STATELAND, INC. v. COMMISSIONER OF INTERNAL REVENUE

.... REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL SECOND DIVISION STATELAND, INC., CTA CASE NO. 8633 Petitioner, Members: -versus- CASTANEDA, JR., Chairperson and CASANOVA, JJ. COMMISSIONER OF Promu lgated: INTERNAL REVENUE, JAN 1 0 2018 .---- Respondent. / x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ,7-f,-,~ ~~ -x AMENDED DECISION CASTANEDA, JR., J.: For resolution is petitioner's Motion for Reconsideration ( Re: Decision dated 12 July 2016}, filed on July 27, 2016 with respondent's Opposition, filed on September 7, 2016. Petitioner seeks reconsideration of this Court's Decision dated July 25, 2016 (assailed Decision), the dispositive portion of which reads: "WHEREFORE, premises considered, the instant Petition for Review is hereby DENIED for insufficiency of evidence. SO ORDERED ." In the assailed Decision, this Court denied the instant petition for failure to comply with the requirements for refund or issuance of ~

AMENDED DECISION CTA Case No. 8633 TCC of unutilized excess Creditable Withholding Tax (CWT), more specifically, its failure to sufficiently establish that the income from which the subject taxes were withheld was duly reported in its Annual Income Tax Return (AITR). Petitioner in its Motion for Reconsideration asserts that based on the Independent Certified Public Accountant's (ICPA's) findings, it had declared in its ITR the income pertaining to the taxes subject of this claim for refund. Petitioner also attached additional evidence in the instant motion, consisting of the breakdown of the total withholding taxes, the corresponding sales transactions for which these taxes were withheld, and the schedules of income reported from year 2004 to 2012 and the AITRs for the years 2004 to 2009, and 2011 to 2012, to prove that the gross income of the sales subject of the withholding taxes were actually reported in the Income Tax Returns of the said years. The Affidavit of petitioner's Accounting Head Ann Celeste A. Mercado was also submitted to corroborate the report previously submitted by the ICPA. Petitioner further includes in its motion an alternative prayer to be allowed to carry-over its unutilized CWT for taxable year 2010 for its future tax liabilities. 1 On the other hand, respondent, in his Opposition2 to petitioner's Omnibus Motion for Reconsideration, avers that petitioner cannot assume that the ICPA's report should be taken as gospel truth and the Court has the final determination on whether petitioner is entitled to a refund based on all the evidence presented and not based on the ICPA's report alone. Respondent further argues that petitioner's attempt to present additional evidence attached to its motion after a decision has already been rendered by the Court is absolutely obnoxious to a system of orderly procedure. In a Resolution dated September 9, 20163, without ruling upon the merits of petitioner's arguments in its motion, the Court granted J-- petitioner's prayer to present additional evidence. 1 Docket, val. VI, p. 3032. 2 Docket, val. VI, pp. 3323-3330. 3 Docket, val. VI, p. 3332-3335.

AMENDED DECISION CTA Case No. 8633 On November 16, 20164, petitioner offered the Direct Testimony of its witness, Ann Celeste Mercado to establish petitioner's causes of action and reliefs set forth in the instant Omnibus Motion for Reconsideration and For Leave To Present/Admit Additional Attached Evidence With Alternative Relief. A Commissioner's Hearing was later set on December 5, 2016 and petitioner was granted fifteen (15) days to file its Supplemental Formal Offer of Evidence.5 Upon motion of petitioner, another Commissioner's Hearing was set on December 12, 2016 and petitioner was given fifteen days (15) from December 12, 2016 to file its Formal Offer of Evidence.6 On December 22, 20167 and December 27, 20168, petitioner filed its Supplemental Formal Offer of Additional Evidence and Ex- Parte Motion to Admit Attached Formal Offer of Evidence, respectively. On August 30, 2017, this Court issued a Resolution on petitioner's Supplemental Formal Offer of Additional Evidence and Ex- Parte Motion to Admit Attached Formal Offer of Evidence. In the said Resolution, the Court admitted Exhibits "P-1507" to "P-1541-A", except Exhibits "P-1509", "P-1512", "P-1509-5", "P-1515", "P-1516", "P-1508-10", and "P-1516-2", which were denied admission by the Court. On September 29, 2017, petitioner filed an Urgent Omnibus Motion for Partial Reconsideration on the Resolution dated 30 August 2017 and to Admit Attached Amendment to the Amended Supplemental Formal Offer of Additional Evidence dated 27 December 2016. Subsequently, in a Resolution dated October 12, 2017, the Court granted petitioner's Urgent Omnibus Motion for Partial Reconsideration and admitted Exhibits "P-1509", "P-1512", "P-1509- '5" "P-1515" "P-1516" "P-1508-10" "P-1516-2" "P-1536-A" "P- ~''' ' ' rG..-- 4 Docket, val. VII, pp. 3342-3402. 5 Order dated November 21, 2016, docket, val. VII, pp. 3717-3718. 6 Docket, val. VII, p. 3731. 7 Docket, val. VIII, pp. 3742-3753. 8 Docket, val. VIII, pp. 4126-4146.

