000.00 384.83 P-29 Charoen Pokphand Foods 401,785.71 P-30 Charoen Pokphand Foods 470,809 .08 15,892.86 P-31 Charoen Pokphand Foods 36,486.08 23,400.00 P- 3 2 Concentrix Services Corp. 28,679.50 P- 3 3 Concentrix Services Corp. 186,000.00 8,035.71 P-34 Concentrix Services Corp. 186,000.00 9,416.18 P-35 DB&B Philippines Inc. 158,000.00 P-37 DB&B Philippines Inc. 77,625.00 729.72 P-38 DB&B Philippines Inc. 77,625.00 573.59 Filinvest Land Inc. 3 ,720 .00 Filinvest Land Inc. 3,720.00 3,160.00 776.25 776.25 61 Exhibit "P- 16", BIR Records, p. 536. 62 Exhibits "P-21 " to "P-54 " and "P-148" to "P-24 5", Docket- Vol. II, pp. 500 to 537 a nd "P-632" to "P-7 37". ~

:' DECISION CTA case No. 9970 I BMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue ----------------------------------------------------- P-39 Filinvest Land Inc. 3,200.00 32.00 P-42 Manulife Data Services Inc. 1,660,714.29 33,214.29 P-43 Philippin e Women's University P-44 Philippine Women's University 1,785.71 35.71 P-45 Philippine Women's University 12,946.43 258.93 P-47 PH02 Damco Philippines Inc. 141,011 .71 1,410.12 P-48 Synnex-Concentrix Corp. 19,967.21 399.34 P-49 Synnex-Concentrix Corp. 48192.83 9 6 3 .8 6 P-50 Synnex-Concentrix Corp. 43,799.06 875.98 P-51 P.J.Lhuillier Inc. 396,103.52 7,922.07 P-52 Thome Ship Management PTE Ltd. 415,000.00 8,300.00 P-53 Thome Ship Management PTE Ltd. 399, 107.50 7 ,982.15 P-54 Thome Ship Management PTE Ltd. 232,143.00 4 ,642.86 P-148 Manulife Data Services Inc. 87,053.50 1,741.07 P-149 Towers Watson Global Business Services Inc. 783,750.00 15,675.00 401,848.00 8,036.96 P-150 Holy Cross of Davao College Inc. P-151 IBM Philippines, Inc. 5,985,000.00 119,700.00 P-152 STI Educational System 2,220,000.00 44,400.00 P-153 Ateneo de Manila University P- 154 Business Process Outsourcing Int'l. 484,483.22 9,689.66 P-155 Concentrix Services Corp. 10,351.86 103.52 P-156 Concentrix Services Corp. 19,505.36 195.05 P-157 Concentrix Services Corp. P-158 Concentrix Services Corp. 117,922.14 2,358.44 P-159 Concentrix Services Corp. 94,492.25 1,889.85 P-160 Concentrix Services Corp. 376,647.26 7 ,532.95 P-161 Concentrix Services Corp. 316,882.82 6,337.66 Concentrix Services Corp. 121 ,35 1.98 2,427.04 P-162 Concentrix Services Corp. 66,251.62 1,325.03 Concentrix Services Corp. 52,119.86 1,042.40 P-163 Concentrix Services Corp. P-164 Concentrix Services Corp. 47,440.16 948.80 P-165 Concentrix Services Corp. P-166 Concentrix Services Corp. 58,136.18 1, 162.72 Concentrix Services Corp. 43,799.06 875.98 P-167 Concentrix Services Corp. 48,192.93 963.86 Concentrix Services Corp. 36,222.99 724.46 P-168 Concentrix Services Corp. P-169 DB&B Philippines Inc. 316,882.82 6,337.66 P-170 DB&B Philippines Inc. P-171 Filinvest Land Inc. 65,875.39 1,31 7.51 P-172 Filinvest Land Inc. 28,679.51 573.59 P-173 NCR Cebu Development Center Inc. 300,000.00 P-174 One Stop Warehousing Solutions 660,000.00 6,000.00 P-175 PhilHealthCare Inc. 760,000.00 13,200.00 P-176 Philippine Women's University 372,000.00 15,200.00 P-177 Philippine Women's University 360,000.00 7,440.00 P-178 Philplans First Inc. 7,200.00 P-179 Philplans First Inc. 4,267.00 P- 180 321,428.50 42.67 P-181 6,428.57 P-182 3,900.00 P-183 88,081.00 78.00 413,284.50 880.81 8,265.69 1,785.71 4 ,017.86 35.71 133,928.57 80.36 107,142.86 2,678.57 2,142.86~

