AFP GENERAL INSURANCE CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES Court of Tax Appeals QUEZON CirrY Third Div ision AFP GENERAL INSURANCE CTA CASE NO. 8191 CORPORATION, Me!Inbers: Petitioner, BAUTISTA, Chairperson, FABON-VICTORINO, and - versus - RINGPIS-LIBAN, lL COMMISSIONER OF INTERNAL Promulgated: REVENUE, MAR 13 201~ x-------------------------------------R--e--s-p--o--n--d--e--n--t-.---------------------------~ ~- -::---8--~�-~'t~!f=-c.~-,-_-x � DECISION BAUTISTA, [.: The Petition for Review,1 filed on November 19, 2010, pursuant to Section 7(a)(2)2 of Republic Act No. 1125,3 as amended by Republic Act No. 9282,4 and Republic Act No. 9503,5 seeks for the cancellation and setting aside of the Form al Letter of Demand dated April 6, 2010, and for the determination that petitioner is only liable for the total d eficiency taxes for the year 2006 in the amount of ~2,002,868.33, inclusive of interest an d other charges. I Records, (CTA Case No. 8191), pp. 1-74, w ith Annexes. 2 SEC. 7. ju risdiction.- The CTA s ha ll exercise: (a) Excl usive a ppella te jurisd iction to rev iew by a ppea l, as herein provided: XXX XXX XXX (2) Inac tio n by the Co mmiss io ner of Inte rna l Reve nu e in c~ses in vo lving di s puted assess me nts, refund s of inte rnal reve nue taxes, fees o r o the r cha rges, pe na lties in re la tion the re to, o r othe r ma tte rs a rising unde r the Na tio na l Inte rnal Reve nue Cod e o r othe r laws ad ministered L1Y the Bureau of Inte rna l Reve nu e, wh ere the Na tio na l Inte rna l Revenu e Cod e prov id es a specific peri od fo r ac ti on, in w hich case the inac tio n shall be d eemed a d enia l. 3 An Ac t Crea ting the Co urt of Tax Appea ls, as am ended. 4 An Act Ex pa nd in g the Jurisd ic ti on of the Co urt of Tax Ap pea ls (CTA), Eleva ting its Ra nk to the Level of a Collegia te Court w ith Spec ial Jurisdicti o n and Enla rging its Membe rship, A mend ing for the P ur pose Certa in Secti ons of Re public Ac t No. 1125, as a mended, O the rw ise Know n as the Law Crea tin g the Court of Tax Appea ls, a nd fo r O the r Purposes . 1"' ' An Act Enl"'g;ng the O cg� n;'"tiO>lli l St��o<toce of the Cooct of 0"" ' I Sectiom ofthe C.w Cce� ting the Couct ofT"' Appeoh, � nd fo.� Ap peo l>, Ame nd;ng fo � the Pocpo>e c.,w ;~ Pocp o ' " �

DECISION CTA CASE NO. 8191 FACTS OF THE CASE Petitioner, AFP General Insurance Corporation, is a domestic corporation duly registered under Philippine laws, with principal office address at AFP Gen. Building, B. Serrano corner EDSA, Barangay Socorro, Cubao, Quezon City. On the other hand, respondent is the duly appointed Commissioner of the Bureau of Internal Revenue ("BIR") mandated by law to enforce and implement the National Internal Revenue Code and related statutes, including, among others, the power to cancel disputed assessments, with office address at the 5th Floor, BIR National Office Building, East Triangle, Diliman, Quezon City. On May 7, 2008, respondent issued Letter of Authority No. 00021964, addressed to petitioner, for the examination of its books of accounts and other accounting records covering the taxable year 2006.6 Pursuant to the said Letter of Authority, on January 12, 2010, petitioner received a Preliminary Asse~sn1ent Notice ("PAN"), with attached Details of Discrepancy, for deficiency Income Tax, Documentary Stamp Tax, Value-added Tax, and Expanded Withholding Tax covering taxable year 2006.7 Consequently, on January 25, 2010, petitioner filed its Letter-Reply against the said PAN.s On February 19, 2010, respondent issued a revised PAN, with attached Details of Discrepancy, for the same deficiency taxes covering the same taxable year;9 which was received by petitioner on March 19, 2010 . 6 Exhibit "F." 7 Exhibit "C." s Exhibit " 0." 9 Exhibit "E."

