VIRICSON CORPORATION v. COMMISSIONER OF INTERNAL REVENUE; OFFICE OF THE REGIONAL DIRECTOR, BUREAU OF INTERNAL REVENUE, REVENUE REGION NO. 8 - MAKATI CITY; BUREAU OF INTERNAL REVENUE, REVENUE DISTRICT OFFICE NO. 52, PARA?AQUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FI RST DIVISION ********* VIRICSON CORPORATION, CTA Case No. 8709 Petitioner, Members: -versus- DEL ROSARIO, Chairperson, UY, and COMMISSIONER OF INTERNAL MINDARO-GRULLA, JJ. REVENUE ; OFFICE OF THE REGIONAL DIRECTOR, BUREAU Promulgated: OF INTERNAL REVEN UE, REVENUE REGION NO. 8- MAKATI CITY; BUREAU OF INTERNAL REVENUE, REVENUE DISTRICT OFFICE NO. 52, PARANAQUE, Respo ndents . X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - DECISION UY, J.: Before the Court is a Petition for Review filed by Viricson Corporation on September 20, 2013, praying for the cancellation and nullification of the final assessment made through respondents' Formal Letter of Demand with Assessment Notices dated December 10, 2012, for allegedly being issued without factual and legal basis. THE FACTS Petitioner Viricson Corporation is a corporation duly organized and registered under and by virtue of the laws of the Philippines.1 On the other hand , respondent Commissioner of Internal 1 Exhibits "P-1 " and "P-2", Docket, pp. 337 and 338 to 346. ~

DECISION CTA Case No. 8709 Page 2 of29 Revenue (CIR) is duly appointed and empowered to interpret the provisions of the National Internal Revenue Code (NIRC) and other tax laws, as well as the power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the NIRC or other laws or portions thereof administered by the Bureau of Internal Revenue (BIR).2 The CIR's co-respondent BIR Revenue Region No. 8-Makati City is attached to the CIR and is tasked and empowered to audit and investigate taxpayers for possible tax deficiencies, and to assess and collect the same, if any, from taxpayers. 3 Additionally, co-respondent BIR Revenue District Office (ROO) No. 52 is attached to the CIR and directly under the supervision of respondent BIR Revenue Region No. 8. The latter is tasked and empowered to audit and investigate taxpayers for possible tax deficiencies, and to assess and collect tax deficiencies, if any, from taxpayers. 4 Petitioner received from respondent BIR Revenue Region No. 8-Makati City the Letter of Authority (LA) No. 00005862 dated May 20, 2010, authorizing several Revenue Officers to examine petitioner's books of accounts and other accounting records for all internal revenue taxes for taxable period January 1 to December 31, 2009. As stated in the said LA, petitioner was to be duly informed of the results of the examination upon approval of the report submitted by the Revenue Officers. 5 Thereafter, petitioner was invited, through the Letter dated August 10, 2009, to attend a dialogue with the Revenue District Officer of respondent BIR ROO No. 52, where relevant tax matters of its concern will be taken up. 6 Petitioner then received the Second Request for Presentation of Records dated September 16, 2009. The said Request asked for the presentation of accounting records as listed in the first request so that the conduct of the required examination for internal revenue tax purposes may be had.7 2 Par. 1.1, Stipulations and Admissions of Facts, Joint Stipulation of Facts and Issues (JSFI), Docket, p. 174. 3 Par. 1.2, Stipulations and Admissions of Facts, JSFI, Docket, p. 175. 4 Par. 1.3, Stipulations and Admissions of Facts, JSFI, Docket, p. 175. 5 Par. 1.4, Stipulations and Admissions of Facts, JSFI, Docket, p. 175. 6 Par. 1.5, Stipulations and Admissions of Facts, JSFI, Docket, p. 175. 7 Par. 1.6, Stipulations and Admissions of Facts, JSFI, Docket, p. 175. ~

