FILPRIDE RESOURCES INCORPORATED v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL SECOND DIVISION FILPRIDE RESOURCES CTA Case No. 8233 INCORPORATED, Members: Petitioner, -versus- Castaneda, Jr., Chairperson Casanova, and Mindaro-Grulla, 11. COMMISSIONER OF Promulgated: INTERNAL REVENUE, NOV 12 2013 Respondent / I .t' I,,. , X - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ~- - - - - - - - - - - X f: DECISION CASTANEDA, JR., J.: This is a Petition for Review filed on February 18, 2011 py Filpride Resources Incorporated (petitioner) to appeal the Final Decision on Disputed Assessment (FDDA)1 of the Commissioner of _ Internal Revenue, through Zenaida G. Garcia, the Assistant Commissioner-Large Taxpayers Service, finding petitioner liable for alleged deficiency income tax, expanded withholding tax (EWT) and value-added tax (VAT) in the aggregate amount of P61,343,211.66 covering taxable year 2006. Petitioner is a corporation duly organized and existing under and by virtue of the laws of the Philippines, with principal office address at Unit 57 Westgate Office, Sampson Road, Central Business District, Subic Bay Freeport Zone. 2 It is registered with the Bureau of Internal Revenue (BIR) with Taxpayer's Identification Number jl- 1 Exhibit "I". 2 Par. 1, Facts Admitted, Joint Stipulation of Facts and Issues (JSFI), docket, p. 182.

DECISION CTA CASE NO. 8233 216-589-000, as evidenced by Certificate of Registration No. OCN 8RC0000018692 dated March 4, 1998.3 On the other hand, respondent is the Commissioner of the Bureau of Internal Revenue, who is duly appointed and empowered to perform the duties of her office, including, among others, the power to decide, cancel, and abate tax liabilities as provided by law. She holds office at the 5th Floor, BIR National Office Building, Agham Road, Diliman, Quezon City. Petitioner received from respondent a Preliminary Assessment Notice (PAN) dated November 18, 2009, finding petitioner liable for deficiency taxes for taxable year 2006.4 After filing its Reply5 to the PAN, petitioner received from respondent a Formal Letter of Demand (FLD) dated January 19, 2010 and Formal Assessment Notices (FAN) all dated January 18, 2010, with Details of Discrepancy, alleging that petitioner had deficiency taxes for taxable year 2006 in the total amount of P759,488,615.53, broken down as follows: 6 Income Tax p 611,207,996.55 Value-added Tax Withholding Tax-Expanded 130/855 305.74 Excise Tax 13,418,511.96 TOTAL 4,006,801.28 P759,488,6 15.53 On February 24, 2010, petitioner filed a letter-protest ore- addressed to respondent, through Zenaida G. Garcia, the Assistant Commissioner for the Large Taxpayer's Service-Excise. 7 On April 26, 2010, petitioner submitted relevant documents to respondent addressed to Sarah B. Mopia, OIC Chief, LT Excise Audit Division I and Luzviminda Pedrosa, Examiner, LT Excise Audit Division I, in support of its protest letter filed on February 24, 2010.8 Thereafter, on October 26, 2010, petitioner submitted additional $- documents to respondent addressed to Rolando M. Balbido, Group 3 Par. 3, Facts Admitted, JSFI, docket, p. 183; Exhibit " B". 4 Par. 4, Facts Admitted, JSFI, docket, p. 183; Exhibit "C"; Exhibit "7". 5 Exhibits "D" to "D-7". 6 Par. 5, Facts Admitted, JSFI, docket, p. 183; Exhibits " E" to "E-5"; Exhibit "10". 7 Exhibits " F" and "J". 8 Exhibits " G" and "J".

DECISION CTA CASE NO. 8233 Supervisor, LT Excise Audit Division I and Luzviminda Pedrosa, Examiner, LT Excise Audit Division 1.9 On January 19, 2011, petitioner received the Final Decision on Disputed Assessment and Audit Result/Assessment Notice all dated January 18, 2011 issued by respondent. In the said FDDA and revised Assessment Notice, respondent declared that there is still due from petitioner tax liabilities for taxable year 2006 in the reduced amount of P61,343,211.66, inclusive of interest and compromise penalties, computed as follows: 10 TAX TYPE BASIC INTEREST COMP. TOTAL Income p 19 863 202.71 p 15 073 985.91 p 50 000.00 p 34 987,188.62 14,512,211.98 11,658,095.25 50,000.00 26 220,307.23 VAT 68,393.22 55,322.59 12,000.00 135,715.81 WE 1'34,443,807.91 p 26,787,403.75 P112,000.00 p 61,343,211.66 TOTAL Hence, on February 18, 2011, petitioner filed the instant Petition for Review11 � Respondent filed her Answer12 on March 23, 2011, interposing the following defenses: "7. Petitioner Filpride Resources Incorporated is liable to pay its deficiency income tax, value-added tax and withholding tax including increments in the total amount of Sixty One Million Three Hundred Forty Three Thousand Two Hundred Eleven and 66/100 (P61,343,211.66). 8. Comprehensive study disclosed that petitioner is liable to pay the total deficiency income tax assessment. Analysis of records and documents revealed that the volume of fuel received per Import Entry Internal Revenue Declaration is 23,728,291.02 liters but per Official Register Book, it was 22,331,596 liters only. Petitioner's claim that the discrepancy of P1,396,695.02 ju liters was directly delivered to customers is not tenable 9 Exhibits " H" and "J ". 10 Par. 6, Facts Admitted, JSFI, docket, p. 184; Exhibits "I" to "I-3". 11 Docket, pp. 4 to 19. 12 Docket, pp. 132 to 141.

DECISION erA CASE NO. 8233 considering that the arrival date of the fuel per IEIRD with SN 69914783 is March 20, 2006, while the date per sales invoice issued to Sea Oil Philippines is December 18, 2006 Withdrawal Certificate No. WCP2005 00065531 is dated December 17, 2006 same date as per Lighter Loading/Delivery Report. The volume of fuel per SN 69914783 in kilogram was converted to liters; thus, the undeclared sales from undeclared receipts of imported diesel increased to P39,735,973.36. The imposition of income tax on the undeclared sales was sustained pursuant to Section 32 of the NIRC. Verification disclosed that petitioner's sales to Manila International Airport Authority as appearing in the certificates of creditable withholding VAT or BIR Form No. 2306 amounted to P14,299,945.59 while the reported sales as appearing in its Summary List of Sales (SLS) amounted to P4,131,271.33. The discrepancy amounting to P10,168,674.56 was assessed pursuant to Section 32 of the NIRC. Income payments amounting to P6,839,322.38 were not subjected to withholding tax; hence, the claim for deduction for income tax was disallowed pursuant to Section 34(K) of the NIRC. Validation of certificates of creditable withholding tax submitted disclosed that the amount of P2,813.10 is unsupported. Hence, the assessment was sustained pursuant to Section 58 of the NIRC, as implemented by Section 2.58.5 of Revenue Regulations No. 2-98. 9. With respect to value-added tax assessments, verification of accounting records and upon considering the discrepancy in sales due to VAT rate transition revealed that the amount of sales reported in VAT return amounted to P2,002,081,196.65 whereas the reported sales as appearing in the Income Tax Return amounted to P2,004,785,459.28. Petitioner failed to submit evidence that no VAT deficiency should be assessed on the difference amounting to P2,595,097.18. Thus, the ~

DECISION CTA CASE NO. 8233 discrepancy was assessed pursuant to Section 106 of the NIRC. The volume of fuel received per Import Entry Internal Revenue Declaration is 23,728,291.02 liters but in Official Register Book, the volume of fuel is only 22,331,595 liters. The claim of petitioner that the discrepancy of 1,396,695.02 liters was delivered directly to customers is not tenable considering that the arrival date of fuel per IEIRD with SN 69914783 is March 20, 2006 while the date per sales invoice issued to Sea Oil Philippines is December 18, 2006, Withdrawal Certificate No. WCP2005 00065531 is dated December 17, 2006 same date as per Lighter Loading/Delivery Report. In addition, the volume of fuel per SN 69914783 in kilogram was converted to liters; thus, the undeclared receipts of imported diesel increased to P39,735,973.36. The imposition of value added on the undeclared sales was sustained pursuant to Section 106 of the NIRC. There was understatement of sales to Manila International Airport Authority amounting to P10,168,674.56 and was assessed pursuant to Section 106 of the NIRC. The amount represented the discrepancy of sales as appearing in Certificates of Creditable Withholding VAT which reported sales amounting to P14,299,945.59 and Summary List of Sales only declared P4,131,271.33. Verification of certificates of creditable withholding VAT to support claim for VAT credits revealed that the reported sales indicated in the Summary List of sales amounted to P149,137,352.78 with the corresponding output VAT at the rate of 7�/o only; thus, the differential rate of 5�/o or total amount of P7,456,867.64 was assessed pursuant to Section 106 of the NIRC. Verification likewise disclosed that the input tax claimed from Herma Shipping and Transport Corp. in the amount of P54,124.39 is supported with official receipt dated January 7 & 8, 2007. Evidently, the documents p pertain to the period beyond 2006. Thus, it was properly disallowed pursuant to Sections 110 and 113 of the NIRC.