DECISION CTA CASE NO. 8191 And on April 6, 2010, respondent issued the subject Formal Letter of Demand, with attached Assessment Notices, against petitioner for the following deficiency taxes:Io Income Tax F8,294,889.09 Basic Tax Due 4,976,933.45 Add: Interest (until April 15, 2010) 25,000.00 Compromise Penalty F13,296,822.54 TOTAL DocumentanJ Sta111p Tax (Increase in Capital Stock) ~250,000.00 Basic Tax Due Add: Surcharge 62,500.00 Interest (until April15, 2010) 162,500.00 Compromise 16, 000 .00 TOTAL 11491,000.00 Documentary Stamp Tax (Insurance Policies) F316,237.83 Basic Tax Due 1,114,521 .99 Add: Surcharge Interest 710,216.39 Compromise 77,000.00 TOTAL ~2,217,976.20 11 Value-added Tax F4,092,402.38 Basic Tax Due 2,046,201 .19 Add: 50% Surcharge 2,660,061.55 Interes t (until April 25, 2010) Compromise F8,798,665.12 TOTAL Expanded Withholding Tax 11470,863.74 Basic Tax Due 306,061 .43 Add: Interes t (April10, 2010) 16,000.00 Compromise ~792,925.17 TOTAL Civil Penalty ~50,000.00 No Permit to Use Loose Lea f Books of Accounts (Computerized Books of Accounts) GRAND TOTAL F25,647,389.03L2 On April 26, 2010, petitioner then filed its Letter-Protest dated ~ April 22, 2010, against the above assessments.13 1o Exhibit "A." II The co rrec t total is P-2,217,976.21. 12 Supra, note ll ; the co rrec t to ta l is P-25,647,389.04. 13 Exhibit "B."

DECISION CTA CASE NO. 8191 Alleging inaction on the part of respondent, on November 19, 2010, petitioner thus filed the present Petition for Review.14 On January 3, 2011, respondent filed her Answer,1s interposing the following Special and Affirmative Defenses: "4. Respondent reiterates and re-pleads the preceding paragraphs of this Answer as part of her Special and Affirmative Defenses; 5. Petitioner AFP General Insurance Corporation (AFP for brevity) is liable to pay its deficiency Income Tax, VAT, DST and EWT for calendar year 2006 in the aggregate amount of Twenty Five Million Six Hundred Forty Seven Thousand Three Hundred Eighty Nine Pesos and 55/100 (~25,647,389.55) 1 6 including penalties, surcharges and interest for the following reasons: 5.1. The instant petition should not be given due course by this Honorable Court for lack of merit; 5.2. Respondent respectfully avers that the assessments for taxable year 2006 in the aggregate amount of ~25,647,389.551 7 were issued i11 accordance with law and regulations; 5.3. Comprehensive study of petitioner's books of accounts and pertinent accounting records disclosed that it is liable to pay the total deficiency Income Tax, VAT, DST and EWT assess1nents. The pertinent portions of the Memorandum Report dated February 19, 2010 of the examiner who conducted the investigation of petitioner's case are quoted hereunder, to wit: XXX XXX XXX I 5.4. It is a well-settled rule in taxation that the burden of proof is on the taxpayer to present evidence to show the incorrectness of the assessment; 14 Supra, note 1. 15 Records , pp. 89-101 . 16 Supra, note 12. 17 Ibid.

DECISION CTA CASE NO. 8191 5.5. In case of disputed assessments, the burden of proof is on the taxpayer to establish the Ifact that it is indeed not liable for any deficiency taxes s~bject of the assessment. The failure to show documents tnat would substantiate a claim that no deficiency taxes a~e due, would result to upholding the validity of the assessment for deficiency income taxes (Camara Steel Industries, Inc. vs. Commissioner of Internal Revenue); 5.6. Well-settled is the rule that tax assessments are entitled to the presumption of correcb1.ess and made in good faith. The taxpayer has the duty to prove otherwise. In the absence of proof of any irregularities in the perforn1.ance of duties, an assessment duly made by a Bureau of Internal Revenue examimer, and approved by his superior officers will not be distu!t'bed. All presumptions are in favor of the correctness of t~x assessments (Sy Po vs. Court of [T]ax Appeals). Dereliction on the part of petitioner to satisfactorily overco~ne the presmnption of regularity and correcb1ess of the aysessment will justify the judicial upholding of said assessm<:jnt notices. 6. Petitioner's contention that the Formal Letter of Demand was void because the Letter of Authority was allegedly unrevalidated is bereft of merit. 6.1. Contrary to petitioner's claim, non-revalidation of the Letter of Authority would not ~ender the latter void but would only warrant disciplinary action against the erring Revenue Officer concerned. Revenue Me1norandum Order ('RMO' for brevity) No. 19-2009 dated May 28, 2009 succinctly provides for the 2009 Audit Progrmn for Revenue Distrih Offices. The pertinent portion of RMO No. 19-2009 is quoted hereunder, to wit: XXX XXX XXX A cursory reading of the aforeh1.entioned RMO would reveal that failure to revalidate a Letter of Authority would I not affect its validity. In fact, it is likewise clear from the wordings of the said RMO that the concerned Revenue Officer is obliged to continue with the investigation of the taxpayer's account and to render the necessary report on