DECISION CTA Case No. 8709 Page 3 of29 Subsequently, respondent BIR Revenue Region No. 8 sent to petitioner the Preliminary Assessment Notice (PAN) dated July 11, 2012, assessing it for alleged deficiency income tax in the amount of P311 ,912.97, deficiency value-added tax (VAT) of P220,243.05, and deficiency expanded withholding tax (EWT) of P8,410.01, for taxable year 2009. 8 On December 10, 2012, BIR Revenue Region No. 8 issued a Formal Assessment Notice (FAN), assessing petitioner for deficiency income tax amounting to P352,813.04, deficiency VAT of P233, 707.69, and deficiency EWT of P8,922.30, for taxable year 2009. 9 Consequently, on January 10, 2013, petitioner filed its Protest10 before the Office of the Regional Director, BIR Revenue Region No. 8, disputing the tax assessments issued against it. In response thereto, respondent BIR Revenue Region No. 8 issued the Letter dated January 18, 2013, 11 informing petitioner that the entire tax docket together with its Protest shall be forwarded to respondent BIR RDO No. 52, and to submit the necessary documents within sixty (60) days from the date of filing of the said Protest to the latter office. Thus, petitioner sent to respondent BIR ROO No. 52 a letter together with certain documents in support of its Protest on March 11, 2013. 12 On July 3, 2013, petitioner received from respondent BIR ROO No. 52 the Letter dated June 25, 2013, 13 requiring petitioner to submit the original receipts and documents that will justify the dropping of the assessment. On July 17, 2013, petitioner sent the Letter-Reply dated July 10, 2013 to respondent BIR ROO No. 52, 14 signifying that it has decided not to submit the original receipts and documents as requested but is instead willing to present the originals for 8 Par. 1.7, Stipulations and Admissions ofFacts, JSFI, Docket, p. 175. r 9 Exhibit "P-8", Docket, pp. 267 to 272; BIR Records, pp. 223 to 229. 10 Exhibit "P-4", Docket, pp. 351 to 354. 11 BIR Records, p. 270. 12 Exhibit "P-5", including submarkings, Docket, pp. 362 to 368. 13 Exhibit "P-7", Docket, p. 370; Exhibit "R-11", BIR Records, p. 321. 14 Exhibit "P-6", Docket, p. 369.

DECISION CTA Case No. 8709 Page 4 of29 comparison, and to have the originals intact when needed for presentation before this Court, should BIR ROO No. 52 deny petitioner's Protest. Petitioner received, on August 21, 2013, the Final Decision on Disputed Assessment (FDDA) dated August 16, 2013, 15 sustaining the subject tax assessments issued against petitioner for taxable year 2009, for its failure to submit original documents as requested. However, in view of the interests that have accrued in the interim, the amounts of the assessed taxes were increased as follows: the deficiency income tax totaled P382,919.09, the deficiency VAT amounted to P253, 103.18, and the deficiency EWT resulted to P9,660.23, respectively computed as follows: I. INCOME TAX p (148,550.00) Taxable Income (Loss) per Income Tax Return (ITR) Add: Adjustments/Disallowance p 646,148.08 Unrecorded gain on sale of motor vehicle 55,650.00 Disallowed professional fee due to non-withholding Unaccounted rent expense 55,000.00 756,798.08 Total Add: Net Operating Loss Carry-over (NOLCO) p 608,248.08 Adjusted taxable income 148,550.00 p 756,798.08 Basic Income Tax due (30%) p 227,039.42 Less: Tax credits/payments per return p 23,711.67 Prior year's excess credits Creditable Tax Withheld per return 22,000.00 Tax paid per ITR p 45,711.67 Less: Excess Minimum Corporate Income Tax 8,800.00 (MCIT) carried over Amount carried over to succeeding year 36,911.67 - p 227,039.42 Basic Tax Due 155,879.67 Add: Interest (4.16.1 0 to 9.20.13) p 382,919.09 TOTAL AMOUNT DUE II. VALUE-ADDED TAX P904,467.00 p 440,000.00 Gross Sales per VAT returns 55,000.00 959,467.00 Add: Income not subjected to VAT p 31,131.63 P1,399,467.00 Unaccounted rent expense 31,131.63 p 167,936.04 VATable sales per audit - Output tax Less: Input tax Less: Unsupported input tax 15 Exhibit "P-3", Docket, pp. 347 to 350; Exhibit "R-13", BIR Records, pp. 330 to 334. '