DECISION CTA CASE NO. 8233 Study of petitioner's sales invoice and official receipts to validate its claim for input tax credits disclosed that the amount of P643,883.15 was found to be purchases from suppliers who are non-VAT with invalid TINs, invalid SI/OR, registered as one time taxpayer (ONEIT) and cannot be found in the BIR database. Thus, the claim was properly disallowed pursuant to Section 110 of the NIRC. Comprehensive study of certificates of creditable withholding VAT to support its claim for VAT credits in the amount of P30,019,105.22 disclosed that only the amount of P30,076,472.61 is applicable for the taxable year 2006. Hence, the difference in the amount of P57,367.39 was properly disallowed pursuant to Section 114 of the NIRC, as implemented by Section 4.110-8 of Revenue Regulations 16-2005. 10. With respect to withholding tax assessments, reconciliation and analysis of the income payments, it was determined that withholding tax in the amount of P68,393.22 is still due and unpaid. Thus, it was properly assessed pursuant to Section 57 (B) of the NIRC. 13. Assessments are presumed correct and made in good faith. The taxpayer has the duty of proving otherwise. In the absence of proof of any irregularities in the performance of official duties, an assessment will not be disturbed. Even an assessment based on estimates is prima facie valid and lawful where it does not appear to have been arrived at arbitrarily or capriciously. (Marcos II vs. Court of Appeals G.R. No. 120880 June 5, 1997) ' 14. The burden of proof is on the taxpayer contesting the validity or correctness of an assessment to prove not only that the Commissioner of Internal Revenue is wrong but the taxpayer is right. Otherwise the presumption of correctness of tax assessment stands gv (Commissioner of Internal Revenue vs. Hantex Trading Co. Inc., G.R. No. 136975, March 31, 2005)

DECISION CfA CASE NO. 8233 15. Petitioner has not pointed out any provision or item in the assessment notice which bears a trace of falsity. Its averments were based on conjectures, surmises and speculations. These cannot supply the basis for the charge of impropriety in the assessments made." On April 8, 2011, petitioner filed its Reply13 to respondent's Answer. On June 8, 2011, the parties filed with this Court their Joint Stipulation of Facts and Issues14, which was approved in a Resolution15 dated June 14, 2011. In the same Resolution, the Court considered the pre-trial terminated and ordered the parties to proceed with the trial on the merits and to only present evidence not covered by their Joint Stipulation of Facts. On August 4, 2011, this Court, upon petitioner's Motion for Commissioning of Independent Certified Public Accountant16, appointed Ronald B. Alvarez as duly commissioned Independent CPA. 17 During trial, petitioner presented Aniebeth Dionzon18 and Ronald B. Alvarez19 as its witnesses. Thereafter, petitioner filed its Formal Offer of Evidence20 on April 17, 2012, submitting Exhibits "A" to "JJ", inclusive of sub- markings; which this Court admitted in Resolutions dated May 22, 201221 and July 19, 201222 � On the other hand, respondent presented as her sole witness Ms. Luzviminda A. Pedroso.23 ~ 13 Docket, pp. 145 to 148. 14 Docket, pp. 182 to 185. 15 Docket, p. 188. 16 Docket, pp. 214 to 216. 17 Minutes of Hearing dated August 4, 2011, docket, p. 229. 18 Minutes of Hearing dated June 22, 2011, July 18, 2011, February 15, 2012, and March 28, 2012, docket, pp. 197, 207, 349, and 355. 19 Minutes of Hearing dated October 19, 2011 and November 16, 2011, docket, pp. 252 and 279. 20 Docket, pp. 424 to 452. 21 Docket, pp. 464 to 465. 22 Docket, p. 477. 23 Minutes of Hearing dated August 1, 2012, docket, pp. 518 and 519.

DECISION CfA CASE NO. 8233 On September 24, 2012, respondent filed her Formal Offer of Documentary Evidence24, submitting Exhibits "1" to "15-a"; which this Court admitted in the Resolution25 dated November 20, 2012. On February 12, 2013, the case was submitted for decision taking into consideration petitioner's Memorandum26 filed on January 28, 2013 and the Report dated February 6, 2013 of the Records Division that respondent failed to submit a Memorandum.27 The parties submitted the following jointly stipulated issue28 for this Court's consideration: "Whether or not Petitioner is liable for deficiency income, value-added and withholding tax for the taxable year 2006 amounting to Sixty One Million Three Hundred Forty Three Thousand Two Hundred Eleven Pesos and Sixty Six Centavos (P61,343,211.66)." I. Deficiency Income Tax and Expanded Withholding Tax Respondent assessed petitioner of deficiency income tax for taxable year 2006 in the aggregate amount of P34,987,188.62, computed as follows: 29 Taxable income per ITR p 3 836 582.76 Add: Adjustments per audit Undeclared sales from undeclared receipts of imported diesel P39 735 973.36 Understated sales to MIAA Per Certificate of Creditable WVAT p 14,299 945 .89 Per Summary List of Sales 4 131 271.33 10 168 674.56 Income payments not subjected to EWT 6 839 322.38 56 743 970.30 Total net income subject to income tax per audit p 60 580 553.06 Tax rate 35% Tax due p 21 203 193.57 Less: Tax Credits/Payments p 38 298.48 Prior year's tax credit p 5 038 140.73 Creditable withholdinq tax (CWT) Less: No supportinq cert. of CWT p 2 813.10 carried over to succeedinq quarter per ITR 3 733 635.25 Total p 3 736 448.35 1 301 692.38 1 339 990.86 Income tax still due p 19 863 202.71 24 Docket, pp. 527 to 536. 25 Docket, pp. 552 to 553. 26 Docket, pp. 567 to 629. 27 Docket, p. 631. 28 Issue, JSFI, docket, p. 184. 29 Exhibits "I" and "M-1"; BIR Records, Folder 1, Part 2, p. 1327 .

DECISION IP 1s o73 985.91 CfA CASE NO. 8233 I 50 000.00 15 123 985.91 Page 9 of 39 p 34,987,188.62 Add: Penalties Interest (4.15.07 to 01.31.11) Compromise Total Deficiency Income Tax The determination of whether or not the assessment is correct shall depend on the propriety of the income imputed as well as the deductible expense and tax credits disallowed by respondent, namely: a. Undeclared sales from undeclared receipts of imported diesel p 39 735,973.36 b. Understated sales to MIAA p 10,168,674.56 c. Income payments not subjected to Ewr p 6 839,322.38 d. No supporting certificate of cwr p 2,813.10 e. Tax credits carried over to succeeding quarter per ITR p 3,733,635.25 The enumerated items shall be discussed in seriatim. a. Undeclared sales from undeclared receipts of imported diesel- P39,735,973.36 In the FDDA, the analysis of records and documents revealed that the volume of fuel received per Import Entry Internal Revenue Declaration (IEIRD) was 23,728,291.02 liters30; but per Official Register Book (ORB), the volume of fuel was 22,331,596 liters31 only. The difference of 1,396,695.02 liters was assessed as undeclared receipt, computed as follows: 32 Total receipts of diesel per IEIRD (in liters) 23 728 291.02 Total receipts of diesel per ORB (in liters) Undeclared receipts 22,331,596.00 Multiply by average selling price per SLS Undeclared sales subject to income tax & VAT 1,396 695 .02 p 28.45 p 39,735,973.32 Petitioner's Chief Financial Officer, Ms. Aniebeth Dionzon, explained the discrepancy in this wise: 33 AS: xxx There is a discrepancy of 1,396,695.02 liters, fV which the BIR treated as undeclared sales amounting to P39,735,973.36. xxx ----------------- 30 Exhibit " M-1-2". 31 Exhibit " M-1-3". 32 Exhibit " M-1-1". 33 Exhibit " K".

DECISION CTA CASE NO. 8233 Q6: Do you agree with this particular assessment? A6: We disagree. The discrepancy in the amount of P39,735,973.36 was partly due to the direct deliveries made by Petitioner to Sea Oil Philippines as shown in Petitioner's IEIRD No. SN 76177656 dated 15 December 2006, with Withdrawal Certificate No. WCP2005 00065531 dated 17 December 2006 and Sales Invoice No. 01383 dated 18 December 2006. Accordingly, the total receipts of diesel per ORB should be adjusted to include the said direct fuel deliveries of 503,974 liters; the adjusted total receipt of diesel per ORB is 22,835,570 liters. With respect to Petitioner's IEIRD No. SN 69914783 dated 17 March 2006, it appears that the weight appearing on the face of the document is 3,284,707 kilograms. However, further investigation has shown that the real volume of the goods is 3,425,028 liters as per Bill of Lading No. WDGDSMN-2610B dated 16 March 2006. Accordingly, the total receipts of diesel per IEIRD should be adjusted by deducting the 4,317,747.35 liters of diesel which is the converted volume of 3,284,707 kilograms of diesel. Thereafter, the correct volume of diesel, which is 3,425,028 liters, should be added back. Based on this computation, the adjusted total receipt of diesel per IEIRD is 22,835,571.67 liters. The difference of 1.67 liters between the ORB and IEIRD is likely due to rounding of decimal points." The Independent CPA made a comparison of the findings per respondent's examiner, petitioner's books, and his audit findings, as presented below: 34 IEIRD Quantity in Liters No. Date Per BIR Per Books Per Audit Variance 73100106 7/ 12/2006 550 000 73224907 8/3/2006 550 000 550 000 - 73871436 8/18/2006 2 030 000 73871411 8/24/2006 2 030 000 2 030 000 1189 686 - - 1189 686 1189 686 800 000 - 800 000 800 000 34 Exhibit " N".