AMENDED DECISION CTA Case No. 8633 1537", "P-1537-A", "P-1538", "P-1538-A", "P-1539", "P-1539-A" and "P-1540". Accordingly, in the same Resolution, the Court submitted for resolution petitioner's Motion for Reconsideration (Re: Decision dated 12 July 2016). The main issue of this case is whether petitioner is entitled to a refund or an issuance of tax credit certificate for its unutilized excess CWT for the taxable year 2010 in the amount of P13,654,157.00. In the assailed Decision, it has been discussed that petitioner was able to comply with the first and second requisites in order for a taxpayer to be entitled to a refund or an issuance of tax credit certificate for its unutilized excess CWT.9 Petitioner's claim for refund was filed within the two-year prescriptive period as provided under Sections 204(C) and 229 of the National Internal Revenue Code (NIRC) of 1997, as amended and the fact of withholding the amount of P13,654,157.00 was established. In view thereof, the Court shall now discuss petitioner's compliance with the third requisite wherein the income upon which the taxes were withheld must be declared as part of the gross income of the recipient. The Court shall first ascertain whether the total amount of sale of goods and services which were booked/recorded by petitioner in its sales register and general ledger (GL) for the taxable year 2010 tally with the sale of goods and services declared as taxable gross income per petitioner's AITR for the same year. In the instant motion, petitioner explains that being a real estate company, it follows, for "accounting purposes", the Percentage of Completion Method. In this method, the gross profit from sale is realized based on percentage of completion of the inventories or house and lots sold to its customers. While for tax purposes, income recognition varies and depends on the terms of payment and actual collection of the sales; whether the sale is considered under "cash 5k-- basis" or "installment plan". 9 Assailed Decision, docket, val. V, pp. 3002 to 3011.

AMENDED DECISION CTA Case No. 8633 Petitioner claims that it adheres with Section 2.57.2 of BIR Revenue Regulations (RR) No. 02-98, as amended by RR No. 17-03 by way of practice in recognizing income from sale for tax purposes. Petitioner explains the following scenarios arising from its installment sales: 1) where income from installment sales were already reported in the prior year ITR/s but the payments of CWTs were made only in 2010, upon receipt of the final installments; 2) the situation where sales are booked on installment plan and the gross income corresponding to the installment payment is already recognized in 2010 and prior years but the withholding tax is not paid until the payment of final amortization is made by the buyer in subsequent years coinciding with the end of installment period. Petitioner also explains that for sales under cash basis, there is also a timing difference on the recognition of sales for income tax purposes and the payment of withholding as the requirement of payment of the withholding tax falls on the 10th day of the month following the month when the payment of more than 25�/o of the contract price is reached. For sales with collected amount of more than 25�/o of the selling price for the months of January to November of the year, the withholding taxes are remitted to the BIR in the months February to December of the same year. While sales with more than 25�/o collection in the month of December and which gross income reported for income tax purposes in the same year, the related withholding taxes are remitted to the BIR in January of the following year. Petitioner states that due to the nature of its business, it cannot fall within the general rule that the income or sales amount to which the CWT relates should be shown as forming part of the gross income of the taxpayer AITR on the same year the Withholding Tax is withheld. The instant motion is meritorious. ~

AMENDED DECISION CTA Case No. 8633 The relevant figures are as follows: Realized Gross Profit Gross profit on Sales Sales Revenue per during the year 2010 of Real Estate per Income Tax Return Audited FS 201011 (per books)10 201012 p 184,574,274.00 __P 190,627,713.00 p 200,434,138.00 ~-- Petitioner reconciled these three figures in the following manner, to show that whatever was recorded per books as Realized Gross Profit for taxable year 2010, formed part of Gross Income per ITR for taxable 2010 to wit13: Gross Profit (net of sales discount) from 2010 p 38 019 341.00 Amount Reference bookings 14,219 943.00 p 184 574,274.00 Annex A-1-2 Add: Gross profit of unconstructed units under 6 053 439.00 Annex A-1-3 percentage of completion deferred per p 190 627 713.00 books but already taxed in 2009 and realized Annex A-1-4 per books in 2010 42 279 839.00 Gross Profit on Sales per Audited Financial Annex A-1-5 Statements 9 673 231.00 Annex A-1-6 4 830 777.00 Realized gross profit from prior years' sales Annex A-1-3 (6 053 429.00} Gross profit of unconstructed units under percentage (24 195.00) I of completion deferred per books this year but already taxable in 2010 (14 393,935.00) Annex A-1-7 (78 745,136.00) Gross profit of lot sales in Washington Place deferred I per books but taxable in 2010 148 194 865.00 52 239_L_284.00 AnnexA-1�8 i Gross profit of unconstructed units under percentage of completion deferred but already taxed in 2009 and p 200_L434,149.00 I recognized in 2010 _Q_er books Annex A-1-9 Interest income earned from socialized housing (Summer Crest Village) Annex A-1 Gross Profit and Interest Income earned from BOI registered _m-ojects Unrealized Gross Profit on current year's sale with less than 25% principal collection Total realized gross profits shown as Net Sales/Revenues/Receipts per 2010 Income Tax Return Interest Income Other Income Total Gross Income per 2010 ITR The groupings of the different kinds of sales revenues that petitioner earned during taxable year 2010 yielded the following)!:- 10 Exhibit "P-1508-2", docket, val. VIII, pp. 3766-3771. 11 Exhibit "P-887", docket, val. V, p. 2719. 12 Exhibit "P-5", Line 21 C, docket, val. V, p. 2693. 13 Exhibit "P-1508-1", docket, val. VIII, p. 3765.