DECISION CTA Case No. 8709 Page 5 of29 VAT due p 167,936.04 Less: Payment 21,668.37 Basic tax due Add: Interest (1.26.1 0 to 9.20.13) p 146,267.67 TOTAL AMOUNT DUE 106,835.51 I Ill. EXPANDED WITHHOLDING TAX (EWT) P253,103.18. Basic Tax due Add: Interest (1.16.1 0 to 9.20.13) p 5,565.00 TOTAL AMOUNT DUE 4,095.23 P9,660.23 Correspondingly, petitioner filed the instant Petition for Review before this Court on September 20, 2013. 16 On January 24, 2014, respondents filed his Answer, 17 interposing the following special and affirmative defenses, to wit: "SPECIAL AND AFFIRMATIVE DEFENSES Respondent reproduces and repleads all the foregoing allegations insofar as they are relevant to her defenses which are discussed hereunder and incorporates them herein by way of reference and, in addition thereto, most respectfully avers THAT: 5. A revenue regulation, the issuance of which is authorized by statute, has the force and effect of law (Vitug & Acosta, Tax Law and Jurisprudence, 3rd Edition, p. 55); 6. Assessment are prima facie 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. (Aban, Law of Basic Taxation in the Philippines, 1st Edition, p. 109); 7. At the outset, the Final Decision on Disputed Assessment dated August 16, 2013 which adopted the findings as laid down in the Formal Assessment Notice (FAN) and its Details of Discrepancies both dated December 10, 2012, reflect the internal revenue liabilities of the petitioner for the taxable year 2009 ended as a 16 Docket, pp. 6 to 23. 17 Docket, pp. 105 to 109. ~

DECISION CTA Case No. 8709 Page 6 of29 result of the failure of the petitioner to submit the original documents despite the considerable period of time given to the latter to support its protest and request for reinvestigation. Consequently, the failure of the petitioner to submit relevant supporting documents made the assessment, hereunder reproduced, against the petitioner final and executory pursuant to Section 228 of the Tax Code. INCOME TAX �!� Unrecorded gain or sale of motor vehicle, P646, 148.08- Verification disclosed that disposed of a motor vehicle with the cost of P623,00.00, on which it failed to record/report the gain on sale amounting to P646, 148.08 in the FSIITR. Consequently, the same was assessed pursuant to Section 32 of the NIRC, as amended. �!� Disallowed professional fee due to non- withholding of tax P55,650.00- Verification disclosed that petitioner failed to withhold and remit the correct withholding taxes on its income payments of professional fees, hence, disallowed pursuant to Section 34(K) and accordance with Section 57 of the Tax Code, as amended, which expressly provides that '... any amount paid or payable which is otherwise deducted from, or taken into account in computing the gross income, or for which depreciation or amortization may be allowed under this Section shall be allowed as deduction only if it is shown that the tax required to be deducted and withheld therefrom has been paid to the Bureau of Internal Revenue. �!� Unaccounted Rent Expense, P55,000.00- As stated in the report, Analysis of 1601-E and Financial statement showed unaccounted payments for rental m the amount of P55,000.00. Hence, the same was considered undeclared income following the case of Perez v. CTA and CIR dated May 30, 1958 and assessed for deficiency income tax pursuant to Section 32 of the NIRC. �!� Net Operating Loss Carrv-Over, P148,550.00- Verification disclosed that petitioner's operation showed taxable income instead of net operating ~