DECISION CTA CASE NO. 8191 the investigation on the basis of th,e unrevalidated Letter of Authority. Based on the fore going, it is re~pectfully submitted that the allegation of petitioner questioning the validity of the Formal Letter of Demand on the basis that the Letter of Authority was void has no basis in fact and law." .l8 On January 26, 2011, petitioner filed its Reply.l9 On April 7, 2011, the parties entered their Joint Stipulation of Facts/Tssues.20 While, on April 26, 2011, the Court issued the Pre-Trial O r d e r . 21 Trial ensued. Both parties present~d and offered their respective documentary and testimonial evidence. On April 17, 2013,22 the case was submitted for decision, taking into consideration the Memoranda for Petitioner23 and Memorandum filed by respondent.24 Hence, this Decision. ISSUE As stipulated upon by the parties, the lone issue for this Court's consideration is that: "WHETHER OR NOT PETITIONER IS LIABLE FOR DEFICIENCY INCOME TAX, V[ALUE]-A[DDED] T[AX], D[OCUMENTARY] S[TAMP] T[AX] AND E[XPANDED] W[ITHHOLDING] T[AX] FOR CALENDAR YEAR 2006 IN THE AGGREGATE AMOUNT OF TWENTY FIVE MILLION SIX HjUNDRED FORTY SEVEN yJ 18 Records, pp. 91-98. C itatio ns omitted . 19 Id., at pp. 117-122. 2o Id., a t pp. 192-194. 2 1 Jd., at pp. 198-201 . 22 Id., a t p. 1314. 23 Jd., a t pp. 1250-1296. 24 Jd. , at pp. 1297-1312.

DECISION CIA CASE NO. 8191 THOUSAND THREE HUNDRED EIGHTY NINE PESOS AND 55/100 (I225,647,389.55)25 INCLUDINQ; PENALTIES, SURCHARGE AND INTEREST."26 RULING OF THE COURT The Court finds the Petition for Rev~ew partly meritorious. Deficiency Assessments for Value-added Tax and Documentary Stamp Taxes. One of the grounds relied upon by petitioner in opposing the assessments for Value-added Tax and Documentary Stamp Taxes is prescription. And relevant thereto is Section 203 of the 1997 National Internal Revenue Code ("NIRC"), as amended, which expressly provides as follows: "SECTION 203. Period of Limitation Upon Assessment and Collection. - Except as provided in Section 222, internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the return, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period: Provided, That in a case where a re turn is filed beyond the period prescribed by law, the three (3)-year period shall be counted from the day the return was filed. For purposes of this Section, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day." From the foregoing, respondent is clearly mandated to assess internal revenue taxes within three (3) years from the last day prescribed j by law for the filing of the return, or the actual date of filing, whichever is later; otherwise, an assessment issued ~fter the required three (3)-year period is considered void. / 1 25 Sup ra, no te 12. 26 Records, p. 193.