AMENDED DECISION CTA Case No. 8633 CWT14 and the corresponding basis from the schedules provided by petitioner: # Type of Sales Transactions Amount of CWT BasisofCWT p 7,693,130.47 Selling Price (net of 1 Cash Basis VAT) 2 Installment Method - Fully Settled 2,933,235.02 Selling Price (net of Accounts in 2010 which Gross Profits VAT) were recognized in 2010 and prior I years (Individual Buyers) 3 Installment Method- Last Collection 2,160,852.69 Selling Price (net of I was made in 2010 but gross profit VAT) I was already fully recognized in Income Tax Returns prior to 2010 I 4 Installment - Corporate Buyers 292,550.00 Installment Pa_yment 5 Installment - Accounts under Home 266,518.10 Selling Price (net of I Development Mutual Fund (HMDF) VAT} 6 Installment Sales of Prior Years 148,660.71 Selling Price (net of which were fully settled in 2011 VAT) I 7 Installment - Bank Financing 159,210.00 Selling Price (net of Accounts VAT) Total p 13,654,157.00 Applicable to the case at hand is Section 2.57.2 of RR No. 02- 98, as amended by RR No. 06-01, further amended by RR No. 17-03, which provides for the imposition of Creditable Withholding Tax on Real Property sales, to wit: "(J) Gross selling price or total amount of consideration or its equivalent paid to the seller/owner for the sale, exchange or transfer of real property classified as ordinary asset- A creditable withholding tax based on the gross selling price/total amount of consideration or the fair market value determined in accordance with Section 6(E) of the Code, whichever is higher, paid to the sellerjpwner for the sale, transfer or exchange of real property, other than capital asset, shall be imposed upon the withholding agent/buyer, in accordance with the following schedule: A. Where the seller/transferor is exempt Exempt from creditable withholding tax in accordance with Sec. 2.57.5 of these regulations B. Upon the following values of real property where the seller/transferor is habitually engaged in real estate business:~ 14 Q&A No. 25, Direct Testimony of Petitioner's Witness, Ann Celeste A. Mercado per her attached Judicial Affidavit, docket, val. VII, p. 3351.

AMENDED DECISION 1.5% 3% CTA case No. 8633 5% With a selling price of five hundred thousand pesos (P500,000.00) or less With a selling price of more than five hundred thousand pesos (P500,000.00) but not more than two million pesos (P 2,000,000.00) With selling price of more than two million pesos (P2,000,000.00) C. Where the seller/transferor is not habitually engaged in the real estate business 6% XXX XXX Gross selling price shall mean the consideration stated in the sales document or the fair market value determined in accordance with Section 6(E} of the Code, as amended, whichever is higher. In an exchange, the fair market value of the property received in exchange, shall be considered as the consideration. (Emphasis supplied) If the buyer is an individual not engaged in trade or business, the following rules shall apply: i. If the sale is a sale of property on the installment plan (i.e payments in the year of sale do not exceed 25% of the selling price), no withholding of tax is required to be made on the periodic installment payments. In such a case, the applicable rate of tax based on the gross selling price or fair market value of the property at the time of the execution of the contract to sell, whichever is higher, shall be withheld on the last installment or instalments immediately prior to such last installment, if the last installment is not sufficient to cover the tax due, to be paid to the seller until the tax is fully paid. ii. If on the other hand, the sale is on a "cash basis" or is a "deferred payment sale" and not on the installment plan (that is, payment in the year of sale exceed 25% of selling price), the buyer shall withhold the tax based on the gross selling price or fair market value of the property whichever is higher on the first installment. However, if the buyer is engaged in trade or business, whether a corporation or otherwise, the following rules shall apply:~