), DECISION CTA case No. 9970 IBMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue ----------------------------------------------------- P-184 Philplans First Inc. 7 2 , 50 0 . 0 0 1,450.00 P-185 Pointwest Innovations Corp. 21,538.46 430.77 P-186 P.J.Lhuillier Inc. 90,771.93 P-187 P.J.Lhuillier Inc. 38,380.94 1,591.57 P-188 Thome S h ip Management PTE Ltd. 45,059.50 767.62 P-189 Thome Ship Management PTE Ltd. 388,839.50 901. 19 P-190 Thome Ship Management PTE Ltd. 45,059 .50 P- 191 Thome Ship Management PTE Ltd. 798,214.00 7,776.79 P- 192 Thome Ship Management PTE Ltd. 176,785.50 901. 19 P-196 Holy Cross of Davao College Inc. 1,354,125.00 P-201 Business Process Outsourcing In t' l 15,964.28 P-202 Accutest Technologies Phils. 5,285.71 3,535.71 P-203 DB&B Philippines Inc. 18,086.68 27,082.50 P-204 DB&B Philippines Inc. 69,642.86 P-205 DB&B Philippines Inc. 45,000.00 52.86 P-206 Concentrix Services Corp. 22,500 .00 180.87 P-208 Concentrix Services Corp. 79,220.70 1,392.86 P-209 Concentrix Services Corp. 94,161.82 900.00 P-210 Concentrix Services Corp. 240,000.00 450.00 P-211 Concentrix Services Corp. 14,534 .04 1,584.41 P-212 Concentrix Services Corp. 660,000.00 1,883.24 P-21 3 DB&B Philippines Inc. 245,000.00 4,800.00 P-214 Electro-System s Industries Corp. 2 3 , 2 1 4 .2 9 290.68 P-215 Filinvest Land Inc. 21,401.79 13,200.00 P-216 Filinvest Land Inc. 624,107.00 4,900.00 P-218 Filinvest Land Inc. 177,678.50 464.29 P-219 Filinvest Land Inc. 80,357.00 2 14.02 P-220 NCR Cebu Developme nt Center Inc. 174,230.00 12,482. 14 P-22 1 Philippine Women's University 3,553 .57 P-222 Philippine Women's University 6,670.00 1,607 .14 P-223 Philippine Women's University 513,392.86 1,742.30 P-224 Philplans First Inc. 282,200.82 133.40 P-225 Philpla n s Firs t Inc. 499,999.95 10,267.86 P-226 Pointwest Innovations Corp. 214,285.71 5,644.02 P-227 Pointwest Innovations Corp. 267,857.14 10,000 .00 P-228 Thome Ship Management PTE Ltd . 4 ,285.71 P-229 Torm Shipping Phils Inc. 3,800.00 5,357.14 P-230 Pointwest Innovations Corp. 9,620.08 P-231 IBM Philippines, Inc. 475,000.00 76.00 P-234 DHL Global Forwarding Phils. 45,1 06.08 192.40 P-235 Towers Watson Global Business Services Inc. 33,455.94 9,500.00 P-236 Towers Watson Global Business Services Inc. 338,750.00 902. 12 Towers Watson Global Business Services Inc. 49,107.14 669. 12 P-237 Holy Cross of Davao College Inc. 78,284.71 6,775.00 P-239 Caspo Incorporated 217,039.00 982.14 P-240 Concentrix Services Corp. 1,565.69 P-241 Concentrix Services Corp . 323,613.00 4,340.78 P-242 Concentrix Services Corp. 1,363,393.00 P-243 Pointwest Innovations Corp. 6,472.26 P-244 3,846.15 27,267.86 60,000.00 696,080.00 76.92 660,000.00 1,200.00 13,921.60 3,800.00 13,200.00 76.00 ~

DECISION CIA Case No. 9970 ISMS Technology Phils. Corporation vs. Commissioner of Internal Revenue P-245 Pointwest Innovations Corp. 59,500.00 1,190.00 T OTAL P42, 130,471.69 P835,490.29 Considering the foregoing, the Court finds that only the creditable withholding tax of P442,60 1.71 is unsupported: Creditable withholding tax forTY 20 14 p 1,278,092.00 Less: Creditable Withhold in g Tax properly 835,490.29 supported by BIR Form 2307 p 442,60 1.71 Unsuppor t ed cred itab le withh ol ding tax It should be noted that petitioner's income tax paym ents of !>372 ,986 .60 for the year 20 14 have not b een considered by respondent. The amount is broken down below: Exhibit Quarter Date Paid Amount Paid P- 106 to 108 (20 14) 05/30/2014 P-254 to 254-a 1Sl Qtr. 1 1 / 2 7 / 2 0 14 p 51,44 1.00 3rd Qtr. P- 13 4<h Qtr. 262,911.60 p 314,352.6063 TOTAL 58,634.0064 p 372,986.60 The Court finds that this amount should b e incorporated in the computation of p etitioner 's deficiency income tax. In fine , petitioner is liable for d eficien cy income tax for the year 20 14 in the adjusted amount of !>6,510 ,495 .44, computed thus: Taxable Income per return p 7,749,577.00 Add: Adj u stments/disallowances p 247,988.31 20,226,3 10.76 19,978,322.45 P 2 7 ,9 7 5 , 8 8 7 . 7 6 Disallowed Expenses due to non- withholding Salaries and Wages not subjected to withholding tax Adjusted Taxable Income Basic Income Tax Due p 8,392,766.33 Less: Tax credits/payments: p 673,794 .00 Prior Year's Excess Credits 372,986.60 Income Tax Pavment under 63 Line 3, Sch ed u le 7- Tax Credits/ Paym en ts, Exhibit "P-13", BIR Records, pp. 266 and 277. 64 Total amount pa id is P85 ,582. 00 consisting of income tax due for th e quarter of P58,634 .00 and pen a lties of P26,948.00. See Exhibits "P- 13" a nd "P- 14", BIR Records, p p. 26 1 to 263 and 282. CPh--