DECISION CTA CASE NO. 8233 74352381 9/8/2006 700 000 700 000 700 000 - 74352336 9/11/2006 700 000 700 000 700 000 - 74352415 9/16/2006 2 598 419 2 598 419 2 598 419 - 76177656 12/15/2006 2 000 000 2 000 000 2 000 000 - (503 974) 77725173 12/29/2006 179 439 179 439 179 439 503 974 69762253 3/8/2006 2 500 000 2 500 000 2 500 000 70433255 4/11/2006 2 163 000 2 163 000 2 163 000 - 71248274 5/11/2006 1 000 000 1000 000 1 000 000 - 71246752 5/12/2006 1 000 000 1000 000 1 000 000 - 72000126 6/6/2006 2 000 000 2 000 000 2 000 000 - 69914783 3/15/2006 4,317 747 3,425,026 3,425,026 - 23,728,291.02 22,835,569.67 22,331,595.67 - TOTAL 892,721 1,396,695.35 He explained the variance, thus: 35 "After a careful validation of evidences provided, we found out that the above discrepancy resulted from two errors: a. BIR converted the weight in kilograms to liters as shown in their final assessment {Exhibit M-1-2} whereas per Import Entry Declaration No. 69914783 {Exhibit N-15} and the Petitioner's Bill of Lading {Exhibit N-20}, the volume in liters is already stated . This error shows a variance of 892,721.35 liters. b. Total undeclared receipts per BIR Assessment 1,396,695.02 Discrepancy per conversion 892,721.35 Remaining Discrepancy 503,973.67 This pertains to the direct delivery from the Coastal Subic to Sea Oil (Exhibit N-8), IEIRD No. 76177656 dated December 15, 2006 and not from IEIRD with SN no. 69914783 dated March 20, 2006 (Exhibit N-15). This resulted to an over-assessment of the BIR with a quantity of 503,974 liters. Please refer to: XXX XXX XXX The sum of the two errors mentioned above, is equivalent to the BIR's assessment of under declaration of 1,396,695.02 liters with the amount of P39,735,973.36. The claim of the BIR is not valid." ~ 35 Exhibit "L", pp. 3 to 4; Exhibit "CC", A10 .

DECISION CTA CASE NO. 8233 Anent item "a" above, examination of Annex A-2.1 of the FDDA36 shows that respondent's examiner picked up the correct quantity of diesel of 3,284,707 kilograms as declared in IEIRD No. 69914783.37 However, the corresponding Bill of Lading shows quantity of 3,425,026 liters. The difference is computed as follows: Exhibit Document Kilograms Ave. Liters N-15 IEIRD No. 69914783 (declared quantity in kilograms} conversion N- 20 Bill of Lading No. WDGDSMN- rate38 2610-B (declared quantity in liters) 3 284 707 .00 1.31450 4,317,747.35 Difference 2 605,573 .22 1.31450 3,425,026.00 679,133.78 1.31450 892,721.35 The Court reiterates the following provision of the Tariffs and Customs Code of the Philippines: "SEC. 1304. Declaration of the Import Entry. - Except in case of informal entry, no entry of imported article shall be effected until there shall have been submitted to the collector a written declaration under penalties of falsification or perjury, in such form as shall be prescribed by the Commissioner, containing statements in substance as follows: a. That the entry delivered to the Collector contains a full account of the value or price of said articles, including subject of the entry; b. That the invoice and entry contain a just and faithful account of the value or price of said articles including and specifying the value of all containers or coverings, and that nothing has been omitted, therefrom or concealed whereby the government of the Republic of the Philippines might be defrauded of any part of the duties lawfully due on the articles; c. That, to the best of the declarant's information and belief, all the invoices and bills of ~ 36 Exhibit " M-1-2" . 37 Exhibit "N-15". 38 Exhibit "M -1-2".

DECISION CTA CASE NO. 8233 lading relating to the articles are the only ones in existence relating to the importation in question and that they are in the state in which they were actually received by him; d. That, to the best of the declarant's information and belief, the entries, invoices and bill of lading and the declaration thereon under penalties of falsification of perjury are in all respects genuine and true, and were made by the person by whom the same purpose to have been made." (Emphasis supplied) Considering the foregoing, petitioner recorded in its ORB the quantity it received based on the information declared on the Bill of Lading. However, petitioner failed to explain the discrepancy between the quantity declared per IEIRD and Bill of Lading. While it may be correct for petitioner to use the quantity per Bill of Lading, it failed to prove why it was wrong for respondent to use the quantity per IEIRD. Regarding item "b", it can be gathered that the ORB from which respondent's examiner picked up the quantity of imported diesel was from the bonded warehouse where petitioner's imported diesel was stored. Naturally, the imported diesel directly delivered to Sea Oil Philippines could not have been included in the ORB of the bonded warehouse. Petitioner submitted the following evidence to support its allegation: 1. Dryness Certificate dated December 18, 2006 issued by Batangas Bay Carriers, Inc. (BBCI);39 2. Lighter Loading/Delivery Reports of BBCI dated December 17, 2006 and December 18, 2006;40 3. Notices of Readiness dated December 16, 2006 and December 18, 2006;41 4. Sales Invoice No. 01383 issued by petitioner to Sea Oil Philippines; 42 5. Subic Bay Metropolitan Authority Gate Pass;43 ~ 39 Exhibit "N -16". 40 Exhibit "N -17''. 41 Exhibit " N-18" . 42 Exhibit " N-19". 43 Exhibit "EE".

DECISION CTA CASE NO. 8233 6. BOC Inspector's Certificate of Lading;44 and 7. Quantity Report by SGS (Subic Bay) Inc. dated December 17, 2006.45 A scrutiny of the foregoing documents shows that indeed petitioner delivered and sold the 503,973.67 liters of fuel with peso amount of P12,599,350.00 (net of VAT) to Sea Oil Philippines on December 18, 2006 and the same was recorded as part of the P1,985,241,196.54 sales per petitioner's 2006 Annual Income Tax Return (ITR).46 In fine, only the amount of P27,136,623.32 (P39,735,973.36 less P12,599,350.00) shall be considered as undeclared sales of petitioner for 2006. However, the related cost should be deducted from the undeclared sales based on petitioner's cost ratio as computed from the total sales and cost of sales declared in its Annual ITR for the year 2006, detailed as follows: Total sales p 1,985,241,196.54 Less: Total cost of sales 1, 938,163 , 357 .97 Gross Profit Gross Profit Ratio p 47,077,838.57 Cost Ratio 2.37139% Undeclared sales 97.628610/o Multiply by cost ratio Cost of undeclared sales p 27,136 623 .32 97 .62861% p 26,493,107.77 Hence, petitioner's undeclared income from undeclared sales resulting from undeclared receipts of imported diesel amounts to P643,515.55, computed as follows: Undeclared sales from undeclared receipts of imported diesel p 27,136,623.32 Less: Cost of undeclared sales 26,493,107.77 Undeclared income p 643,515.55 b. Understated sales to MIAA - P10,168,674.56 When petitioner submitted certificates of creditable withholding VAT to support its claimed creditable withholding VAT for the year (v 44 Exhibit "FF" . 45 Exhibit " GG". 46 Exhibit " Q-1".

DECISION CTA CASE NO. 8233 2006, respondent found the following discrepancy and assessed petitioner for understated sales to Manila International Airport Authority (MIAA): Per Certificate of Creditable WVAr7 p 14 299,945.89 Per Summary List of Sales48 4 131,271.33 Difference p 10,168,674.56 Petitioner asserted that the difference found by respondent's examiner arose merely from the erroneous inclusion of certain Certificates of Final Tax Withheld at Source, which pertain to sales made in prior years.49 The Independent CPA examined the certificates of withholding submitted by petitioner relating to its sales to MIAA and compared them with respondent's findings, and found the following: Exhibit Period Covered VAT Withheld Income Per BIR50 Variance 0 -1 p 418 774.97 Payments per 1/ 1/05 to 10/31/ 05 Certificate of p 8 375 499.40 p 5,583 666.27 0 -2 10/1/05 to 0 -3 12/31/05 Final Tax Withheld at 0 -4 1/1/06 to 9/30/ 06 11/ 1/05 to Source 0 -5 11/30/05 p 13 959 165.67 0-6 11/1/06 to 0-7 11/ 30/ 06 19 650.00 432 300.00 393 000.00 39 300.00 0 -8 8/ 1/ 06 to 8/ 31/ 06 164 040.70 3 263,195.79 3 283 195.79 (20, 000.00 ) 7/ 1/ 06 to 7/ 31/ 06 9/ 1/06 to 9/30/06 - TOTAL 38 394.55 844 680.10 844 680. 10 - 14 383.92 287 678.40 287 678.40 15 124.99 302 499.80 302 499.80 - 18 616.07 372 321.40 372 321.40 - 22 053.55 441 071.00 441 071.00 - p 711,038.75 P19,902 912.16 P14,299,945.89 p 5,602,966.27 The Court also found that petitioner submitted a Certificate of Withholding issued by MIAA covering the period January 2007 with income payment in the amount of P715,247.00 and a corresponding withholding tax of P35,762.35.51 Examination of the related invoice reveals that said income payment pertains to the following Sales ?v Invoices issued by petitioner in the year 2006: 47 Exhibit "M-1-5". 48 Exhibit "M-1-6". 49 Par. 27, Petitioner's Memorandum, docket, p. 585. 50 Exhibit "M-1-5". 51 Exhibit "0 -9".