AMENDED DECISION CTA Case No. 8633 i. If the sale is a sale of property on the installment plan (i.e payments in the year of sale do not exceed 25% of the selling price), the tax shall be deducted and withheld by the buyer on every installment which tax shall be based on the ratio of actual collection of the consideration against the agreed consideration appearing in the Contract to Sell applied to the gross selling price or fair market value of the property at the time of the execution of the Contract to Sell whichever is higher. XXX XXX ii. If on the other hand, the sale is on a "cash basis" or is a "deferred payment sale" and not on the installment plan (that is, payment in the year of sale exceed 25% of selling price), the buyer shall withhold the tax based on the gross selling price or fair market value of the property whichever is higher on the first installment. (Emphasis ours) The Court finds that petitioner correctly adhered to the foregoing, when it comes to the timing and basis of remittance of CWT. For cash basis and installment transactions with non-corporate buyers, the basis is the gross selling price net of VAT, whereas, for installment sales with corporate buyers, the basis is the installment payments made during each year. The number of accounts for each type of sale transaction and the corresponding income in 2010, prior years and succeeding years are also summarized as follows15 : No. of Buyers Gross Income in Gross Income Gross Income 2010 ITR reported in prior Reported in # (Transactions) Amount of CWT p 85 026 958.97 succeeding p 7 693 130.47 20 771 866.58 years years 1 98 2 933 235.02 0.00 2 160 852.69 1986 089.93 - - 2 71 292 550.00 2 601 081.65 266 518.10 186 987.92 p 16 362 534.12 - 3 82 148 660.71 354 417.23 34 139 557.12 159 210.00 1,600 830.49 - 4 38 p 110 927,402.28 319 188.45 p 13 654L1~.00 331 416.73 p 2 557,168.28 5 12 771 009.57 p 52,753,526.91 6 2 1 047 522.68 1 723 066.14 7 2 p 6 098 766.67 -------- The Court noted the CWT relating to each kind of sales transaction to the Schedule of Gross Profit (Net of Sales Discount) in 2010 per Books16� ~ 15 Exhibit "P-888", docket, vol. IV, p.2396; Q&A No. 27, Direct Testimony of Petitioner's Witness, Ann Celeste A. Mercado per her attached Judicial Affidavit, docket, vol. VII, p. 3352. 16 Exhibit "P-1508-2", docket, vol. VIII, pp. 3766-3771.

AMENDED DECISION CTA Case No. 8633 The Court's verification resulted to the following: I. Under the Sale on Cash Basis 1. Transaction categorized as Unrealized Gross Profit Upon tracing the related income to the reported Realized Gross Profit per Books (as reconciled to the Annual Income Tax Returns)17, the Court noted the following transactions were categorized under the column "Unrealized Gross Profit per Books", and hence, did not form part of the total Realized Gross Profit (RGP) per Books of P184,574,274.00: Period Payor/Withholding ,.Tax Withheld Gross Income Exhibit Unrealized Gross Sales Type Covered Ajtents 20 760.00 No. Profit per 2010 HDMFSales 21,230.52 ,.(Tax Base) HDMFSales 1stQu.t!t,er Shervll P. Alvarez 692000.00 nP�299" Books 1~650.96 183 057.00 HDMFSales �~� ... 313 644.00 HDMFSales 17604.00 HDMFSales 2nd~_!lt!t.el' � Michael L. De Jesus 101,684.00 '"P~300" 390282.00 HDMFSales 17,955~00 Sps. Jaime C. 7~471.28 14.1203.�00 Cash Basis �:��� Cash Basis Callano &: Lina S. 1.04 67:1.76 Cash Basis 22,176.00 �, 275 173.00 Cash Basis 2nd Quarter Callano 42 851.79 655,032.00 "P-301" 129,305.00 Cash Basis 31 980.90 Cash Basis SPS.�RUTH& 25 620.00 :1 432;664.oo Cash Basis Cash Basis � - - � 2ndQuat!t.er At.RitT ROMANO 104,352.15 586,800.00 "P�302" 240,870.00 Cash Basis 19,575.00 396 943.00 Cash Basis ,1,:,/ ,.S~. ROMEO & 29 767.50 296 730.00 1 339.29 254 200.00 Qutfter , 'lftATRidA RACAL 25 027.45 59$,500.00.�, .....~303" 971,016.00 87 936.84 180,596.00 �':" <��; ; $1'&\~I)WIN & 220 500.00 RQNflYN 2nd 390,626.92 ''��� \ p 495.298.68 979 842.00 3rd'tluarter;; � ASTORGA �498,0SS.OO. "P-3M"' 3 540,697.00 p 4.973,361.00 Sub-total 3,na,iti:L:oo SPS. GLADYS & 4th Quarter MICHAEL NIELES 739,200.00 "P-89" 1 428 392.86 "P-90" 4th Quarter Elias C. Arnoco 4th Quarter JOY & JOY LIN 1 066 030.00 "P-88" 4th Quarter PAROHINOG 4th _Quarter SPS. ARLAN RAYMUND 854 000.00 "P-81" 4th Quarter & RHIA REYES SPS. SALVACION & 2,087,043.00 "P-104" TOBIAS CORDOVALES SPS. ROLANDO & 652 500.00 "P-404" ALEXIS BINAS 992 250.00 "P-103" 4th Quarter AIZA J. DOMINGO 26 785.71 "P-82" 4th Quarter MYP GBY PHILIPPINE 4th Quarter CORPORATION 500 548.94 "P-101" 4th Quarter MYP GBY PHILIPPINE CORPORATION 1 758 736.78 "P-102" MYP GBY PHILIPPINE :10 :105,487.29 CORPORATION p 13.843.588.29 Sub-total TOTAL Based on the Court's review, all the 4th Quarter Cash Basis sales in the above table can be traced to Exhibit "P-1508-6" representing the "Gross Profit of Lot Sales in Washington Place Deferred per Books but Taxable in 2010 in the amount of P4,830,777.00"18. The same is fo- 17 !d. 18 Docket, val. VIII, p.3785.