DECISION CTA Case No. 9970 IBMS Technology Ph!'ls. Corporation vs. Commissioner ofInternal Revenue Regular/Normal Rate from Previous p 1,278,092.00 835,490.29 1,882,270.89 Quarters 442,601.71 .. 6,510 ,49 5 .44 Creditable withh olding tax Less: Disallowed Creditable Withholding Tax Basic Deficiency Income Tax II. Value-Added Tax (VAT) Respondent assessed petitioner for deficien cy VAT 1n 2014, as follows: 65 Taxable Receipts per return p 62,6 18,6 14.42 Add: Receipts not Subjected to VAT (Schedule 3) 3,2 11 ,281.69 Taxable Sales as a djusted .. 65,829,896. 1 1 Output Tax Due Less: Input Tax claimed per return p 7,899,587.53 Less: Input Tax Carried Forward to Succeeding Period p 8,979,765.02 VAT Payable Less: Payments per VAT returns 2,038,090.63 6,941,674.39 Basic Tax Due Add: Interest (0 1.26.15 - 0 1.29.18) p 957,913. 14 TOTAL AMOUNT DUE 571,959.35 p 385,953.79 232,418.20 p 618,371.99 A . Sales not subjected to VAT Respondent's examiner found that, upon comparison of the amount of receipts per ITR as against the amount of receipts subjected to VAT p er VAT returns , there are receipts not subj ected to VAT amounting to P3,2 11 ,28 1.69, h en ce, assessed and subjected to 12�/o VAT pursuant to Section 108 of the Tax Code, to wit: 66 S che dule 3 : p 97,571,953.00 t> 98,178,851.00 606,898.00 94,967,569.31 Sales per ITR/FS: Regular Sales p 3,211,2 81.69 Other Income Sales per VAT Sales n ot subjected to VAT 65 Exhibit "P- 16", BIR Records, p. 538. 66 Exhibit "P- 16", BIR Record s, pp. 535 to 536. ~

DECISION � CTA case No. 9970 IBMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue As shown above, respondent picked up petitioner's reported sales as declared in its ITR, particularly Schedules 1 and 3.67 However, petitioner asserts that respondent's findin gs "do not specify the receipts which were not subjected to VAT, hence, defective as it cannot respond to such finding s p e c i f i c a l l y . "68 Petitioner also avers that some of its transactions are VAT zero-rated and submitted Philippine Economic Zone Authority (PEZA) certifications69 to support it. Upon examination, the Cou rt finds that respondent clearly considered all of petitioner's sales, including its zero-rated sales for the year 20 14, as shown hereafter: Exhibit Period ,.VATable ,.Zero-rated ,.Total Sales P-97 1st Qtr. 24, 13 1,0 55.27 1,938,367.45 26,069,422.72 P-100 2nd Qtr. 17,781,377.75 4,452,201.62 22,233,579.37 P-102 3�d Qtr. 16,642,353.82 11 ,911, 135.73 28,553,489.55 P- 104 4 th Qtr. 4,063,827 .58 14 ,047, 250.0 9 18 ,111,077.67 TOTAL 1'62,618,614.42 p 32,348,954 .89 ,. 94 ,967,569.31 We cannot subscribe to petitioner's assertion that the assessment is defective for respondent's failure to specify the receipts which were not subjected to VAT. On the contrary, it is incumbent upon petitioner to explain or account for the said discrepancy since respondent clearly indicated the source or how the amount in the above computation was arrived at. Hence, for petitioner's failure to explain the discrepancy, the su bject assessment should remain. Once again, the Court reiterates that tax assessments by tax examiners are presumed correct and made in good faith. The taxpayer has the duty to prove otherwise. In the absence of proof of any irregularities in the performance of duties, an assessment duly made by a BIR examiner and approved by his 67 Exhibit "P-13", BIR Records, pp. 268 to 269. 68 Pa ragra ph 10, III . Discu ssion / Argum ents, Me mora ndum for Petition er , Docke t- Vol. II, p . 102 9. 69 Exhibits "P- 109 to P-11 3" and "P-246", Docket - Vol. II, pp. 57 2 to 576 a nd 738. ~