DECISION CTA CASE NO. 8233 Exhibit Invoice Invoice Gross Amount Net of VAT 0-29 No. Date p 333,782.00 p 298,019.64 0 -30 01305 11/3/2006 467,294.80 417,227.50 01306 11/6/2006 p 715,247.14 TOTAL p 801,076.80 It should be noted that the foregoing was already included in the total income payment of P4,131,271.33, as per Summary List of Sales used by respondent in her comparison but not included in the total income payment of P19,902,912.16, per certificate of final tax withheld at source. Thus, necessary adjustment should be made. Consequently, the difference found by respondent should be P16,486,887 .83, computed as follows: Income Per Certificate of Creditable WVAT* p 20,618,159.16 Income Per Summary List of Sales 4,131,271.33 Difference P16,486,887.83 *P19,902,912.16 + P71~247.00 =P20,618,159.16 As correctly pointed out by petitioner, the certificates of withholding include income payments for periods other than for taxable year 2006. Only the amount P5,382,013.39 pertain to year 2006, to wit: Exhibit Period Covered VAT Withheld Income Payments 0 -3 1/1/06 to 9/30/06 p 164,040.70 per Certificate of 0-5 11/1/06 to 11/30/06 Final Tax Withheld at 0-6 8/1/06 to 8/31/06 14 383.92 0-7 7/1/06 to 7/31/06 15 124.99 Source 0 -8 9/1/06 to 9/30/06 18,616.07 p 3,263 195.79 0-9 1/1/07 to 1/31/07 22,053.55 35,762.35 287,678.40 TOTAL 302,499.80 p 269,981.58 372,321.40 441,071.00 715,247.00 p 5,382,013.39 However, the Independent CPA likewise found, by verifying the foregoing with the official receipts issued by petitioner to MIAA, that income payments as reflected in certificates of withholding for the months of July, August, and September 2006 in the respective amounts of P372,321.40, P302,499.80, and P441,071.00 were already included in the amount of P3,263,195.79 (Exhibit "0-3") r representing Certificate of Withholding for the period January to September 2006, as detailed below:

DECISION CT"A CASE NO. 8233 Exhibit Invoice Invoice Gross Amount Net of VAT BIR Form No. 2306 0 -31 No. Date p 193,800.00 p 176,181.82 0 -10 p 2,147 304.12 0 -11 24580 12/29/2005 199 500.60 181,364.18 372 322.13 Exh. 0 -7 0 -12 24635 1/12/2006 210 600.00 191/454.55 302 500.71 Exh . 0 -6 0 -13 24853 1/27/2006 211 800.00 189 107.14 441 071.42 Exh. 0 -8 0 -14 25287 3/15/2006 210 300.00 187 767.86 0 -15 25380 3/30/2006 214 800.00 191, 785 .71 P3,263,198.39 Exh . 0 -3 0 -16 25017 2/9/2006 214 800.00 191 785.71 0 -17 25258 3/4/2006 222 000.00 198 214.29 0 -18 00060 4/21/2006 232 800.00 207 857.14 0 -19 00121 5/10/2006 238 800.00 213 214.29 0 -20 00152 5/24/2006 244 800.00 218,571.43 0 -21 00236 6/14/2006 249 000.00 222 321.43 0 -22 00285 7/6/2006 168 000.80 150,000.70 0 -23 00554 7/21/2006 168 800.80 150 715.00 0 -24 00609 8/4/2006 170 000.00 151,785.71 0 -25 00649 8/11/2006 170 000.00 151 785.71 0 -26 00801 8/24/2006 164 000.00 146 428.57 00904 9/4/2006 160 000.00 142 857.14 00935 9/13/2006 p 3,643 802.20 P3,263,198.39 TOTAL Thus, total income payments from MIAA for the year 2006 would amount to P4,266,121.19, computed as follows: Exhibit Period Covered VAT Withheld Income 0-3 1/1/06 to 9/30/06 Payments 0 -5 11/l/06 to 11/30/06 p 164 040.70 p 3 263 195.79 0-9 1/1/07 to 1/31/07 14,383.92 287,678.4052 TOTAL 35,762.35 715,247.00 p 4,266,121.19 p 214,186.97 Comparing the said amount with petitioner's Summary List of Sales (SLS) to MIAA for the year 2006, there remains a discrepancy of P134,849.86, as computed below: Per Certificate of Creditable WVAT p 4,266,121.19 4,131,271.33 Per Summary List of Sales 134,849.86 Difference p The said unaccounted discrepancy is petitioner's undeclared income that should be subjected to income tax. c. Income payments not subjected to dV withholding tax- P6,839,322.38 52 Supported by sales invoices per Exhibits "0-27" and "0 -28".

DECISION CTA CASE NO. 8233 By comparing petitioner's Annual ITR with its Alphalist for the year 2006, respondent found that income payments made by petitioner amounting to P6,839,322.38 were not subjected to withholding tax.53 Hence, the corresponding expenses were disallowed and petitioner was assessed of deficiency income tax and deficiency expanded withholding tax. Petitioner asserted that the discrepancy found by respondent can be attributed to the timing difference in remitting the subject withholding tax,S4 that is, the same was subjected to expanded withholding tax in the following month of January 2007 and was remitted in February 2007. Petitioner also reasoned out that as long as it can be proven that there is proof of withholding, the amount of the income payments should be allowed as deductible expense from the gross income. In this case, petitioner allegedly proved that the necessary tax was withheld on the income payments. In support of its allegations, petitioner submitted invoices, statement of accounts, official receipts, checks issued for its purchases from TWA, Inc. for December 2006 and January 2007, and BIR Form No. 1601-E for the month of January with Alphalist of Payees55 to prove that the corresponding taxes were withheld therefrom and remitted to the BIR in February 2007, detailed as follows: Exhibit Invoice No. Invoice Date Gross Net WTDue NetofWT P-3 23115 12/28/2006 p 1 512 000.00 p 1 350 000.00 p 13 500.00 p 1498 500.00 P-4 23116 12/28/2006 P-5 21493 12/16/2006 3 162 000.00 2 823 214.29 28 232.14 3 133 767.86 P-6 21966 12/14/2006 410 200.00 366 250.00 3 662.50 406,537.50 P-7 21488 12/14/2006 367 400.40 328 036.07 3 280.36 364 120.04 408 800.00 365 000.00 3 650.00 405,150.00 P-11 23501 1/12/2007 P-10 SOA 0469 1/16/2007 p 5 860 400.40 p 5,232,500.36 p 52,325.00 p 5,808 075.40 P-8 SOA 0478 1/25/2007 420 000.00 375 000.00 3 750.00 416 250.00 P-9 1/29/2007 410 200.00 366 250.00 3 662.50 406 537.50 25094 77 280.00 69 000.00 690.00 76 590.00 10 000.00 1120 000.00 1 000 000.00 1 110,000.00 p 2 027 480.00 p 1,810,250.00 p 18,102.50 p 2,009 377.50 TOTAL p 7 887 880.40 p 7,042,750.36 p 70 427.50 p 7,817 452.90 Less: Overpayment on December 200656 843 749.36 8,437.49 EWT remitted for the month of January 200757 p 6 199,001.00 p 61,990.01 53 Exhibit "M-1-4". 54 Pars. 32, 33, 34, and 35, Petitioner's Memorandum, docket, pp. 595 to 597. 55 Exhibits "P-1" and "P-2". 56 Exhibit "P-22-1"; BIR Records, Folder 1, Part 1, p. 765. 57 Exhibit "P-2-1" (Included in the remitted amount of P196,953.07).

DECISION CfA CASE NO. 8233 As found by the Independent CPA and as verified by this Court, purchases made in December 2006 amounting to P5,232,500.36 (net of VAT), which formed part of the purported income payments not subjected to expanded withholding tax, were indeed subjected to expanded withholding taxes in January 2007 and remitted on February 14, 2007. Thus, only the amount of P1,606,822.02 remains unaccounted and petitioner should be made liable to pay deficiency income tax and withholding tax only on the said remaining discrepancy. But, since the income payments of P5,232,500.36 was already due and demandable in December 2006 based on the invoice that it received, it is incumbent upon petitioner to withhold and remit to the collecting agent of the BIR the corresponding taxes thereon, pursuant to Section 2.57.4 of Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 12-01, as quoted hereunder: "SECTION 2.57.4. Time of Withholding. - The obligation of the payor to deduct and withhold the tax under Section 2.57 of these Regulations arises at the time an income payment is paid or payable, or the income payment is accrued or recorded as an expense or asset, whichever is applicable, in the payor's books, whichever comes first. The term 'payable' refers to the date the obligation becomes due, demandable or legally enforceable. Provided, however, that where income is not yet paid or payable but the same has been recorded as an expense or asset, whichever is applicable, in the payor's books, the obligation to withhold shall arise in the last month of the return period in which the same is claimed as an expense or amortized for tax purposes." (Emphasis supplied) Considering that the corresponding withholding taxes due thereon in the amount of P43,887.51 (P52,325.00 less P8,437.49) was already due for payment on January 15, 2007 but was belatedly remitted only on February 14, 2007, the same shall be imputed with 9v interest computed from January 15, 2007 until February 14, 2007, pursuant to Section 249(A) of the NIRC of 1997.