AMENDED DECISION CTA Case No. 8633 one of the reconciling items added to the RGP per Books to arrive at the Gross Income per ITR19, as can be seen in the earlier table. The aforementioned RGP included the RGP of P3,540,697.00 relating to the CWT amount of P390,626.92 is found to have formed part of the 2010 Annual ITR of petitioner. As for the 1st to 3rd Quarter Cash Basis sales in the above table which are HDMF Sales in the total amount of P104,671.76 (P 495,298.68 less P390,626.92), according to the ICPA report, the revenue of P3, 738,101.00 (P13,843,588.29 less P10, 105,588.29) to which those CWTs relate must have been reported in the years when the petitioner received the loan proceeds. 20 However, despite submission of petitioner's Schedules for the years 201121 and 201222, the Court cannot trace or verify the realizations of income on these CWTs. Hence, the CWT on these HDMF Sales in the sum of P104,671.76 is disallowed, since the related income was not recorded in petitioner's books during the year 2010, and did not form part of the Gross Income in the ITR for taxable year 2010. s 2. !CPA Findings23 The ICPA noted a transaction with Air Insurance Agency, Inc. which was categorized by petitioner under cash basis transaction. However, the transaction pertains to commission given by the former to the latter in exchange for client referral. Petitioner treated the commission income received as deduction from related insurance expense incurred from Air Insurance Agency, Inc. The details of the transaction are as follows24 : TIN LAST NAME TAX BASE TAX WITHHELD 004-521-292- AIR INSURANCE AGENCY, p 13,389.65 p 1,338.96 L__ 000 INC. -- ~-- -- ------------ A- 19 Exhibit "P-5", Section E, Line 121, docket, vol. V, p. 2694. 20 Exhibit "P-1414", docket, vol. IV, p. 2554. 21 Exhibit "P-1516-1", docket, vol. VIII, p. 3990. 22 Exhibit "P-1515-1", docket, vol. VIII, p. 3959. 23 Exhibit "P-1414", docket, vol. IV, p. 2533-2556. 24 Exhibit "P-1414", docket, vol. IV, p. 2550.

AMENDED DECISION CTA Case No. 8633 With regard to the rest of the items under Cash Basis, the Court finds the same in order. II. Installment Sales These are fully settled accounts in 2010 wherein the last collection was made in 2010 but the Gross Profit was realized in prior years. These accounts pertain to installment sales from prior years wherein buyers are individuals not engaged in trade or business. The payments in the year of sale do not exceed 25�/o of the selling price. The final installments on these sales were recognized in prior years corresponding to payments and the last realization of gross profit was in 2010, the same year when the CWT was withheld and remitted to the BIR. 25 Meanwhile the category "Last Collection Made in 2010 but Gross Profit Realized in Prior Years" contains accounts which were already recognized in full as taxable income in prior years but the full payment of the outstanding balance only happened in 2010. 26 To reiterate, the timing of withholding for individual buyers not engaged in trade or business, is upon final payment, and the basis is the entire Gross Selling Price, net of VAT, if any, whereas the timing of recognition of gross profit is based on the installment collection made every year. In addition, the Court finds the following per verification of the GL schedules provided in the Supplemental ICPA Report and Motion for Reconsideration: 1. Traced to 2010 GL Schedules The same procedure was done with the income payments falling under Category 2 (2010 Sales - Fully settled accounts in 2010, -j-z.. 25 Q&A No. 51, Direct Testimony of Petitioner's Witness, Ann Celeste A. Mercado per her attached Judicial Affidavit, docket, val. VII, p. 3361. 26 Q&A No. 80, Direct Testimony of Petitioner's Witness, Ann Celeste A. Mercado per her attached Judicial Affidavit, docket, val. VII, p. 3377.