.. DECISION CTA Case No. 9970 ISMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue su perior officers will not be disturbed. All presumptions are in favor of the correctness of tax assessments.70 B . Input Tax Carried Fonuard to Succeeding Period By the end of the fourth quarter of taxable year 20 14, petitioner had P2,038,090.63 excess input taxes.71 Respondent dedu cted the same from th e total input taxes for the taxable year in computing for the input taxes that are to be offset against the output tax due since this shall be carried over to t h e next succeeding period/ quarter(s) as provided under Section 11 O(B) of the Tax Code as amended. 72 The Court finds this deduction proper as the carried over excess input tax for the taxable year 20 14 may have been utilized to offset against any output tax that petitioner may have incurred in the succeeding taxable period. Besides, petitioner failed to proffer any evidence to establish sufficiently that it did not utilize the said input tax carried over of P2,038,090.63 to th e succeeding period. Thus, if the Court were to allow this without ascertaining that such excess input tax carried over is still available, taxpayers may end up benefiting twice from it, i.e., tax credit against outpu t VAT in the subsequent periods and payment for deficiency VAT at the expense of the government. It s h ould be noted that per respondent's FAN, total input taxes for 2014 amounted to P8,979,765 .02 . However, upon verification of its quarterly VAT returns, petitioner's total input taxes amounted to P8,980,365.03, to wit: Ex h ibit Period , To tal Inpu t Tax P-97 1st Qtr. 3, 133,168.23 P-100 2nd Qtr. 2,225,623.80 P-102 3rd Qtr. 1,145,521.56 P-104 4th Qtr. 2,476,051.44 p 8,980 ,365.03 TOTAL 70 Commissioner of Internal Revenue vs. Traders Royal Bank, G.R. No. 167134, March 18, 2015. 71 Exhibit "P-105", Docket - Vol. II, p. 570. 72 Exhibit "P-16", BIR Records, p. 535 .~

DECISION CTA Case No. 9970 IBMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue Thus, petitioner's total input taxes that are applicable against the output tax due per respondent's audit should be P6,942,274.40, computed as follows: Total input tax per VAT returns filed p 8,980,365.03 Less: Input tax carried over to s u cceeding period 2,038 ,0 9 0.63 Adjusted Allowable input tax p 6 ,942,274 .40 As to petitioner's VAT payments per returns, while respondent picked up the amount of P571,959.35, the Court found that petitioner made total payments amounting to Pl,l38,823.02, as shown below: Exhibit Period VAT Paid p 929,266.21 P-79 to P-81 J anuary 20 14 2 09,556 .81 P-90 to P-92 August 2014 p 1,138,823.02 Total VAT Payments Upon recomputation, petitioner's deficiency VAT liability assessment for the taxable year 20 14 should be cancelled, thus: Taxable Receipts per return p 8,980,365.03 p 62,618,614.42 Add: Receipts not Subjected to VAT 3,211,281.69 Taxable Sales as adjusted 2,0 38,090 .63 p 65,829,896. 11 Output Tax Due Less: Input Tax claimed per return p 7,899,587.53 Less: Input Tax Carried Forward to Succeeding Period VAT Payable 6,942,274.4 Less: Payments per VAT returns p 957,313.13 Basic Tax Due 1' 138,823.02 (P 181 ,509.89) III. Expanded Withholding Tax In addition to petitioner's rentals and professional fees previously found by respondent as not subjected to withholding tax, the following expenses are likewise found to be not subjected to withholding tax, thus, assessed for deficiency EWT in the total amount ofP35,976.54: CHI--