DECISION CTA CASE NO. 8233 d. Unsupported Creditable Withholding Tax P2,813.10 With regard to respondent's findings of unsupported creditable withholding tax for the year 2006 in the amount of P2,813.10, petitioner conceded for the reason that it cannot locate anymore the relevant certificates of creditable withholding tax. 58 e. CWT carried over per return - P3, 733,635.25 In arriving at the assessed amount of deficiency income tax of P34,987,188.62, respondent disallowed from the total tax credits of P5,076,439.2159 the amount of P3,733,635.2560 representing excess tax credits carried over to the succeeding quarter of 2007, presumably to recapture the tax benefit realized by petitioner in carrying the said amount to the succeeding year. However, it was improper for respondent to disallow the said excess tax credits because any tax benefit derived by petitioner from the carry-over of the said amount redounds to the succeeding year 2007. Since the tax benefit will be in the succeeding year, at most, petitioner may only be assessed in the said succeeding year. In fine, petitioner has no deficiency income tax liability for the year 2006, since it has sufficient tax credits to cover its income tax liability for the same year, as shown below: Taxable Income per ITR p 3 836 582.76 Add: Adjustments per audit p 643,515 .55 2,385 187 .43 134 849.86 6/221,770.19 Undeclared sales from undeclared receipts of imported diesel 1 606,822.02 2,177,6 19.57 Understated Sales to MI AA p p Income payments not subjected to tax p 38 298.48 Taxable Income Tax Due Less: Tax Credits/ Payments Prior Year's Excess Tax Credits I p 2 631 872 .66 Creditable Tax Withheld for the First Three Quarters 58 Par. 38, Petitioner's Memorandum, docket, p. 602. 59 Total of Prior Year's Excess Credits of P38,298.48 and CWT for yea r 2006 in t he amount of P5,038, 140.73 (P2,631,872.66 plus P2,406,268.07). 60 Line 29 of Exhibit "Q- 1" .

DECISION 2 406 268.07 5,035 , 327 .73 5,073,626.2 1 p 5 038 140.73 CTA CASE NO. 8233 2 813.00 (P 2,896,006.64) Creditable Tax Withheld per BIR Form 2307 for the Fourth Quarter Total cwr for year 2006 Less: Unsupported CWT Overpayment However, petitioner is liable to pay deficiency expanded withholding tax for the year 2006 in the amount of P16,068.22, computed as follows: Income not subjected to EWT p 1 606,822.02 EWT Rate x1% Deficiency EWT p 16,068.22 Likewise, petitioner shall be liable to pay the deficiency increments of P721.44 for late remittance of withholding taxes of P43,887.51, as computed below: Deficiency on Increments for Late Remittance of Withholding Taxes Expanded withholding taxes due p 43,887.51 Add: 20% Interest (01-15-07 to 02-14-07) [43,887.51 x 20% x 30 days I 365] 721.44 Total Tax Due p 44,608.95 Less: Payment (02-14-07) 43,887.51 Total Amount Due p 721.44 II. Deficiency Value-added Tax Respondent assessed petitioner of deficiency value-added tax for the year 2006, computed as follows: 61 Sales per return: Vatable sales - Non-government p 1,395 908,936.48 588 227 000.79 Vatable sales - Government 4,032,601.00 p 1 988 168 538.27 Zero-rated sales Add: Adjustments per audit Corrections per VAT Rate Transition: Total Vatable sales: p 69 740 734.11 At 10% At 12% 1 926 018/658.74 Zero-rated sales 6 321/803.80 p 2/002 081 196.65 Reflected per VAT Return 1,988 168 538.27 13 912 658.38 Total sales per audit p 2,002 081 196.65 Understatement of sales: 61 Exhibits " I " and "M-1"; BIR Records, Folder 1, Part 2, pp. 1325 to 1327.

DECISION CTA CASE NO. 8233 Per ITR p 2 004 676 293.83 Per VAT Return 2,002 081 196.65 2,595 097 .18 Net sales from undeclared receipts of imported 39,735 973.36 diesel Understatement of sales to MIM 10,168,674.56 52,499,745 .11 Total sales subject to VAT as corrected p 2 054,580 941.75 Less: Zero-rated sales 6 321,803.80 Total sales subject to VAT per audit p 2,048,259 137.95 Output tax: p 69 740 734.11 p 6 974 073.41 At 10% At 12% 1 978 518 403 .84 237 422 208.46 p 2 048 259 137.95 p 244 396 281.87 Add: Under-computation of output VAT on sales to government 7,456,867.64 Total output tax p 251 853 149.51 Less: Input tax credits p 213 493 120.97 Claimed per VAT Return Less: Input tax carried over to succeeding quarter 5,485,229.89 Total p 208 007 891.08 Less: Deductions Disallowed input tax: IP Herma Shipping & Transport Corp. 54 124.39 Input tax on local purchases I 643,883.16 698,007.55 207 309,883.53 VAT Payable p 44 543 265.98 Less: Tax credits/Payments per return p 30 088 421.39 Total claim per VAT return Less: Unsupported creditable VAT 57 367.39 30 031 054.00 Deficiency VAT p 14 512 211.98 Add: Penalties Interest (1.25.07 to 01.31.11) p 11 658 095 .25 Compromise 50,000.00 11 708 095.25 Total deficiency VAT p 26,220 307.23 a. Understatement of sales - P2,595,097 .18 Respondent's examiner found the difference of P2,595,097 .18 when she compared petitioner's adjusted sales per VAT Returns with the adjusted sales reported per Annual Income Tax Return for the year 2006, computed as follows: 62 Per ITR: p 1 985 241196.54 Sales/Revenues Add: Other Income 19 544 262.74 Total gross income p 2 004 785 459.28 Less: Meralco refund not subject to VAT Per VAT Returns: (109,165.45) p 2 004 676 293.83 Sales - At 10% p 69 740 734.11 2,002,081,196 .65 At 12% 1,926 018 658.74 Total gross income Add: Zero-rated sales p 1,995 759 392.85 6,321,803.80 62 Exhibit "M-1-8".

DECISION I P 2,595,097.18 I CfA CASE NO. 8233 I Difference Petitioner claimed that the alleged discrepancy in the amount of P2,595,097.18 was due to subsequent price adjustments made with respect to sales transactions covering the month of January 2006 and prior years, at which time the VAT rate was still 10�/o. However, due to system limitations, as the BIR's Electronic Filing and Payment System (EFPS) automatically computes 12�/o of the sales amount, petitioner was constrained to adjust the amount of sales as VAT base to reflect the correct amount of output tax due.63 In support of its allegation, petitioner submitted in evidence its Summary of Sales and Other Income64, Detailed Schedule of Sales65 and Other Income66 on Per Day Basis, Reconciliation of VAT Relief vs. VAT Returns67, and the Schedule of Quarterly Sales Transactions68 attached to the Quarterly VAT Returns of petitioner. After examination of petitioner's evidence, the Court finds that petitioner has no understatement of sales since it clearly illustrated how much of its gross receipts were subjected to 0�/o, 10�/o or 12�/o VAT rate. As correctly pointed out by petitioner, the difference was only due to VAT rate transition from 10�/o to 12�/o during the year 2006, by virtue of RA No. 9337, as clarified in Revenue Memorandum Circular (RMC) No. 22-2006. In applying the correct and applicable VAT rate, the total income for VAT purposes will be the same as the total income as reported in petitioner's Annual ITR for 2005 in the amount of P2,004,785,459.26. Hence, there is no understatement of sales. b. Sales from undeclared receipts of imported diesel - P39, 735,973.36 As previously discussed, petitioner failed to submit proof of error in the assessment pertaining to the assessed sales from undeclared receipts of imported diesel; hence, the assessment should be upheld but in the modified amount of P27,136,623.32. p 63 Exhibit " K", p. 5, A12; Par. 40, Petitioner's Memorandum, docket, p. 603. 64 Exhibit "Q". 65 Exhibit " Q-11". 66 Exhibit "Q-1 2". 67 Exhibit "Q- 10". 68 Exhibits "Q-6", "Q-7", "Q-8", and "Q-9".

DECISION CTA CASE NO. 8233 c. Understatement of sales to MIAA - P10,168,674.56 After consideration of evidence presented with regard to respondent's assessment on petitioner's understatement of sales to MIAA amounting to P10,168,674.S6, the Court finds that petitioner should be held liable for deficiency VAT on the adjusted discrepancy amounting to P134,849.86, computed as follows: Per Certificate of Creditable WVAT p 4,266,121.19 4,131,271.33 Per Summary List of Sales 134,849.86 Difference p d. Under-computation of output VAT on sales to government- P7,456,867.64 Respondent found that petitioner's sales to government for the year 2006 per SLS amounting to P149,137,3S2.78 have corresponding output tax at the rate of 7�/o only. As a consequence, petitioner was assessed of the remaining S0/o or in the amount of P7,4S6,867.64, as shown below: 69 Name of Customer Goods Rate Output Tax Date OT at 5�/o DPWH p 1639 799.62 0.07 (OT) 5/ 31/ 2006 p 81 989.98 DPWH 0.07 6/30/2006 p 109 319.98 Subtotal 0.07 4/ 30/ 2006 MIAA 1,688,579.43 0.07 112,571.97 5/ 31/ 2006 84, 428 .97 MIAA 0.07 p 221,891.95 6/30/2006 p 166 418. 95 MIAA p 3,328,379.05 p 14 049.00 p 10,536.75 0.07 4/30/ 2006 Subtotal p 210,735 .00 0.07 5/3 1/2006 National Power Corporation 0.07 6/30/2006 National Power Corporation 444,735.00 29 649.00 22,236 .75 National Power Corporation 212,440.09 14 263.91 10, 622. 00 Subtotal p 86~910. 09 p 5~961. 91 p 4~395. 50 TOTAL p 18 243 562.08 p 1,216 237.47 p 912,178 .10 57 476 184.52 3,831 745 .63 2/873 809.23 3,461,06 5. 85 69 221,317.04 4,609,638.92 p 144,941 063.64 p 9 657. 622.02 p 7.247.053.18 p 149,137,352.78 P9,937 475.88 P7,456,867.64 Petitioner argued that the discrepancy arose from the erroneous computation by the BIR of the output tax. Respondent computed output tax by multiplying the tax base by 7�/o then dividing it by 10S0/o. The remaining S0/o computed by multiplying the tax ~ 69 Exhibit "M-1-9".