DECISION CTA CASE NO. 8191 In the case at bench, however, the Court finds the records bereft of evidence to provide the reckoning of the mandated three (3)-year prescriptive period for Documentary Stamp Taxes, except in the case of Value-added Tax; thus, the case of Taligaman Lumber Co., Inc., v. The Collector of Internal Revenue,27 is hereby qu9ted: "It is, however, clear that since prescription is one of the affirmative defenses set up by petitioner herein, it was incumbent upon the latter, if it wanted to avail itself of the benefits of Section 331, to prove that it had submitted said returns, xxx." Based on the records of the case, petitioner failed to submit or even bf prove its compliance with Section 200(B) the 1997 NIRC, as amended, to quote: "SEC. 200. Payment of Documentary Stamp Tax. - XXX XXX XXX (B) Time for Filing and Payment of the Tax. - Except as provided by rules and regulations promulgated by the Secretary of Finance, upon the recommendation of the Commissioner, the tax return prescribed in this Section shall be filed within ten (10) days after the close of the month when the taxable docum.ent was made, signed, issued, accepted, or transferred, and the tax thereon shall be paid at the same time the aforesaid return is filed." Thus, applying the earlier-quoted ruling and considering that the records are wanting of any returns filed by petitioner, the Court finds the deficiency assessments for Docu1nentary Starnp Taxes on the increase in capital stock and insurance policies made within the prescribed three (3)- year period. The Court, nonetheless, takes into consideration the Letter of Authority No. 00021964, issued by rE?spondent on May 7, 2008, addressed to petitioner, covering the examination of books of accounts and other accounting for the taxable yea~ 2006.28 And a perusal of t~e / 27 G.R. No. L-15716, Ma rch 31, 1962, 4 SC RA 842. 7 28 Exhibit " F. "

DECISION CTA CASE NO. 8191 Formal Letter of Demand, with attached Assessment Notices,29 against petitioner for deficiency assessment for Documentary Stamp Tax on insurance policies, the same includes unremitted Documentary Stamp Tax for taxable year 2005 in the amount of F680,099.44, inclusive of surcharge, interest and compromise penalty. Considering that the amount of F680,099.44 is clearly beyond the coverage of the examination of the records pursuant to the Letter of Authority issued by respondent, the Court must, thus, nullify the defic~ency assessment for the said amount. Likewise, the Court finds the deficiency assessment for Value- added Tax issued beyond the mandated three (3)-year period. Section 114 of the 1997 NIRC, as amended, provides as follows: "SEC. 114. Return and Payment of Value-added Tax. - (A) Tn General. - Every person Vable to pay the value-added tax imposed under this Title shall fi~e a quarterly return of the amount of his gross sales or receipts within twenty-five (25) days following the close of each taxable quarter prescribed for each taxpayer: Provided, however, That VA~-registered persons shall pay the value-added tax on a monthly basis." Records show that petitioner submitted its Monthly Value-added Tax Declarations (BIR Form No. 2550-M),30 and Quarterly Value-added Tax Returns (BIR Form No. 2550-Q),31 for the taxable year 2006, as early as February 27, 2006,32 and the latest on January 24, 2007;33 the three-year period then within which respondent ca~1 validly issue an assessment against petitioner is at the earliest on February 27, 2009, and until January 24, 2010. Considering that respondent issued the subject Formal Letter of Demand, with attached Assessment Notices, only on April 6, 2010,34 the same is clearly made beyond the three (3)-year mandated ! period. And in the absence of any exccftions provided under Section 222 of the 1997 NIRC, as amended, the said issuance made by respondent is deemed void. 29 Exhibit "A." 30 Exhibits" !," " 1-1, " " 1-3, " " 1-4, " " 1-6," " 1-7," " 1-9 " and " 1-10. " 31 Exhibits " 1-2," "I-5," " 1-8" and " 1-11 ." 32 Exhibit "1." 33 Exhibit "1-11. " 34 Exl1 ibit "A."

DECISION CTA CASE NO. 8191 Therefore, while the Court sustains the deficiency assessments for Documentary Stamp Taxes on the increase in capital stock and insurance policies for taxable year 2006, the Court hereby cancels the deficiency assessment for Value-added Tax for the year 2006, and the unremitted Documentary Stamp Tax for the year 2005, on the ground of prescription. Deficiency Assessments for Income Tax, Expanded Withholding Tax and Documentary Stamp Taxes. On the remaining deficiency assessments for Income Tax and Expanded Withholding Tax, petitioner contests the disallowances made by respondent on its expenses in the amount of ~14,391,140.56, and subjecting the same amount to deficiency taxes. Further, petitioner claims that as per its computation, it is only liable for deficiency Expanded Withholding Tax in the amount of ~792,925.17, and Creditable Withholding Tax in the amount of ~1,209,943.16, or in the aggregate amount of ~2,002,868.33, inclusive of interest and other charges. After perusal of the foregoing a~guments, vis-a-vis with the records, the Court resolves to sustain the said assessments. To put on record, petitioner failed to present and/ or even offer any evidence to substantiate its claims o~ undue disallowance of its legitimate expenses, erroneous assessment for Expanded Withholding Tax, and the correct computation of its deficiency taxes. Lest it be forgotten, Section 8 of RA No. 1125,35 as amended by RA No. 9282,36 and RA No. 9503,37 clearly provides that this Court is a "court shout of record." And as a court of record, this Court is required to conduct a formal trial to prove every minute aspect of any claim. Therefore, cases filed before this Court are litigated de novo, and party litigants 35 Supra, note 3. 31> Sup ra, no te 4. 37 Supra, note 5.