.� DECISION CTA Case No. 9970 .. ISMS Technology Ph!Ys. Corporation vs. Commissioner ofI nternal Revenue Schedule 4 Per ITR Per Alphalist/ Disallowed Rate EWT Due Expense/ Income 1601-E Expenses Payments J> 117,021.00 Purchase of sewices & 379,082.00 Contractors: 10 1,6 2 3 . 0 0 Fuel and Oil Office Supplies 2 ,4 6 5 ,3 9 0 . 0 0 Repairs and Mainten ance 46,525,080 .00 Acquisition of Equipment p 49 ,588 ,196.00 Direct Charge s-Materials, 18 ,271 ,392.82 Supplies and Facilities p 3 1,3 16 ,803.18 p 30,058, 128.30 P1 ,258,674 .88 1% p 12,586.75 Sub-total Less: Importation s 23 ,389.79 p 35,976.54 TOTAL Add: EWT (Schedule 1) TOTAL Again, petitioner insists that it withheld and remitted all the required withholding taxes on its paym en ts for rental and professional fees . However, a s previously discussed, without supporting documents submitted as evidence, petitioner's m ere a ssertion cannot over come the presumption of r egularity of respondent's assessment. With regard to the additional EWT a ssessment of P12,586 .75, petitioner avers that it cannot be a ssessed as the c ompany is n o t listed as on e of t h e Top Twenty Thou s and Corporations by the BIR.73 However, the Court notes that in it s monthly rem ittance returns, p etitioner actually withheld a s a Top 20,000 Corpora tion on income paym ents to local suppliers of goods and services: Exhibit Mo n th Tax Base Tax Rate Tax Required P-132 May p 5,00 1,382.6 1 1% to be Withhel d P- 134 Jun 1% P-136 Jul 1,5 0 9,73 0 .0 0 1% p 50 ,013 .83 9 19,943 .00 2% 15 , 0 9 7 .3 0 P - 138 Aug 206 ,156.50 2% 9, 199.43 2 12,4 56.17 1% 4, 123 .13 P- 140 Sep 524,666.00 2% 4,249. 12 1% 5 ,246.66 P- 142 Oct 1,2 19,593.97 2% 24,39 1.88 P- 144 Nov 1,800,250. 11 1% 18,002.50 2% 16,832.94 841,647 .10 31,407 .1 3 3, 140,7 13 .34 37,436.21 1,87 1,8 10 .50 73 Pa ragra ph 11 , III. Discu s s ion / Argumen t s, Memorandu m for Petitioner, Docket - Vol. II, p. 1029. ~

,; DECISION CTA Case No. 9970 /BMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue 6 ,96 1,820.00 1% 69,618.20 55,486.82 P- 146 Dec 2 ,774,341.00 2% 11,735.28 1 , 17 3 ,5 2 8.0 0 1% Again, for failure of petitioner to submit evidence to prove otherwise, the assessment for deficiency EWT in the amount of P35,976.54 is upheld. IV. Withholding Tax on Compensation As previously discussed, respondent's examiner found salaries and wages that were not subjected to withholding tax on compensation, hence the expense was disallowed as a deduction from gross income. The corresponding withholding tax liability is likewise assessed herein:74 Schedule 2: p 1,209,036.44 p 25,405,954.00 p 4,927,985.28 5 , 2 9 1 , 7 9 5 .9 5 Salaries and Wages Pe r FSI ITR Less: Salaries and Wages per 1601C P20, 114,158.05 Salaries & wages not subjected to withholding tax Multiplied by 24.534 1% p 4 ,934,827.65 Basic Deficiency Withholding Tax To recall, the Court found that only the non-taxable fringe benefits amounting to P135,835.60 can be considered. Accordingly, petitioner is liable for deficiency withholding tax on compensation in the adjusted amount of P4,901,501.61 , computed as follows: Sa laries & wages n ot subjected to withholdin g tax p 19 ,9 7 8 ,322.45 Mu ltiplied by: p 1,209,036.44 24 .5341% , 4,901,501.61 p 4 ,927,985.28 Basic Deficiency Withholding Tax on Compensation V. Final Withholding Tax Respondent's verification disclosed that petitioner failed to withhold and remit the FWT on the cash dividends declared 74 Exhibit "P-16", BIR Records, p. 536 . ~

DECISION ' CTA Case No. 9970 IBMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue amounting to P600 ,000.00, hence, assessed pursuant to Section 2 .57 .1 of RR No. 2-98, as amended. Petitioner counters that the final tax amounting to P840,000.00� was paid and remitted, although BIR Form No. 1601-E was used instead of BIR Form No. 1601-F.75 However, petitioner's Monthly Remittance Return of Creditable Income Taxes Withheld (Expanded) (BIR Form No. 1601-E) for the month of April 2014 and the corresponding proofs of payment were denied admission as evidence by the Court.76 Thus, for petitioner's failure to proffer evidence to support its claim, the following deficiency FWT assessment should remain:77 Schedule 5 : t> 6,000,000.00 Cash dividends 10% Multiplied by: Tax rate Basic Deficiency Final Withholding Tax p 600,000.00 VI. Documentary Stamp Tax Respondent's examiner found that petitioner failed to pay the DST on its advances pursuant to Section 179 of the NIRC of 1997, thus, petitioner was assessed as follows: 78 Schedule 6 : p 5,000,000.00 Advances from related parties Multiplied by DST Rate X p 1.00 I P200.00 Basic Deficiency Documentary Stamp Tax p 25,000.00 Petitioner counters that the subject amount pertains to its "Deposit for Future Subscription and that the proposed increase in capitalization was still pending with the SEC. Hence, subjecting the said deposit to 'Stamp on Debt Instruments' xxx 1s premature as there was no debt 75 Paragraph V of Exhibit "P-17", Docket - Vol. II, p . 472 . See also Paragraph 13, III. Discu s sion/ Arguments, Memorandum for Petitioner, Docket - Vol. II, p. 1030. 76 Resolution dated June 14, 2022, Docket- Vol. II, pp. 1009 to 10 15. 77 Exhibit "P-16", BIR Records, p . 535. 78 Exhibit "P- 16", BIR Records, pp. 534 to 535.~