DECISION CfA CASE NO. 8233 base by S0/o has been allegedly unpaid and therefore formed part of the assessment. 70 Pursuant to Section 114(C) of the NIRC of 1997, as amended by RA No. 9337, as implemented by Section 4.114-2 of RR No. 16- 200S, the Government or any of its political subdivisions, instrumentalities or agencies, including government-owned or controlled corporations (GOCCs) shall deduct and withhold a final VAT due at the rate of S0/o on gross payment of account of each purchase of goods and/or services subject to ten percent (10�/o) (12�/o effective February 1, 2006) VAT. The S0/o final VAT withholding rate shall represent the net VAT payable of the seller. The remaining (S0/o) (7�/o effective February 1, 2006) effectively accounts for the standard input VAT for sale of goods or services to government or any of its political subdivisions, instrumentalities or agencies, including GOCCs, in lieu of the actual input VAT directly attributable or ratably apportioned to such sales. Section 114(C) of the NIRC of 1997 and Section 4.114-2 of RR No. 16-200S are quoted hereunder for easy reference: "SEC. 114. Return and Payment of Value-added Tax.- XXX XXX XXX (C) Withholding of Value-Added Tax. - The Government or any of its political subdivisions, instrumentalities or agencies, including government- owned or controlled corporations (GOCCs) shall, before making payment on account of each purchase of goods and services which are subject to the value-added tax imposed in Sections 106 and 108 of this Code, deduct and withhold a final value-added tax at the rate of five percent (S0/o) of the gross payment thereof: Provided, That the payment for lease or use of properties or property rights to nonresident owners shall be subject to ten percent (10�/o) withholding tax at the time of payment. For purposes of this Section, the payor or person in control of the payment shall be considered as the withholding agent." jv 70 Exhibit "CC", A19, p. 10; Pars. 52 and 53, Petitioner's Memorandum, docket, pp. 610 to 611.

DECISION CTA CASE NO. 8233 "SECTION 4.114-2. Withholding of VAT on Government Money Payments and Payments to Non- Residents. - (a) The government or any of its political subdivisions, instrumentalities or agencies, including government-owned or controlled corporations (GOCCs) shall, before making payment on account of each purchase of goods and/or services taxed at 10�/o VAT pursuant to Sees. 106 and 108 of the Tax Code, deduct and withhold a final VAT due at the rate of five percent (S0/o) of the gross payment thereof. The five percent (5�/o) final VAT withholding rate shaII represent the net VAT payable of the seller. The remaining five percent (5�/o) effectively accounts for the standard input VAT for sales of goods or services to government or any of its political subdivisions, instrumentalities or agencies including GOCCs, in lieu of the actual input VAT directly attributable or ratably apportioned to such sales. Should actual input VAT exceed five percent (S0/o) of gross payments, the excess may form part of the sellers' expense or cost. On the other hand, if actual input VAT is less than S0/o of gross payment, the difference must be closed to expense or cost." (Emphasis supplied) To prove that its sales to government agencies were subjected to final VAT of S0/o, petitioner submitted Certificates of Final Tax Withheld at Source summarized as follows: Exhibit Period Payor Income Payment VAT Withheld V-1 Covered NPC p 48,363,686.95 p 2,418,184.46 V-2 NPC V-3 Jan-06 NPC 20, 753,311.39 1,037,665.56 V-4 Feb-06 NPC 22 950,814.89 1,147 540.70 V-5 Mar-06 NPC 11,890 192.57 V-6 Apr-06 NPC 28,138 945.89 594,509 .63 V-7 May-06 NPC 44,449,662.20 1,406 947.30 V-8 Jun-06 NPC 53,010,212.35 2,222 483.11 V-9 Aug-06 NPC 84,337,125.60 2,650,510.51 V- 10 Aug -06 NPC 46,131 543.65 4,216,856.25 V-11 Sep-06 NPC 104,731,827.11 2,306,577 .18 V-12 Oct-06 NPC 92,356,477.07 5 236,591.36 Nov-06 15,955,344.70 4,617,823.86 Dec-06 797,767.24

DECISION CTA CASE NO. 8233 V- 13 Jan-Oct OS MIAA 13,9S9,16S.67 4 18, 774 .97 V- 14 Oct-Dec OS MIAA 432,300.00 19 6SO.OO V- 1S Jan-Sep 06 MIAA V- 16 MIAA 3 263,19S.79 164 040.70 V- 17 Nov-OS MIAA 844,680.10 38 394.SS V-18 Nov-06 MIAA 287,678.40 14,383.92 V-19 Aug -06 MIAA 302,499 .80 1S 124.99 V-20 Jul - 06 MIAA 372,321.40 18, 6 16 .07 V-21 Sep-06 MIAA 441,07 1.00 22 OS3.SS V-22 Jan-07 DPWH 71S,247 .00 3S, 76 2.3 S V-23 Feb-06 DPWH 162,671.49 7,677. 79 V-24 Mar-06 DPWH 184,267.20 8 37S.78 V-2S Mar-06 DPWH S8,079 .76 V-26 Apr-06 DPWH 1 161,S9S.20 36,87S.43 V-27 May-06 DPWH 826,009 .60 19, 687 .29 V-28 May-06 DPWH 393 , 74S.82 67,768.69 V-29 Jun - 06 DPWH 13,862.99 V-30 Jun-06 DPWH 1,3SS,373.78 99, 12S.SS V-31 Jul -06 DPWH 277 , 2S9.87 71,409.24 V-32 Aug-06 DPWH 66,743.3S V-33 Sep-06 DPWH 1,982,S11.08 10,331.97 V-34 Nov-06 DPWH 1 428,184.80 Dec-06 1 334,867 .00 100,1S9.04 TOTAL 81,48S.S8 206,639.48 2,003, 180.70 p 30,041,840.72 1,629,711 .S3 p 606,633,321.08 It is noteworthy that included in the foregoing were income payments from MIAA supported by certificates of withholding pertaining to periods outside the year 2006 and those that have been taken up twice as discussed previously in the deficiency income tax assessment arising from understatement of sales to MIAA, to wit: Exhibit Period Payor Income Final VAT V- 13 Covered MIAA Payments Withheld V- 14 Jan-Oct OS MIAA p 13,9S9,16S.67 p 418 774.97 V- 16 Oct-Dec OS MIAA V- 18 Nov-OS MIAA 432 300.00 19 6SO.OO V- 19 Aug-06 MIAA 844,680.10 38,394.SS V-20 MIAA 302 499.80 1S 124.99 Jul-06 372 321.40 18 616.07 Sep-06 441,071.00 22, 0S 3 .SS TOTAL p 16,352,037.97 p 532,614.13 Out of the income payment of P606,633,321.08 only the amount of P590,281,283.11 (P606,633,321.08 less P16,352,037.97) pertains to sale to government agencies for the year 2006, with a final VAT withheld amounting to P29,509,226.59 (P30,041,840.72 less P532,614.13). In line with this, respondent allegedly found that the sales to government amounting to P149,137,352.78 was subjected only to 7�/o VAT instead of 12�/o, thus, assessed for the deficiency tax of P7,456,867.64 representing the remaining 5�/o jz---- output VAT.

DECISION CTA CASE NO. 8233 However, upon verification of petitioner's Summary List of Sales, the Court finds that petitioner's sales to government agencies for the months of April, May, and June 2006, the period covered by the present assessment, actually amount to P142,048,364.35, and the sales were properly subjected to 12�/o output tax, except for the sale to NPC for the month of June 2006 amounting to P255,777.36, which was only subjected to 10�/o VAT, as shown below: Period Sales Output Tax Tax Covered Customer Rate p 1,561,713.93 p 187,405.67 12% 5/31/2006 DPWH 12% 6/30/2006 DPWH 1,608,170.89 192,980.51 p 3,169,884.82 p 380,386.18 12% Subtotal 12% p 200 700.00 p 24 084.00 12% 4/30/2006 MIAA 5/31/2006 MIAA 423,557.14 50,826.86 12% 6/30/2006 MIAA 12% 218,571.43 26,228.57 12% Subtotal p 842,828.57 p 101,139.43 10% 4/30/2006 NPC p 17 374,821.03 p 2,084,978.52 5/31/2006 NPC 6/30/2006 NPC 54,739,223 .35 6,568,706.80 6/30/2006 NPC 65,665,829.22 7,879,899.51 Subtotal 255,777.36 25,577.74 TOTAL 1'138,035,650.96 p 16,559,162.57 P142,048,364.35 P17,040,688.18 Accordingly, petitioner should be made liable only to additional output tax of 2�/o or in the amount of P5,115.54, computed thus: Sale to NPC for June 2006 p 255,777.36 Output tax rate 12% Tax due Less: Output tax applied p 30,693.28 Deficiency VAT on sales to government 25,577 .74 p 5,155.54 e. Input tax carried over to succeeding quarter P5,485,229.89 Out of the alleged input tax claimed per VAT Return of P213,493,120.97, respondent deducted the amount of P5,485,229 .89 representing input tax carried over to succeeding quarter. However, the Court finds it improper for respondent to disallow petitioner's excess input tax in the amount of P5,485,229.8971 reflected in its Quarterly VAT Return for the fourth quarter of 2006 because any tax benefit derived by petitioner from the carry-over of the said amount ? 71 Exhibit "Q-5", Line 29.