DECISION CTA Case No. 8709 Page 7 of29 loss as previously claimed in its ITR. The tax benefit of this amount has already been forwarding to succeeding period as provided for under Section 34(0)(3) of the NIRC which states that 'The net operating loss of the business or enterprise for any taxable year immediately preceding the current taxable year, which had not been previously offset as deduction from gross income shall be carried over as deduction from gross income for the next (3) consecutive taxable years immediately following the year of such Joss.' �!� Excess MCIT carried over to next period, P8,800.00- Verification disclosed that petitioner's final return filed resulted to excess MCIT amounting to P8,800.00. This was excluded in the computation of deficiency income tax because this shall be carried forward and credited against petitioner's normal corporate income tax for the (3) immediately succeeding taxable year pursuant to Section 27 (E)(2) of the 1997 Tax Code. �!� Excess Credit Carried-Over to Succeeding year- P36,911.67- The excess tax credit reflected in petitioner's Annual Income tax return cannot be credited against the deficiency income tax considering the said amount has already been forwarded to succeeding periods as provided by Section 76 (B) of the National Internal Revenue Code and Section 2.58 (C) of Revenue Regulation 2-98. VALUE ADDED TAX �!� Income not subjected to VAT P904,467.00- In relation to the above, the proceeds from sales of motor vehicle in the amount of P904,467.00 should also be subjected to VAT pursuant to Section 108 of the tax code. �!� Unaccounted Rent expense, P55,000.00 - In relation to the above, based on such income of P55,000.00, petitioner was assessed of value added tax pursuant to Section 110 of the Tax Code 1997, in relation to Section 113 and 237 of the same Code. ~

DECISION CTA Case No. 8709 Page 8 of29 EXPANDED WITHHOLDING TAX �!� Basic tax due on non-withholding P5,565.00- Verification disclosed that petitioner failed to pay the corresponding expanded withholding tax on its income payments pursuant to 2.57.2 of Revenue Regulation 2-98, as amended. 8. Over and above all, petitioner should be reminded that taxes are important because it is the lifeblood of the government and so should be calculated without unnecessary hindrance (Commissioner vs. Algue, Inc. L- 28896, 17 February 1988). Taxes are enforced proportional contribution from persons and property levied by the state, thus, no one is considered entitled to recover that which he must give up to another. - Non videtur guisguam id capere quod ei necesse est alii restitute re." Petitioner filed a Reply on February 7, 201418, alleging, among others, that petitioner admits that it made an oversight mistake in Paragraph 4 of its Petition for Review when it stated that BIR ROO No. 52 is under the supervision of Revenue Region 7; that nonetheless, the paragraph immediately preceding it shows that petitioner was well aware that BIR ROO No. 52 is under the BIR Revenue Region 8's jurisdiction. More importantly, petitioner seeks to controvert respondent's allegation that it failed to submit supporting documents allegedly stated in paragraph 17 of the Petition for Review. Petitioner counter-alleges that in said paragraph, it merely stated that petitioner opted not to submit the original receipts and documents as insisted by respondents, but was more than willing to present the originals for comparison purposes with the photocopies already submitted. However, petitioner insists that by no stretch of the imagination does such allegation admit a failure on its part to submit supporting documents. During the Pre-Trial Conference held on June 20, 201419, the parties were directed to submit their Joint Stipulation of Facts and Issues on the basis of the proceedings held on said date. On July 7, 2014, the parties filed their Joint Stipulation of Facts and lssues. 20 In the Resolution dated July 22, 2014, 21 the Court directed the parties to 18 Docket, pp. 111 to 118. 19 Order dated June 20, 2014, Docket, pp. 172-173 20 Docket, pp. 174 to 177. 21 Docket, pp. 180 to 181. ~