'- ~' DECISION " CTA Case No. 9970 ISMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue instrument then issued."79 However, petitioner failed to support its allegation with documentary evidence. As a consequence, the foregoing asses sment should be upheld. VII. Improperly Accumulated Earnings Tax Respondent's investigation disclosed that petitioner accumulated retained earnings and profits instead of having them distributed as dividends, h ence, t he latter assessed for IAET pursuant to Section 29 of the 1997 NIRC, as amended, and implemented by RR No . 2-2001, as follows: so Schedule 7 P2,351 ,821. 10 f> 7,749,577.00 Taxable income for the year 6,000,000.00 Less: Income tax paid 8,351,821.10 p (602,244.10) Dividends declared Total 29,528,732.00 Add: Retained Earnings from prior years p 28,926,487.90 Accumulated Earnings as of Dec. 31, 2014 Less: Amount that may be retained 5 0 0 , 0 0 0 .0 0 Improperly Accumulated Taxable Income p 28,426,487.90 IAET Rate Improperly Accumulated Earnings Tax 10% p 2,842,648.79 Petitioner avers that it appropriated its r etained earnings for the acquisition of a land/property to be used for its office, considering the high cost of rentals in Makati City and for future expansion.81 To support its allegation, petitioner submitted a Secretary's Certificate dated J uly 15, 2020 .82 A reading of the said Secretary's Certificate �reveals that at t he special meeting of the Board of Directors of the corporation on February 8 , 2015, petitioner declared a cash dividend in the amount of P4 ,000,000.00 to qualified stockholders of record as of December 31, 20 14, which will be paid on or before April 25, 2015. Other documents submitted by p etitioner purportedly supporting its contentions were denied admission as evidence, 79 Paragra ph 14, III. Discussion/ Arguments, Mem orandum for Petitioner , Docket- Vol. II, p. 1030. 80 Exhibit "P- 16", BIR Records, p . 534. 81 Par agra ph 15, III . Discu ssion / Argumen ts, Memorandum for Petitioner, Docket- Vol. II, p. 1030. 82 Exhibit "P- 12", Docket- Vol. II , p . 466. ~

L~ DECISION CTA Case No. 9970 ISMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue hence, cannot be considered, namely, the Board Resolution dated April 25, 2014, the Secretary's Certificate dated March 18, 2021 of the board meeting on April 25, 2014, and the appraisal report dated April 17, 2016. Pursuant to Section 3 of RR No . 2-2001, the following constitute accumulation of earnings for the reasonable needs of the business: "SECTION 3. Detennination of Reasonable Needs of the Business. xxx For purposes of these Regulations, the following constitute accumulation of earnings for the reasonable needs of the business: a . Allowance for the increase in the accumulation of earnings up to 100% of the paid-up capital of the corporation as of Balance Sheet date, inclusive of accumulations taken from other years; b. Earnings reserved for definite corporate expansion projects or programs requiring considerable capital expenditure as approved by the Board of Directors or equivalent body; c. Earnings reserved for building, plants or equipment acquisition as approved by the Board of Directors or equivalent body; d. Earnings reserved for compliance with any loan covenant or pre-existing obligation established under a legitimate business agreement; e. Earnings required by law or applicable regulations to be retained by the corporation or in respect of which there is legal prohibition against its distribution; f. In the case of subsidia ries of foreign corporations in the Philippines, a ll undistributed earnings intended or reserved for investments within the Philippines as can be proven by corporate records and/ or relevant documentary evidence." (Emphasis supplied) However, petitioner failed to prove that the appropriation of its retained earnings is for the reasonable needs of the business for lack of eviden ce. On the other hand, examination of petitioner's Balance Sheet as of December 3 1, 2014 shows that p etitioner's capital ~