DECISION CTA CASE NO. 8233 redounds to the succeeding quarter/year 2007. Since the tax benefit will be in the succeeding quarter/year, at most, petitioner may only be assessed in the said succeeding quarter/year. f. Disallowed input taxes - P698,007 .55 The disallowed input tax in the amount of P698,007.55 consists of input tax from Herma Shipping and Transport Corp. amounting to P54,124.39 and input tax on local purchases amounting to P643,883.16. 1. Input tax from Herma Shipping and Transport Corporation- P54,124.39 Respondent's examiner disallowed input taxes claimed by petitioner for being supported by official receipts dated January 7 and 8, 2007, which are outside taxable year 2006.72 Petitioner argued that this is just a matter of timing difference since the corresponding sales invoices of the said official receipts are dated October 27, 2006 and November 30, 2006.73 Examination of petitioner's Summary List of Purchases for the fourth quarter of 200674 and the submitted invoices issued by Herma Shipping and Transport Corp. ("Herma Shipping" for brevity) show that petitioner claimed total input taxes therefrom in the amount of P54,097.50, as shown below: Invoice Invoice Gross Amount Exhibit No. Date p 126 311.67 VAT Net of VAT S-1 p 13 533 .39 p 112 778.28 S-2 45645 10/27/2006 126 336.24 S-3 125 973.63 13 536.03 112, 800.2 1 S-4 45634 10/27/2006 126, 288.45 13 497.17 112,476.46 13,530.91 112,757.54 45633 10/27/2006 p 504,909.99 PS4,097.50 P450,812.49 45963 11/30/2006 TOTAL The corresponding official receipts issued by Herma Shipping when the foregoing invoices were paid are summarized as follows: ~ 72 Exhibit "I", p. 3. 73 Exhibit " K", A19, p. 6; Par. 57, Petitioner's Memorandum, p. 613 . 74 Exhibit "Q-13".

DECISION CTA CASE NO. 8233 Exhibit OR OR Gross 2�/o EWT OR Amount 5-5 No. Date Amount p 2,255.57 p 124,056.10 5-6 9057 1/2/2007 p 126,311.67 5-7 9058 1/2/2007 126,336.24 2,256 .00 124 080.24 5-8 9060 1/8/2007 125,973 .63 2,249 .53 123,724.10 9061 1/8/2007 126 288.45 2,255 . 15 124 033.30 P9,016.25 TOTAL PS04,909.99 P495,893.74 Considering that petitioner purchased services from Herma Shipping, the input taxes claimed therefrom should be supported by VAT official receipts, as provided by Section 110(A)(1)(b) in relation to Section 113(A)(2) of the NIRC of 1997, as amended, as implemented by Sections 4.110-2 and 4.110-8(a)(4) of Revenue Regulations No. 16-2005, to wit: "SEC. 110. Tax Credits. - (A) Creditable Input Tax. - (1) Any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section 113 hereof on the following transactions shall be creditable against the output tax: XXX XXX XXX (b) Purchase of services on which a value-added tax has actually been paid." "SEC. 113. Invoicing and Accounting Requirements for VAT-registered Persons. - (A) Invoicing Requirements. - A VAT-registered person shall issue: XXX XXX XXX (2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services." (Emphasis supplied) ~

DECISION CTA CASE NO. 8233 "SECTION 4.110-2. Persons Who Can Avail of the Input Tax Credit. -The input tax credit on importation of goods or local purchases of goods, properties or services by a VAT-registered person shall be creditable: XXX XXX XXX (c) To the purchaser of services or the lessee or licensee upon payment of the compensation, rental, royalty or fee." (Emphasis supplied) "SECTION 4.110-8. Substantiation of Input Tax Credits. - (a) Input taxes for the importation of goods or the domestic purchase of goods, properties or services is made in the course of trade or business, whether such input taxes shall be credited against zero-rated sale, non- zero-rated sales, or subjected to the 5�/o Final Withholding VAT, must be substantiated and supported by the following documents, and must be reported in the information returns required to be submitted to the Bureau: XXX XXX XXX (4) For the purchase of services - official receipt showing the information required under Sees. 113 and 237 of the Tax Code." (Emphasis supplied) The Independent CPA verified "that these transactions were claimed as part of the purchases for 2006 instead of 2007 as evidenced by the summary list of sales and purchases for the 4th quarter of 2006 (Exhibit Q-13) and 1st quarter of 2007 (Exhibit T, T-1 1 to T-4)."75 Even so, petitioner still cannot claim the subject input taxes in the fourth quarter of 2006 by virtue of the afore- quoted VAT law and regulations. ~ 75 Exhibit " L", p. 12.

DECISION CfA CASE NO. 8233 Hence, input taxes from purchase of services from Herma Shipping are creditable in the first quarter of 2007 when the services were paid by petitioner as evidenced by the submitted official receipts. Consequently, respondent's disallowance of the said input taxes for the year 2006 is in order and the deficiency VAT assessment arising therefrom should be upheld. 2. Input tax on local purchases - P643,883.16 Respondent disallowed petitioner's input taxes from its local purchases amounting to P643,883.16 for the year 2006 for being supported by invoices and/or official receipts that are issued by non- VAT suppliers, with invalid TINs, invalid invoices/official receipts, registered as one-time taxpayer (ONETT) and cannot be found in the BIR database, to wit: 76 Supplier Service Contractor Goods Input Tax Alphatemp Refrigerat Anthony Hotel & Restaurant p 1,070.00 p 5 580 .33 p 669.64 Atienza Shipping Lines Berwite Estela P1,070.00 p 589 .29 70. 71 Cygma Greek Taverna D and Y Hardware 4,161 606.67 499 392.80 De Luna, Adrina 26 785 .66 Donatos canteen 3 214.28 E4J Motors EM Petroleum 977.68 117.32 EM Petroleum Haulers 89.29 Hot Shots 10.71 Island Exhibit Link 70 .51 JTR 3 214. 28 Pagunsan Serenia 68 101.25 Pangan, Merly 8.46 Pastry Shop and Restaurant 232.17 Petron Socony 664,285 .75 5 952.42 79 714. 29 Ribbons and Beads Shop 156 762. 50 151 392.45 Shinjuku 8 172.15 Sports Central (Manila) I nc. 26,785 .66 SSG Supermart 26, 785 .66 18 81 1.50 St. Anthony Hotel & Restaurant Sun Serigraphics 27. 86 Taluban Efehemia Tape Measure Shop 714. 29 Trapal Rowena D. Wilconsa Enterprises 18 167.09 TOTAL 3 214.28 3 214.28 3 750.00 375 .00 1 339.29 160.71 100.00 1 769 .58 10.00 30.58 212.35 589.29 1,339.25 95 .36 3.67 70 .71 160.71 26 785.66 3 214.28 803.58 6,250.00 96.43 PS,096,181.47 750.00 P242,573.05 P643,883.16 76 Exhibit "M - 1-11" .

DECISION CfA CASE NO. 8233 Petitioner counters that E.M. Petroleum Haulers was registered as percentage taxpayer but became VAT-registered as of September 14, 200177 and that it erroneously encoded the name of some of its suppliers, namely: 78 Encoded Instead of Atienza Shipping Lines San Nicholas Line and OEMS Express Carqo E4J Motors OEMS Express Carqo JTR Golden Arawana Marine Enterprises, Inc. However, scrutiny of the invoices and/or official receipts submitted by petitioner79 reveals that its argument of erroneous encoding of the names of suppliers is not tenable. Even though petitioner submitted invoices and official receipts issued by San Nicolas Line and DEMS Express Cargo, the same do not support its allegations. It may be observed that the names of the suppliers per invoices and/or official receipts are clearly identifiable, hence, no way that anybody could possibly report it as another supplier. Further, the disallowed amounts do not tally with those amounts indicated in the invoices and/or official receipts issued by Golden Arawana, San Nicolas Line, and DEMS Express Cargo. Moreover, petitioner claimed input taxes of P2,069,903.53 from said suppliers as indicated in its Summary List of Purchases for the year 2006, to wit: 80 Name of Supplier Amount Input Tax p 4,161,606.67 p 499,392.80 Atienza Shipping Lines OEMS Express Carqo 9,725,000.06 1,167,000.01 San Nicholas Lines Inc. 2,925 089.30 351,010.72 San Nicholas Shipping 52,500.00 437 500.00 TOTAL P2,069,903.53 P17,249,196.03 The Court could not ascertain whether the said invoices and/or official receipts indeed pertain to the disallowed input taxes or to the claim as shown in the foregoing. r Anent petitioner's disallowed input taxes on purchases from E.M. Petroleum Haulers, respondent's examiner found that said 77 Par. 65, Petitioner's Memorandum, docket, p. 619. 78 Pars. 64, 66, and 67, Petitioner's Memorandum, docket, pp. 619 to 620. 79 Exhibits "U-1" to "U-31". 80 BIR Records, Folder 1, Part 1, pp. 825 to 834.