DECISION CTA CASE NO. 8191 prove every minute aspect of their cases;38 for mere allegation IS not evidence,39 and is not equivalent to proo�.40 Further, Section 34 of Rule 132 of the Revised Rules of Court prescribes that no evidence shall be considered unless formally offered. With the foregoing and in the absence of any evidence to overturn the presumption accorded to the subject deficiency assessments for Income Tax and Expanded Withholding Tax, in addition to the earlier findings made on the deficiency assessments for Documentary Stamp Taxes on the increase in capital stock anS insurance policies, the Court finds petitioner to be liable thereto. Compromise Penalties The Court further puts emphasis on the case of Felisa L. Vda. De San Agustin v. Commissioner of internal Revenue,41 which states that "a compromise being by its nature is mutual in essence." Thus, the imposition of a compromise penalty without the conformity of the taxpayer is illegal and unauthorized.42 In the case at bench, the records failed to disclose that the parties have arrived at an agreement for the imposition of compromise penalties. With that, the Court has no recourse but to cancel the imposition of compron'lise penalties in the amounts of ~25,000.00 covering the deficiency assessment for Income Tax; ~16,000.00 covering the deficiency assessment for Docu1nentary Stamp Tax on the increase in capital stock; ~16,000.00, ~20,000.00 and ~25,000.00, covering the respective 1nonths of January, Febru~ry and May for deficiency Documentary Stamp Tax on insurance P9licies; ~16,000.00 covering the deficiency assessment for Expanded Withholding Tax; and ~50,000.00 covering the Civil Penalty for using umegistered computerized books of accounts. 38 Commissio ne r o f Inte rna l Revenu e 11. Ma nila M ining Corpo ra tio n, G.R. No. 153204, A ug us t 31, 2005, 468SCRA 571 . 39 Martinez 11. N ational La bor Rela tio ns Co mmission , G. R. No. 11 7~95, May 29, 1997, 272 SCRA 793. 40 Philippine National Bank v. Co urt of A ppeals, G.R. No. 116181,ra nu a ry 6, 1997, 266 SCRA 136. 41 G.R. No. 138485,September 10, 2001,364 SCRA 802. f. 42 Co mmiss io ne r of Inte rnal Revenu e v. Lia nga Bay Logging Co. Inc., et al. , G.R. o. L-35266, Janua ty 21, 1991, 193 86, SC RA citing Collector v. UST, 104 Phil. 1062; Phil. ln.t. Fa ir Collector, G.R. Nos . L- 12928 and L-12932, Mardz / 31, 1962, 4 SCRA 774 . /

DECISION CTA CASE NO. 8191 Tax Amnesty Finally, the Court notes that petitioner availed of the Tax Amnesty Program under RA No. 9480.43 Entitled as "An Act Enhancing Revenue Administration and Collection by Granting an Amnesty on All Unpaid Internal Revenue Taxes Imposed by the National Government for Taxable Year 2005 and Prior Years," the same provides as follows: "SEC. 2. Availment of the Amnesty. - Any person, natural or juridical, who wishes to avail himself of the tax amnesty authorized and granted under this Act shall file with the Bureau of Internal Revenue (BIR) a notice and Tax Amnesty Return accompanied by a Statement of Assets, Liabilities and Networth (SALN) as of December 31, 2005, in such form as may be prescribed in the implementing rules and regulations (rRR) of this Act, and pay the applicable amnesty tax within six months from the effectivity of the IRR." (Boldfacing supplied.) From the afore-quoted provision, any person intending to avail of the Tax Amnesty Program shall file the following: (a) a notice; (b) tax amnesty return; (c) SALN as of December 31, 2005; and (d) pay the applicable tax to the BIR. Based on the records of the case, petitioner submitted its Notice of Availment of Tax Amnesty dated November 13, 2007;44 Tax Amnesty Return (BIR Form 2116);45 Tax Amnesty Payment Form (BIR Form No. 0617);46 and Development Bank of the Philippines BIR Tax Payment Deposit Slip dated November 14, 2007.47 In its Notice of Availment of l ax Amnesty, petitioner had indicated that attached therewith is the required Statement of Assets, Liabilities and Networth ("SALN") as o~ December 31, 2005, and had even put an "x" mark on the box stating "With. previous SALN/Balance Sheet." However, the Court finds the re9ords wanting of any evidence I 43 Lapsed into law on May 24, 2007. 44 Exhibit "f. " 45 Exhibit " K. " 46 Exhibit " L. " 47 Exhibit "L- 1."