DECISION CTA Case No. 8709 Page 9 of29 submit a Supplemental Joint Stipulation of Facts and Issues stating the list of documents to be presented, the names of their witnesses, and the trial dates agreed upon by the parties. In compliance thereto, the parties filed their Supplemental Joint Stipulation of Facts and Issues on August 7, 2014. 22 In the Resolution dated August 18, 2014, the parties' Joint Stipulation of Facts and Issues and Supplemental Joint Stipulation of Facts and Issues were approved by the Court. 23 Subsequently, the Court issued the Pre-Trial Order dated August 28, 2014. 24 During trial, petitioner presented its Director, Racquel Singson- Jugo,25 as its sole witness. For their part, respondents presented as their lone witness, Revenue Officer Arnulfo Bilason. 26 Thereafter, the Court considered the case submitted for decision on December 14, 201527, taking into consideration the filing of petitioner's Memorandum on December 1, 2015,28 and respondents' failure to submit their memorandum despite lapse of the given period to do so. 29 Hence, this Decision. THE ISSUES The parties stipulated the following issue30 for resolution of this Court, to wit: "WHETHER OR NOT PETITIONER IS LIABLE FOR THE DEFICIENCY TAXES, NAMELY, INCOME TAX, VALUE ADDED TAX AND EXPANDED WITHHOLDING TAX FOR TAXABLE YEAR 2009, AS EMBODIED IN THE FINAL DECISION ON DISPUTED ASSESSMENT DATED AUGUST 16, 2013." 22 Docket, pp. 185 to 189. 23 Docket, pp. 196 to 197. 24 Docket, pp. 199 to 207. 25 Minutes ofthe Hearing dated October 7, 2014, Docket, pp. 316 to 319. 26 Minutes ofthe Hearing dated July 28,2015, Docket, pp. 467 to 468. 27 Resolution dated December 14,2015, Docket, p. 515. 28 Docket, pp. 494 to 512. 29 Records Verification dated December 4, 2015, Docket, p. 513. ~ 30 Joint Statement of the Issues, JSFI, Docket, p. 176.

DECISION CTA Case No. 8709 Page 10 of29 THE COURT'S RULING The instant Petition for Review is partly meritorious. Respondent contends that the assessment against petitioner has become final, executory, and demandable, for the latter's alleged failure to submit original documents in support of its protest. Considering that this matter relates to the jurisdiction of this Court, the same shall be addressed first. Needless to state, to inquire into the existence of jurisdiction over the subject matter is the primary concern of a court, for thereon would depend the validity of its entire proceedings. 31 This Court is endowed with jurisdiction. Section 228 of the NIRC of 1997 read as follows: "SEC. 228. Protesting of Assessment. - When the Commissioner or his duly authorized representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings: xxx XXX XXX XXX The taxpayer shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void. Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be required to respond to said notice. If the taxpayer fails to respond, the Commissioner or his duly authorized representative shall issue an assessment based on his findings. Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within sixty (60) days from filing of 31 Commissioner of Internal Revenue vs. Silicon Philippines, Inc. (formerly Intel Philippines Manufacturing, Inc.), G.R. No. 169778, March 12, 2014. ~

DECISION CTA Case No. 8709 Page 11 of29 the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final. XXX XXX xxx." (Emphasis supplied) In relation thereto, Section 3.1.5 of Revenue Regulations (RR) No. 12-9932 provides as follows, to wit: "SECTION 3. Due Process Requirement in the Issuance of a Deficiency Tax Assessment. - 3.1 Mode of procedures in the issuance of a deficiency tax assessment: XXX XXX XXX 3.1.5 Disputed Assessment. -The taxpayer or his duly authorized representative may protest administratively against the aforesaid formal letter of demand and assessment notice within thirty (30) days from date of receipt thereof. xxx. XXX XXX XXX The taxpayer shall submit the required documents in support of his protest within sixty (60) days from date of filing of his letter of protest, otherwise, the assessment shall become final, executory and demandable. The phrase 'submit the required documents' includes submission or presentation of the pertinent documents for scrutiny and evaluation by the Revenue Officer conducting the audit. The said Revenue Officer shall state this fact in his report of investigation. XXX XXX xxx." (Emphases supplied) Based on the foregoing provisions, petitioner is mandated to submit the required documents in support of its protest within sixty (60) days from date of filing of the protest letter, otherwise, the 32 SUBJECT: Implementing the Provisions of the National Internal Revenue Code of 1997 Governing the Rules on Assessment of National Internal Revenue Taxes, Civil Penalties and Interest and the Extra-Judicial Settlement of a Taxpayer's Criminal Violation of the Code Through Payment of a Suggested Compromise Penalty, dated September 6, 1999. ~