DECISION CfA CASE NO. 8233 supplier is registered as a percentage taxpayer.81 The Court examined the official receipts submitted by petitioner and found the following: OR Withholding Tax Exhibit No. OR Date Net of VAT Input Tax Total OR Amount p 49 105.00 p 982 .10 1. VAT official receipts 244.76 p 54 015.50 100.92 13 461.75 U-33 0064 10/7/2006 p 5 892.60 p 54 997.60 101.41 5 550.87 201.85 5 577.79 0050 10/28/2006 12 237.95 1 468.55 13 706.51 57.37 11101.75 U-34 0076 11/4/2006 5 046.25 605.55 5 651.79 45.65 3 155.43 5 070.72 608.49 5 679.20 2 510.75 0063 10/7/2006 p 1,734.07 p 95,373.84 U-35 0077 11/4/2006 10 092.50 1 211.10 11 303.60 p 222.50 565.01 p 12 237.50 0080 11/4/2006 2 868.57 344.23 3 212.80 44.37 31 075.80 2 440.62 U-36 0078 11/4/2006 2 282.50 273.90 2 556.40 1 921.05 105 657.72 Subtotal p 86,703.49 p 2,752.94 p 10,404.42 p 97.107.91 P4,487.01 p 151,411.64 P246,785.48 2. Non-VAT official receipts stamped "VAT registered as of 9/14/01" 0961 12/22/2006 p 11125.00 p 1 335.00 p 12 460.00 U-37 0836 2/25/2006 28 250.73 3 390.09 31 640.81 0957 12/22/2006 2 218.75 266.25 2 484.99 U-38 0828 2/18/2006 96 052.47 11 526.30 107,578.77 Subtotal p 137.646.95 p 16,517.63 p 154164.58 TOTAL P224 350.44 P26,922.05 P251,272.49 Section 4.113-4(A)(2) of Revenue Regulations No. 16-2005 provides that input taxes of VAT invoices or official receipts issued by non-VAT persons "shall be recognized as an input tax credit to the purchaser under Sec. 110 of the Tax Code, provided the requisite information required under Subsection 4.113 (B) of these Regulations is shown on the invoice or receipt." Thus, input taxes on purchases from E.M. Petroleum Haulers supported by VAT official receipts amounting to P10,404.42 should be disallowed since the submitted official receipts do not reflect the requisite information required under Subsection 4.113(8) of RR No. 16-2005. Likewise, input taxes in the amount of P16,517.63 should be disallowed for being supported by non-VAT official receipts. The stamp "VAT registered as of 9/14/01" has no bearing since Section "b" of the Transitory and Other Provisions of Revenue Regulations No. 16-2005, as amended, clearly provides: "(b) Unused invoice or receipts. - Taxpayers who changed status from NON-VAT to VAT or from VAT to NON-VAT as a result of the implementation of RA No. 9337 should submit within thirty (30) days from effectivity of the law an inventory of unused invoices or receipts as of the day immediately preceding the effectivity of RA No. 9337 indicating the number of ~ 81 Exhibit "M-1-11".

DECISION CTA CASE NO. 8233 booklets and the corresponding serial numbers. Unused non-VAT invoices/receipts shall be allowed for use in transactions subject to VAT provided the phrase 'VAT- registered as of [effectivity date of RA No. 9337]' is stamped on all copies thereof. Likewise, unused VAT invoices/receipts shall be allowed in VAT-exempt transactions provided the phrase 'Non-VAT-registered as of ' is stamped on all copies thereof. These unused invoices or receipts with the proper stamp shall be allowed for use in transactions subject to VAT/Non-VAT up to December 31, 2005. " (Emphasis supplied) Hence, petitioner's disallowed input taxes in the amount of P643,883.16 shall remain. g. Unsupported Creditable VAT - PS7,367.39 Respondent avers that petitioner submitted Certificate of Final Tax Withheld at Source to support its claim for VAT credits in the amount of P30,019,105.22, but verification disclosed that only the amount of P30,076,472.61 is applicable for taxable year 2006. Hence, the difference of P57,367.39 is disallowed.82 As pointed out by the Independent CPA, it is clearly shown in respondents FDDA that VAT credits per certificates of withholding exceed the VAT credits claimed by petitioner for the year 2006;83 hence, the disallowance of the discrepancy has no basis. Nevertheless, the Court has examined the subject certificates of withholding VAT and, as previously discussed, the total adjusted VAT withheld amounts to P29,509,226.59. On the other hand, petitioner's Quarterly VAT Returns for the year 2006 show petitioner's claimed VAT withheld on sales to government in the aggregate amount of P30,019,105 .11, as determined below: Exhibit Period Sales to Govt. Output Tax Due Creditable VAT Withheld Total VAT Q-2 Covered p 74 813,852.33 p 8 977 662.28 VAT Withheld on sales to Withheld Government l 5t Qtr p 418 774.97 p 4/257 086.84 p 3 838 311.87 82 Exhibits "I", p. 3 and "M-1-5". 83 Exhibit "L", p. 13.

DECISION CTA CASE NO. 8233 Q-3 2nd Qtr 142 173 813.50 17 060 857.62 58 044.55 7 110 764.15 7 168 808.70 222,819 206.92 26 738 304.83 P476,819.52 11 172 203.17 11172 203.17 Q-4 3rd Qtr 148 420 128.04 17 810 415.36 7 421 006.40 7 421 006.40 P588,227,000.79 P70,587 240.09 P29 542 285.59 P30 019,105.11 Q-5 4th Qtr TOTAL Therefore, the unsupported claim of VAT withheld on sales to government for taxable year 2006 would amount to P509,878.52, computed as follows: VAT withheld on sales to qovernment per VAT Returns p 30,019,105.11 VAT withheld per BIR Form No. 2306 29,509 226.59 Unsupported withholding VAT credits p 509,878.52 However, based on the foregoing, petitioner has no deficiency VAT liability for the year 2006, as detailed below: Sales per return : Vatable sales - Non-government P1 395 908 936.48 Vatable sales - Government 588 227 000.79 Zero-rated sales 4 032 601.00 P1,988,168 538.27 Add: Adjustments per Audit 41,184 131.56 P2,029,352,669.83 Corrections per VAT Rate Transition Total Vatable sales: At 10% p 69 740 734.11 At 12% 1 926 018 658.74 Zero-rated sales 6 321 803.80 P2 002 081,196.65 Reflected per VAT Return 1,988,168,538.27 P13 912 658.38 Net sales from undeclared receipts of imported diesel 27 136 623.32 Understatement of sales to MIAA 134 849.86 Total sales subject to VAT as corrected Less: Zero-rated sales 6,321,803.80 Total sales subiect to VAT per audit P2 023,030 866.03 Output tax: p 241,368,889.24 5, 155 .54 At 10% p 69 740 734.11 p 6 974 073.41 At 12% 1,953,290,131.92 234,394,815.83 p 241,374,044.78 2,023 030 866.03 P213,493 120.97 212 795 113.42 Add: Under-computation of output VAT on sales to government 698 007.55 p 28 578 931.36 Total Output tax Less: Input tax credits Claimed per VAT Return Less: Deductions p 54 124.39 Disallowed in~ut tax Input tax from Herma Shipping Input tax on local purchases 643 883.16 VAT Payable

DECISION p 30 088 421.39 CTA CASE NO. 8233 509 878.52 29 578 542.87 p (999,611.51) Less: Tax credits/Payments per return Total claim per VATreturn Less: Unsupported creditable VAT Excess Input VAT III. Compromise Penalty The compromise penalties imposed by respondent against petitioner for the following deficiency taxes shall be cancelled there being no compromise agreement between the parties: Compromise Tax Type Penalty Income Tax Value-Added Tax p 50,000.00 WT-Expanded Total 50,000.00 12,000.00 p 112,000.00 Under Revenue Memorandum Order No. 01-90, compromise penalties are amounts suggested in settlement of criminal liability, and may not be imposed or exacted on the taxpayer in the event that a taxpayer refuses to pay the same. Thus, compromise penalties imply mutual agreement between the taxpayer, on one hand, and the Commissioner of Internal Revenue, on the other. Absent any showing that petitioner consented to the compromise penalties, the same should not be imposed. The imposition of the same without the conformity of the taxpayer is illegal and unauthorized.84 WHEREFORE, premises considered, the instant Petition for Review is hereby PARTIALLY GRANTED. Accordingly, the assessments issued by respondent against petitioner covering taxable year 2006 for deficiency income tax and value-added tax are hereby CANCELLED. However, respondent's assessment of deficiency expanded withholding tax for taxable year 2006 is hereby UPHELD but in the modified amount of P20,806.72, inclusive of the twenty- five percent (25�/o) surcharge imposed under Section 248(A)(3) of the NIRC of 1997, computed as follows: Basic Tax 20�/o Interest Tax Type Due Surcharge Total EWT p 20,085.28 p 16,068.22 p 4,017.06 84Commissioner of Internal Revenue vs. Lianga Bay Logging Co./ Inc./ eta!., G.R. No. 35266, January 21, 1991.

DECISION CTA CASE NO. 8233 Deficiency Increments p 721.44 721.44 for late remittance of EWT P16,068.22 P4,017.06 p 721.44 P20,806.72 Total In addition, petitioner is hereby ORDERED TO PAY: a. Deficiency interest at the rate of twenty percent (20�/o) per annum on the basic deficiency expanded withholding tax of P16,068.22 computed from January 15, 2007 until full payment thereof pursuant to Section 249(8) of the NIRC of 1997, as amended; b. Delinquency interest at the rate of 20�/o per annum on the total EWT due of P20,085.28 and on the 20�/o deficiency interest which have accrued as aforestated in "a", computed from January 19, 2011 until full payment thereof pursuant to Section 249(C) of the NIRC of 1997, as amended; and c. Delinquency interest at the rate of 20�/o per annum on the deficiency increments for late remittance of withholding taxes in the amount of P721.44 computed from January 19, 2011 until full payment thereof pursuant to Section 249(C) of the NIRC of 1997. SO ORDERED. Q~~c . ~~ ~ � llfANITO C. CASTANEul~ JR. Associate Justice WE CONCUR: ~ N.M~ .. 6~ CAESAR~A CIELITO N. MINDARO-GRULLA Associate Justice Associate Justice

DECISION CTA CASE NO. 8233 ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. CL~~ C . ~~.~ I <.lUANITO C. CASTANEffA, JR. Associate Justice Chairperson CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. Presiding Justice