DECISION CTA CASE NO. 8191 that petitioner has indeed attached its SALN or submitted the same as part of its evidence. The importance of the submission o~ the SALN as of December 31, 2005 cmmot be disregarded; Section 4 of tihe Tax Amnesty Law provides for the presumption accorded to the SALN, to wit: "SEC. 4. Presumption of Correctness of the SALN. - The SALN as of December 31, 2005 shall be considered as true and correct except where the mnount of declared networth is understated to the extent of thirty percent (30%) or more as 1nay be established in proceedings initiated by, or at the instance ot parties other than the BIR or its agents: Provided, That such proceedings must be initiated within one year following the date of the filing of the tax amnesty return and the SALN. Findings of or admission in congressional hearings, other administrative agencies of government, and/ or courts shall be admissible to prove a thirty percent (30%) under- declaration." Thus, upon its filing, the presumption of correctness and due execution applies to the SALN. The provision also sets a limit within which a proceedings to challenge the presumption may be initiated, i.e., within one (1) year following the date o~ the filing of the tax amnesty return and the SALN. Sans the require1 SALN, and for such failure, petitioner cam1ot avail of the benefits provided under Section 6 of RA No. 9480, which states that: "SEC. 6. Immunities and Privileges. - Those who availed themselves of the tax amnesty under Section 5 hereot and have fully complied with all its conditions shall be entitled to the following immunities and privileges: 1. The taxpayer shall be immune from the payment of taxes, as well as additions thereto, and the appurtenant civit criminal or administrative penalties under the National Internal Revenue Code of 1997, as amended, arising from the failure to pay I any and all internal revenue taxes for taxable year 2005 and prior years." /

DECISION CTA CASE NO. 8191 With its failure to fully comply witht RA No. 9480, and taking into consideration the insufficiency of evidence to overcome the presumption accorded to the subject assessments as earlier discussed, the Court has no recourse but to consider the Formal Letter of Demand, with Assessment Notices, dated April 6, 2010 as valid. WHEREFORE, the Petition for Review 1s hereby PARTLY GRANTED. Accordingly, the deficiency assessments for Value-added Tax covering taxable year 2006 in the total amount of ~8,798,665.12; Documentary Stamp Tax on insurance policies covering taxable year 2005 in the total amount of ~680,099.4,4; and Civil Penalties in the amounts of ~25,000.00 for deficiency Income Tax, ~16,000.00 for deficiency Documentary Stamp Tax on the increase in capital stock, ~16,000.00, ~20,000.00 and ~25,000.00, for the respective months of January, February and May for deficiency Documentary Stamp Tax on insurance policies, ~16,000.00 for deficient y Expanded Withholding Tax, and ~50,000.00 for using unregistered co1nputerized books of accounts, are hereby CANCELLED and SET ASIDE. On the other hand, as regards the deficiency assessments for Income Tax, Documentary Stamp Taxes, apd Expanded Withholding Tax for the taxable year 2006, petitioner is l~ereby ORDERED to PAY the amount of ~12,746,567.80, inclusive of tlhe twenty five percent (25 %) surcharge imposed under Section 248(A)(3) of the 1997 NIRC,48 as amended, and the twenty percent (20 %) irtercst imposed under Section 249 of the 1997 NIRC,49 as a1nended, computed as follows: Type of Tax Basic Tax 25'Y., Surcharge 20% Interest Total - Income Ta x ~8 , 294,889 . 09 ~2f 0 73,722 . 2 7 ~10 ,3 6 8,6 11. 36 Documentary Stamp Tax on Increase in Capital Stock 250,000.00 I 62,5oo.oo - 312,500 .00 I 48 SEC. 248. Civil Penalt ies. - I (A) There shall be imposed , in addition to the tax required to be pa id , a pena lly equiva lent to twenty fi ve percent (25%) of the a mount due, in the follow ing cases: XXX XXX XXX (3) Failure to pay the d efi ciency tax within the time prescribed for its paym ent in the notice of assess ment. 49 SEC. 249. Interes t. - I XXX XXX XXX (B) Deficiency Interest. -An y defi ciency in the tax due, as the term is defined in this Cod e, shall be s ubject to the interes t prescribed in Subsec tion (A) hereof, w hich interes t sha ll be assessed and collec ted fr om the da l e prescribed for its pay ment until the full pay ment thereo f.