l- DECISION " CTA case No. 9970 ISMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue stock amounts to P5 ,000 ,000.00,83 not P500,000.00 as determined by respondent's examiner. Thus, respondent's computation of IAET should be adjusted accordingly. Pursuant to the foregoing, p etitioner's deficiency IAET should be P1,992,648.79, computed as follows: Taxable income for the year I" 2,351,821.10 p 7,749,577.00 Less: Income tax paid 6,000,000.00 Dividends declared - 2014 4,000,000.00 p 12 ,35 1,821.10 Dividends declared - 20 15 p (4,602,244.10) Total Add: Retained Earnings from prior years 29,528,732.00 Accumulated Earnings as of Dec. 31, 20 14 p 24,926,487.90 Less: Amount that may be retained Improperly Accumulated Taxable Income 5,000,000.00 IAET Rate I" 19,926,487.90 Imprope rly Accumulated Earnings Tax 10% p 1,992,648.79 Compromise penalty Respondent also imposed a compromise p enalty of P80,000.00 for the following viola tions: 84 Nature ofViolation Violated Provision Amount Due Failure to file and pay the improperly Section 29, NIRC p 40,000.00 Section 179, NIRC 30,000.00 accumulated earnings tax return Section 255, NIRC 10,000.00 Failure to file and pay the documentary stamp tax I' 80,000.00 return Failure to file and pay the final withholding tax return TOTAL Respondent's b asis for the foregoing is S ection 255 of the NIRC, as amended .85 Su ch imposition cann ot be su s tain ed. Under Revenue Memorandum Order ("RMO") No. 007 - 15, compr omise p en alties are only amounts su ggested in settlem ent of criminal 83 Schedule 10, Line 13, Exhibit "P- 13", BIR Records, p. 276. See also BIR Records , p. 265. 84 Exhibit "P- 16", BIR Records, p. 533. �-- ___....- 85 Exhibit "P- 16", BIR Records, p. 533. ~

L~ DECISION CTA Case No. 9970 """ ISMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue liability, and may not be imposed on or exacted from the taxpayer in the event that a taxpayer refuses to pay the same. It is well-settled that the Court has no jurisdiction to compel a taxpayer to pay the compromise penalty because by its very nature, it implies a mutual agreement between the parties in respect to the thing or subject matter that is so compromised, and the choice of paying or not paying it distinctly belongs to the taxpayer.s6 Absent a showing that herein petitioner consented to the compromise penalty, its imposition should be cancelled. The imposition of the same without the conformity of the taxpayer is illegal and unauthorized. 87 To recapitulate, petitioner is liable for the following basic deficiency taxes for the year 2014: Type ofTax Basic Deficiency Income tax ~ 6,510,495.44 Expanded Withholding Tax (EWT) Withholding Tax on Compensation (WTC) 35,976.54 Final Withholding Tax (FWT) 4,901,50 1.61 Documentary Stamp Tax (DST) IAET 600,000.00 25,000.00 TOTAL 1,992,648.79 p 14,065,622.38 In addition to the foregoing basic deficiency taxes, petitioner is liable to a penalty of 25o/o surcharge imposed on the basic deficiency taxes pursuant to Section 248(A)(3) of the 1997 NIRC, as amended, which provides: "SEC. 248. Civil Penalties.- (A) There s hall be imposed, in addition to the tax required to be paid, a penalty equivalent to twenty-five percent (25%) of the amount due , in the following cases: XXX (3) Failure to pay the deficiency tax within the time prescribed for its payment in th e notice of assessment; xxx" 86 The Philippines International Fair, Inc. vs. The Collector of Internal Revenue et al., G.R. Nos. L-12928 and L-12932, March 31, 1962, 4 SCRA 781. 87 Commissioner of Internal Revenue vs. Liangga Bay Logging Co., Inc. and the Court of Tax Appeals, G.R. No. 35266, J anuary 2 1, 1999, 193 SCRA 92-93. ~

l ...., DECISION CTA Case No. 9970 " ISMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue Moreover, petitioner is liable to pay the deficiency interest at the rates of 20�/o per annum computed from the date prescribed for its payment until December 31, 2017 and 12�/o computed from January 1, 2018, upon the effectivity of the TRAIN Law, until the demand made by the Commissioner or his authorized representative on February 5, 2018, in accordance with Section 249(B) of the 1997 NIRC, as amended by TRAIN Law. To recall, the FAN issued by respondent states:ss "In view thereof, you are requested to pay your aforementioned deficiency tax liabilities through the duly authorized agent bank in which you are enrolled using the electronic BIR Payment Form (eBIR Form 0605) within the time as s hown in the enclosed assessment notice. xxx" The said Assessment Notices show a due date of February 5, 2018.89 Likewise, petitioner is liable to pay the delinquency interest at the rate of 12�/o per annum imposed on the basic deficiency tax, 25�/o surcharge and deficiency interest computed from February 5, 2018 until full payment thereof pursuant to Section 249(C) of the 1997 NIRC, as amended. Thus, for the taxable year 2014, petitioner is liable to pay the aggregate amount of P25,345,346.56, consisting of basic deficiency taxes, surcharges, and deficiency interest computed as of February 5, 2018, detailed as follows: Basic deficiency tax Income Tax EWT WTC p 6,510,495.44 p 35,976.54 p 4,901 ,501.6 1 Add: 25% Surcharge 1 , 2 2 5 ,3 7 5 . 4 0 1,627,623.86 8 ,994.14 Deficiency Intere st on: 3,535,288.21 Income Tax 77,055.73 20% from April 16, 20 15 to Dec. 31, 2017 (P6,5 10,495.44 X 20% x 99 11365 days) 12% from Jan. 1, 20 18 to Feb. 5, 2018 (P6,510,495.44 X 12% X 36/365 days) 88 Exhibit "P- 16", BIR Records, p. 537. 89 Exhibit "P- 16", BIR Records, pp. 525 to 532.~