DECISION CTA Case No. 8709 Page 12 of29 assessment shall become final. Such being the case, since petitioner filed its Protest on January 10, 2013, 33 it had until March 11, 2013 within which to submit the relevant supporting documents to its protest. Records show that on March 11, 2013 petitioner sent to respondent BIR ROO No. 52 a letter together with certain documents in support of its Protest. 34 Petitioner, therefore, was able to submit relevant supporting documents within 60 days from the filing of the said Protest. Moreover, the Court finds that the failure of petitioner to submit original receipts and documents in support of its protest did not render the assessments final, executory, and demandable. Records further indicate that petitioner was not inclined to submit the original receipts and documents, but was willing to present them for purposes of comparison only as evidenced by its letter-reply dated July 10, 2013, 35 to wit: "July 10, 2013 Mr. ARNULFO S. BILASON Revenue Officer BUREAU OF INTERNAL REVENUE Revenue District Office No. 52 Paranaque City Re: Viricson Corporation FAN for 2009 Dear Mr. Bilason: Thank you for your letter dated June 25, 2013, which we received on July 3, 2013. We have advised our client to comply with your request regarding the original receipts and documents. However, we are not inclined to submit them. We will accompany our client with the originals but we will not leave them with your good office. This is to ensure that should your good office deny our client's Protest, we will have the originals intact for presentation to the Court of Tax Appeals. We trust we have made our client's position clear. We look 33 Exhibit "P-4", Docket, pp. 351 to 354. 34 Exhibits "P-5", including submarkings, Docket, pp. 362 to 368. 35 Exhibit "P-6", Docket, p. 369. ~

DECISION CTA Case No. 8709 Page 13 of29 forward to the speedy disposition of this deficiency tax assessment. Very truly yours, (signed) Rodolfo 0. Reyes Senior Partner" Thus, the assessment against petitioner has not become final, executory, and demandable, on the ground of failure to submit original documents in support of its protest within 60 days from the filing of said protest. Such being the case, the Court has jurisdiction over the instant case. The Court will now proceed to determine the propriety of the said assessments. Petitioner is not liable for the subject deficiency income tax assessment in the amount of P382,919.09. Respondents assessed petitioner of deficiency income tax in the amount of P382,919.09, computed as follows: 36 I. INCOME TAX p (148,550.00) Taxable Income (Loss) per Income Tax Return (ITR) Add: Adlustments/Disallowance p 646,148.08 756,798.08 55,650.00 608,248.08 Unrecorded gain on sale of motor vehicle 55,000.00 148,550.00 Disallowed professional fee due to non-withholding p 756,798.08 Unaccounted rent expense Total p Add: Net Operating Loss Carry-over (NOLCO) Adjusted taxable income Basic Income Tax due (30%) p 227,039.42 Less: Tax credits/payments per return p 45,711.67 - 8,800.00 227,039.42 Prior year's excess credits p 23,711.67 36,911.67 p Creditable Tax Withheld per return 22,000.00 Tax paid per ITR Less: Excess Minimum Corporate Income Tax (MCIT) carried over Amount carried over to succeeding year Basic Tax Due 36 Exhibit "P-3", Docket, pp. 347 to 350. ~