DECISION CTA CASE NO. 8191 Ex panded Withholding Tax 470,863.74 11 7,715.94 - 588,579.68 Subtotal F9,015,752.83 F11,269,691.04 F2,253,938.21 - Increments for Late Remittance of F9,015,752.83 F877,789.97 Documentary Stamp Tax on I F 250,795.34 186,085. 1 7 Policies of Insurance 59,209.03 413, 001. 62 F6 26,9 94 .63 January 126,876.14 131,409.86 1,476,876.76 Fe b r u a r y 281,591 .76 441,414.23 F12,746,567.80 May F441,414.23 Subtotal 1,035,462.53 Total F3,289,400.74 In addition, petitioner is hereby ORDERED to PAY, as follows: (a) Deficiency interest at the r r te of twenty percent (20 %) per annum on the basic deficiency Income Tax, Documentary Stamp Tax on the increase in capital stock, and Expanded Withholding Tax computed from the dates indicated below, until full payment thereof pursuant to Section 249(B) of the 1997 NIRc,so as amended; Tax Type Basic Tax Deficiency Interest F8, 294,889 .09 computed from Income Tax April1 5, 2007 Docum entary Stamp Tax on Increase in F 250,000 .00 Capital Stoc k F470,863.74 January 5, 2007 Ex panded Withholding Ta x I January 15, 2007 b) Delinquency interest at the rate of twenty percent (20 %) per am1um on the total amount of ~11,269,691.04, representing basic deficiency Income Tax, Documentary Stamp Tax on the increase in capital stock, and Expanded Withholding Tax, plus twenty five percent (25 %) surcharge, computed from the dates indicated below until full payment thereof pursuant to Section 249(C) of the 1997 NIRC,s1 as amended; 5o Ibid. 51SEC. 249. Interest.- XXX XXX XXX (C) Delinquency Interest. - In case of fa ilure to pay: XXX XXX XXX (3) A d efi ciency tax, o r an y s urcha rge o r inte res t the reon on the due da te a ppea rin g in the n otice a nd d ema nd of the Commissione r, the re shall be assessed and co llec ted on the unpa id a m ount, inte rest a t the ra te prescribed in Su b<ectto n (A) h eceof u ntH the " m o unt ;, fu IIy P" td, w h t<h '""" "' ' h" ll fo ,m pa '' o f the ta>. ~

DECISION CTA CASE NO . 8191 Tax Type Basic Tax plus Delinquency 25'~� Surcharge Interest Income Tax I :Jl10,368,611 .36 computed from Documentary Stamp Tax on increase in capital stoc k 312,5 00 .00 588,579.68 4/ 15/2010 Expanded Withholdin g Tax ~11,269,691.04 4/ 15/ 2010 4/ 10/201 0 c) Delinquency interest at the rate of twenty percent (20 %) per annum on the increments for late remittance of Documentary Stamp Tax on insurance policies in the amount of ~1,476,876.76, computed from April15, 2010, until full payment thereof pursuant to Section 249(C) of the 1997 NIRC, as amended; and d) Delinquency interest at tme rate of twenty percent (20 %) per mu1um on the twenty percent (20 %) deficiency interest which have accrued as afore-stated in (a), computed from April 15, 2010, until full pat ment thereof pursuant to Section 249(C) of the 1997 NIRC, as amended. SO ORDERED. . BAUTISTA WE CONCUR: (l}v..~ ~ ~ MA. BELEN M. RINGPIS-LIBAN Associate Justice

DECISION CTA CASE NO. 8191 ATTESTATION ~bove I attest that the conclusions in the Decision were reached in consultation before the case was assign.e~ to the writer of the opinion of the Court's Division. LOVEL Associ Chair CERTIFICATION Pursuant to Section 13 of Article VIII of the Constitution and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. Presiding Justice