AMENDED DECISION CTA Case No. 8633 and Gross Profit Realized in 2010) of the CWT Summary, being traced to Exhibit "1508-4'127 which is the breakdown of the reconciling item "Realized GP from Prior Year's Sales". Further, it is noted that Court was able to match all of the accounts in the CWT summary to Exhibit "1508-2'128 which means that petitioner was able to sufficiently prove that the CWT being claimed for refund met the third requisite, hence, may be entitled to the refund of CWT in connection with the income payments under Category B in the amount of P 2,933,235.02. However, the Court found that the Tax Base used per withholding tax certificates (BIR Form No. 2307) and remittance forms (BIR Form No. 1606) on the following accounts is not the same as the Gross Selling Price, net of VAT (if any) as per GL Schedules: Tax Gross Selling Price per Withheld Should-be Realized Annex"A-1- Tax Gross Profit Tax Base per forming part Difference 2"* Withheld (Tax Withheld) in 2010 NAME CWT Schedule of the Claim p 632,256.00 p 18,967.68 p 832.21 p (11,467.68) JONATHAN BULAQUENA p 500,000.00 p 7,500.00 739,754.00 22,192.62 108,920.08 (14,692.62) SPS. RICARDO & 624,002.00 18,720.06 6,644.25 792,338.00 23 770.14 11,220.06 13,262.19 JOCELYN GALLEGO 500,000.00 7,500.00 766 660.00 22 999.80 (16 270.14) 52 357.65 766 660.00 22,999.80 (15 499.80) 81,767.54 I SPS. RIONEL & IMELDA (6,369.87) 699,998.00 20 999.94 i DITAN 500,000.00 7,500.00 (13,499.94) 530 853.00 15 925.59 7,413.10 ELMA ALMOSA 500,000.00 7,500.00 (10 300.59) 482 635.00 14 479.05 14 001.63 MARICEL GARCIA 500 000.00 7 500.00 708,478.00 21,254.34 (8 854.05) (13,754.34) 35 979.69 LUCITO JUNIOR REGIS 554,331.00 16,629.93 778,614.00 23,358.42 117,891.97 (15,585.42) SOLEDAD CAJEFE & 435 694.00 13 070.82 68,641.84 P7,957,942.00 P238,738.26 (6 320.82) FELISA YOUNGBERG 500,000.00 7,500.00 P(121,395.21) 51 776.40 P559,488.55 SPS. LEMUEL & JULIET DALISAY 375 000.00 5 625.00 DIGNA & ROMULO TORRES 375 000.00 5 625.00 ERNEST RAMIREZ 500,000.00 7,500.00 SPS. REYNALDO & JOSIE SOTELO 500,000.00 7,500.00 SPS. ROLLY & BEVERLY LACSE 450 000.00 6 750.00 TOTAL p 5,754,331.00 1'94,629.93 *Computed as Selling Price less VAT, if any. For the foregoing accounts, the income payments on which the taxes withheld were based had a different Selling Price per GL schedules compared to the Gross Selling Price per Exhibit "1508-2". It is noted that the difference in amount does not correspond to the VAT component of the items. In this instance, petitioner was not able to provide the Court with an explanation or reconciliation of the difference in recording and reporting of the same.fo- 27 Docket, vol. VIII, pp. 3773-3783. 28 Docket, vol. VIII, pp. 3766-3771.

AMENDED DECISION CTA Case No. 8633 In view of the foregoing, the Court disallows the sum of P94,629.93 representing an under-withholding of CWT. In addition, as correctly found by the ICPA29, the amount of P27,219.33 CWT pertaining to the account of Sps. Romulo and Merly Daraug with corresponding tax base of P907,311.00 should be disallowed because there was still outstanding balance as of 2010. 2. Traced to Prior Years GL Schedules Out of the P2,160,852.69 CWT related to Installment Method - Last Collection was made in 2010 but gross profit was already fully recognized in Income Tax Returns prior to 2010, the ICPA aptly noted certain item which petitioner erroneously classified as a Fully Settled Account in 2010, but, upon examination turned out to still have an outstanding balance. Hence, the related amount withheld subject for refund is disallowed. Details of this account are as follows: TIN LAST NAME FIRST NAME TAX BASE TAX GUERRERO p 3,992,044.64 WITHHELD 117-519-983- SPS. RODGER p 199,602.23 000 & LUZ 3. Installment - Corporate Buyers The following represent the CWT withheld from petitioner's corporate buyers, wherein the tax withheld by the buyer is based on every installment payment. The ICPA obtained all available official receipts and application of payment (AoP) to support installment income payments of corporate buyers, and these have been taken into consideration in the assailed Decision:30 Gross Amount Realized Gross Profit of Income NAME Tax Withheld in 2010 Open Mission in the Philippines Inc. p 7 986.61 Open Mission in the Philippines Inc. 8 106.41 p 239.60 p 6 379.12 Open Mission in the Philippines Inc. 8 228.00 Open Mission in the Philippines Inc. 8 351.42 243.19 6 474.80 Open Mission in the Philippines Inc. Open Mission in the Philippines Inc. 716 531.78 246.84 6 571.92 Open Mission in the Philippines Inc. 55 861.71 Open Mission in the Philippines Inc. 28 014.75 250.54 6 670.50 Open Mission in the Philippines, Inc. 8 673.59 19,285.24 21 495.95 49 580.77 1 675.85 44 244.18 840.44 22 188.54 260.21 6 869.75 578.56 15,274.50 )L_ 29 Exhibit "P-1414", docket, vol. IV, p. 2551. 30 Exhibit "P-1507", p. 7, docket, vol. VII, p. 3409.