DECISION erA Case No. 9970 IBMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue EWT 20% from Jan. 2 1,20 15 to Dec. 21,211.37 31,2017 (P35,976.54 x 20%x 425.80 1,076/ 365 days) 12% from Jan. 1, 20 18 to Feb. 5, 2018 (P35,976.54 X 12% X 36/365 days) WTC 20% from Jan. 2 1, 20 15 to Dec. 2,889,87 1.63 3 1, 201 7 (P4,901 ,50 1.61 X 20% x 1,076/365 days) 58,012.29 12% from Jan. 1, 2018 to Feb. P66,607.85 P 9 ,074,760.93 5 , 20 18 (P4,901,501.61 X 12% x 36 365 da s Total Amount Due on February 5, 2018 P11,750,463. 2 4 FWT DST IAET Basic Deficiency Tax p 600,000.00 p 25,000.00 p 1,992,648.79 Add: 25% Surch arge 150,000.00 6,250.00 498, 162.20 Deficien cy Interest on : FWT 20% fro m Jan. 2 1,2015 to Dec. 353,753.42 3 1,20 17 (P600,000.00 X 20% X 7, 10 1.37 DST 1,076 /365 days) 12% from Jan. 1, 2018 to Feb. 14,945.21 IAET 5, 20 18 {P600,000.00 X 12% X 295.89 36/ 365 days) 78 1,773.44 20% from Jan . 6, 2015 to Dec. 31, 20 17 (P25,000.00 X 20% X 23,584.23 1 ,08 1/365 days) 12"/o from Jan. 1, 2018 to Feb . 5, 2018 (P25,000.00 X 12% X 36/365 days) 20% from Jan. 16, 20 16 to Dec. 31 , 20 17 (P1 ,992,648.79 X 20% x 1,076I 365 days) 12% from Jan. 1, 20 18 to Feb . 5, 2018 (P1,992 ,648.79 x 12%x 36 365 da s Total Amount Due on February 5, 2018 p 1 ,110,854.79 P46,491.10 P 3,296,168.66 p 25,345,346.57 TOTAL AMOUNT DUE In addition, petitioner is liable for delinquency interest at the rate of 12�/o per annum on the respective total amounts still due on February 5, 2018, computed from February 6, 2018 until full payment thereof pursuant to Section 249(C) of the 1997 NIRC, as amended by TRAIN Law and implemented by Revenue Regulations No. 21 -2018. WHEREFORE, the instant Petition for Review 1s PARTIALLY GRANTED. Respondent's VAT assessment and the compromise penalties are CANCELLED for lack of merit, while the assessments for deficiency income tax, EWT, WTC, FWT, DST and IAET are UPHELD, but with modification. Accordingly, petitioner is ORDERED TO PAY respondent the following: ~

~j DECISION CTA Case No. 9970 IBMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue Income Tax Basic Deficiency 25% Surcharge Deficiency Total p 6,5 10,495.44 I' 1,627,623.86 Interest as of I' 11,750,463.24 Expanded Feb. 5,2018 Withholding Tax 35,976.54 (EWT) I' 3,612,343.94 4,90 1,50 1.61 Withh olding Tax on 600,000.00 8 994.14 21,637. 17 66 ,607.85 Compensation 25,000.00 (WTCJ 1,225,375.40 2,947,883.92 9,074,760.93 Final Withholding 1,992,648.79 150,000.00 360,854 .79 1 ' 1 1 0 ,8 5 4 . 7 9 Tax (FWT) � 1 4,0 6 5 , 6 2 2 .3 8 6 ,250.00� 15,241.10 Documentary 498, 162.20 805,357.67 46,491.10 Stamp Tax (DST) 3,296, 168 .66 �3,516,405.60 �7,763,318 .59 P 2 5 , 3 4 5 , 3 4 6 .5 7 IAE T TOTAL In addition, petitioner is ORDERED TO PAY respondent delinquency interest at the rate of twelve percent (12�/o) per annum on the total amount due of P25,345,346.57 as of February 5, 2018, as determined above, or equivalent to the amount of P8,332 .7290 per day, computed from February 6 , 2018 until full payment thereof pursuant to Section 249(C) of the 1997 NIRC, as amended by TRAIN Law and implemented by Revenue Regulations No. 21-2018. SO ORDERED. ~�7.~ CATHERINE T. MANAHAN Associate Justice WE CONCUR: Presiding Justice ~ ~ {~-~(~ MARIAN IViJF. REdS-FAJ'ARDO Associate Justice 90 P25 ,345,34 6. 57 multip lied by 12% d ivided by 365 days.

DECISION CfA Case No. 9970 IBMS Technology Phils. Corporation vs. Commissioner ofInternal Revenue CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. Presiding Justice