AMENDED DECISION 27 958.83 838.76 22 144.25 27 958.83 838.76 22 144.25 CTA Case No. 8633 6 540.24 327.01 Page 15 of 19 13 409.41 670.47 2 394.07 6 872.79 343.64 1 227.04 Open Mission in the Philippines Inc. 6 987.34 349.37 1 247.50 Open Mission in the Philippines Inc. 1 595 504.20 79 775.21 3 868.63 St. Mary's School of Novaliches Inc. 6 927.71 346.39 279 912.25 St. Mary's School of Novaliches Inc. 2 050.87 61.53 3 713.16 St. Mary's School of Novaliches Inc. 7,868.58 236.06 1 650.71 St. Mary's School of Novaliches Inc. 7 043.17 352.16 6 284.85 St. Mary's School of Novaliches Inc. 7 986.61 239.60 3 775.05 Youngji International School 2 085.05 62.55 6 379.12 Youngji International School 8 106.41 243.19 1678.23 Youngji International School 2 119.80 63.59 6 474.80 Youngji International School 8 228.00 246.84 1 706.20 Youngji International School 735 982.85 22 079.49 6 571.92 Youngji International School 724 883.20 21 746.50 580 964.45 Younqji International School 7 160.55 358.03 563 855.32 Youngji International School 14 681.12 734.06 7 739.89 Youngji International School 120 833.35 3 625.00 8,000.04 Youngji International School 19 166.65 575.00 80 887.12 Youngji International School 3 233.82 97.01 1 868.39 Younqji International School 3 285.03 98.55 1 897.98 Youngji International School 3 337.04 100.11 1 928.03 Lightlife Baptist Church Inc. 3 389.87 101.70 1 958.55 Lightlife Baptist Church Inc. 3 443.55 103.31 1989.56 Lightlife Baptist Church Inc. 3 498.07 104.94 2 021.06 Lightlife Baptist Church Inc. 2 640 000.00 132 000.00 2 053.07 Liqhtlife Baptist Church Inc. P6,881,582.45 p 292,550.01 195 500.36 Lightlife Baptist Church Inc. P1,986,089.93 Lightlife Baptist Church Inc. Lightlife Baptist Church Inc. St. Mary's School of Novaliches Inc. TOTAL Here, the only relevant realized gross profits are the ones related to installment payments made during the year 2010. However, the amount of realized gross profit related to supposed installment payments were not found in any of the GL schedules for taxable year 2010. Hence, the CWT claimed relating to Corporate Buyers for the amount of P292,550.01 should be disallowed. 4. Installment - HDMFAccounts These represent sales to buyers availing themselves of Pag- Ibig/HDMF Financing. HDMF requires submission of title in the name of the buyers before the release of the loan proceeds. Hence, CWTs were paid in advance for the purpose of securing Certificate Authorizing Registration (CAR) from the BIR, being a requirement by the Register of Deeds to process title transfer. As such, the corresponding income will only be reported in the year when full payments are made upon receipts of the loan proceeds from the concerned financial institution. There are also CWTs under this category which pertain to installment buyers who later converted to HDMF financing. Hence, for the latter accounts, there were portions)k-

AMENDED DECISION CTA Case No. 8633 of income realized and reported in the prior years' ITR, and final realization of income is made when the account is fully paid from the proceeds of the HDMF loans.31 Name Tax Base Amount of Tax Withheld 1 EUNICE SALON 658 800.00 19 764.00 2 SPS. FERLINETTE & RONNIE VERGUELA 707 684.00 21 230.52 3 SPS. ARIEL & SHERYLL JANE PACA 740 000.00 22 200.00 4 SHERYLL ALVAREZ 692 000.00 20 760.00 1ST QUARTER 2 798 484.00 83,954.52 5 MICHAEL DE JESUS 707 684.0.0 21230.52 SPS. JAIME.&UNA CALLANO �� 655 032.00 19 650.96 6 SPS. RUTH & ALBERT ROMANO �586,800.00 <�1:7 604.00 SPS. ROMEO & PATRICIA RACAL 598,500.00 J 17 955.00 .:7�� 2 548 016.00 76,440.48 �a 2ND QUARTER 9 SPS. EDWIN & RONALYN ASTORGA 498,085.00 7 471.28 10 SPS. LEA & JERRY MEDRANO 808 400.00 24 252.00 11 SPS. LUZVIMINDA & EDGARDO PEREY 814 000.00 24 420.00 3RD QUARTER 2,120,485.00 56,143.28 12 SPS. WILLIAM & MINDA AGOJO 1 665 994.00 49 979.82 4TH QUARTER 1665 994.00 49,979.82 TOTAL 9,132,979.00 266,518.10 However, not all of the above accounts can be traced to any of the Realized Gross Profit Schedules provided by petitioner, hence, we cannot ascertain the fact of its forming part of petitioner's Gross Income for tax purposes in any given taxable year. Considering the foregoing, as it has been discussed in Item # I (Cash Basis), the Court disallows P104,671.76 for refund. 5. Installment Sale of Prior Years And Bank Financing Accounts, Fully Settled in 2011 The following are prior years' installment sales which were settled in 2011, hence, recognized in 2011 but the corresponding CWT were paid in 2010 as required for early transfer of titles for bank take-out purposes or before the release of the loan proceeds: 329-- 31 Q&A No. 107, Direct Testimony of Petitioner's Witness, Ann Celeste A. Mercado per her attached Judicial Affidavit, docket, vol. VII, p. 3386. 32 Q&A Nos. 118 and 125, Direct Testimony of Petitioner's Witness, Ann Celeste A. Mercado per her attached Judicial Affidavit, docket, vol. VII, p. 3388-3389.

AMENDED DECISION CTA Case No. 8633 Name Loan Amount of Realized Exhibit Gross Profit in Reference Proceeds Tax Withheld Succeeding "P-1516-2", Received perCWTin Year(2011) p.333 Date 2010 p 838,269.00 PRIOR YEARS'INSTALLMENTSALES p 15,599.00 Culla, Sps. June & p 853868.00 Flordeliza 2011 p 126,160.71 Suspene, Sps. Alejandro & Vannessa 2011 22,500.00 Sub-total p 148,660.71 BANK FINANCING ACCOUNTS Terrenal, Sps. Efren & "P-1516-2", p.634 Lilibeth 2011 116 010.00 p 1,061,259.00 "P-1516-2", Lindog, Sps. Maria 43,200.00 p 661,807.00 p.83s Leonor & Raul 2011 159,210.00 p 1,723,066.00 p 307,870.71 Sub-total TOTAL A scrutiny of the supporting documents reveals that indeed these accounts have been recognized as income in the succeeding year 2011 when the loan proceeds were received by the petitioner based on the bank credit memos presented by petitioner and the journal vouchers booking the corresponding income. In view of the above, the Court allows the refund of the tax credits in the amount of P307,870.71 in connection with 2010 Installment Sales of Prior Year Fully Settled in 2011 and Bank Financing Accounts. Lastly, the Court found that the schedules of Realized Gross Profit per Books for each prior taxable year are reconcilable to the Annual ITRs of the respective taxable years, hence, the Court can be certain that the realized gross profit per books were reported accordingly in the Gross Income for Annual Income Tax Return purposes. In sum, petitioner has sufficiently proven its entitlement to a refund or issuance of tax credit certificate representing its unutilized excess CWT for the taxable year 2010, in the modified amount of P12,934,749.05, computed as follows: Total CWT claimed per Petition P13,654,761.27 ~: ~ 33 Docket, val. VIII, p. 3993. 34 Docket, val. VIII, p. 3996. 35 Docket, val. VIII, p. 3998.

AMENDED DECISION CfA Case No. 8633 1) !CPA's Findings 1,338.96 Cash Basis Installment Method - Last Collection in 2010 199,602.23 but RGP in Prior Years Installment Method - Last Collection in 2010 27,219.33 but RGP in 2010 94,629.93 2) Court's Findings 292,550.01 Cash Basis 104,671.76 Corporate Accounts HDMF P12,934,749.05 Total refundable CWT for the taxable year 2010 WHEREFORE, premises considered, petitioner's Motion for Reconsideration (Re: Decision dated 12 July 2016), is PARTIALLY GRANTED. Accordingly, the assailed Decision dated July 12, 2016 is hereby amended to read as follows: "WHEREFORE, the instant Petition for Review is PARTIALLY GRANTED. Accordingly, respondent is ORDERED TO REFUND or ISSUE TAX CREDIT CERTIFICATE to petitioner in the reduced amount of P12,934,749.05 for its unutilized excess CWT for the taxable year 2010. SO ORDERED." SO ORDERED. I CONCUR: ~'hC-~.Q. iUANITO C. CASTANEfiA, JR. Associate Justice ~ CAESAR A. CASANOVA Associate Justice

AMENDED DECISION CTA Case No. 8633 ATTESTATION I attest that the conclusions in the above Amended Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. ~---.:~c. Q:T'~ok. t' g,__ JlJANITO C. CASTANEDA/JR Associate Justice Chairperson CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson�s Attestation, it is hereby certified that the conclusions in the above Amended Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. Presiding Justice