DECISION CTA Case No. 8709 Page 14 of29 Add: Interest (4.16.10 to 9.20.13) 155,879.67 TOTAL AMOUNT DUE p 382,919.09 The deficiency income tax assessment is hinged on the following items, to wit: A. Unrecorded gain on sale of motor vehicle P646, 148.08 B. Disallowed professional fee due to non-withholding 55,650.00 55,000.00 C. Unaccounted rent expense D. Disallowed NOLCO 148,550.00 8,800.00 E. Disallowed excess MCIT carried over L _ Disallowed amour~t carried over_tg succeeding year p 36,911.67 A. Unrecorded gain on the sale of motor vehicle - P646, 148.08 Respondents' verification disclosed that there was a disposal of motor vehicle with the cost of P623,000.00, and that petitioner failed to record or report the gain on sale amounting to P646, 148.08 in its Audited Financial Statements or ITR as other income; hence, it was assessed on the basis of Section 32 of the NIRC of 1997, as amended. The said amount of P646, 148.08 is determined by respondents as follows: 37 Schedule 1: P904,467 .00 Proceeds from sale of motor vehicle Less: Book Value as of July 31, 2009 P623,000.00 P364,681.08 258,318.92 Acquisition Cost Accumulated Depreciation P646, 148.08 Unrecorded Gain on Sale of Motor Vehicle -------- Petitioner disputes the assessment for being an erroneous finding and that the basis or source as to how respondents arrived at such amount was not disclosed or made apparent in their correspondences. According to petitioner, the above-mentioned motor vehicle was a 1996 Honda Accord 2.2 AfT and was the subject of the Deed of Sale dated July 30, 2009 between the late Ricardo T. Singson and Mr. Alfredo S. Marbella.38 Petitioner claims that only gains derived from dealings in property are considered as gross income for tax purposes pursuant to Section 32(A)(3) of the NIRC of 1997, as amended. As such, only the actual gain derived by 37 Schedule 1, Details of Discrepancy, FDDA, Exhibit "P-3", Docket, p. 349. 38 Exhibit "P-4A", Docket, p. 355. ~

DECISION CTA Case No. 8709 Page 15 of29 petitioner from said sale amounting to P200,000.00 must be included in its gross income for taxable year 2009.39 On this score, the Court rules in favor of petitioner. It was error for respondents to treat the amount of P904,467.00 as "Proceeds from sale of motor vehicle", because the same actually represents the "Cost" of the "Retirement/disposals" of "Motor Vehicle". This is clear in petitioner's Audited Financial Statements,40 which reflect as follows: 2009 Real Property, Furniture & Leasehold Improvements Motor Vehicle and p 3,195,319 Fixtures Total Costs p 3,195,319 p 623,000 p 264,696 p 4,083,015 Beginning balance 1,710,467 1,710,467 Additions p 849,603 (904,467) - (904,4672 Retirementldise_osals 39,795 Ending Balance p 1,429,000 - p 4,889,015 Accumulated p 889,397 Depreciation and p 2,305,922 p 264,696 p 1,365,992 Impairment Loss 110,850 Beginning balance p 330,575 p 185,815 Depreciation p 1,476,843 RetiremenUdisposals 58,468 12,588 P3,412,173 Ending balance Net Book Value p 389,043 p 198,403 p 1,039,957 p 66,294 Needless to state, the "Cost" of the "Retirement/disposals" of "Motor Vehicle" cannot be equated with the "Proceeds from sale of motor vehicle", the latter being the amount received because of the said sale. The Accounting and Financial Reporting Policies of petitioner, as reflected in its Notes to Audited Financial Statements, enlighten Us as to the composition of the above-stated "Cost" of petitioner's "Properties and Equipment", to wit: "Properties and equipment, except for land, is stated at acquisition cost less accumulated depreciation and amortization and any impairment in value. Land is stated at cost less any impairment in value. The initial cost of property and equipment consists of its purchase price, including import duties and non- refundable purchase taxes (if any) and any directly 39 Petitioner's Memorandum, Docket, pp. 498 to 500. 40 Petitioner's Audited Financial Statements for the year ended December 31, 2009, BIR ~ Records, p. 7.

DECISION CTA Case No. 8709 Page 16 of29 attributable cost of bringing the asset to the location and condition for its intended use. Subsequent costs that can be measured reliably are added to the carrying amount of the asset when it is probable, that future economic benefits associated with the asset will flow to the Company. The costs of day to day servicing of an asset are recognized as an expense in the period in which they are incurred."41 (Emphasis and underscoring supplied) Thus, respondents' finding that there was "Unrecorded Gain on Sale of Motor Vehicle" cannot be sustained, because the same was erroneously arrived at. In Commissioner of Internal Revenue vs. Hantex Trading Co., lnc., 42 the Supreme Court held: "We agree with the contention of the petitioner that, as a general rule, tax assessments by tax examiners are presumed correct and made in good faith. All presumptions are in favor of the correctness of a tax assessment. It is to be presumed, however, that such assessment was based on sufficient evidence. Upon the introduction of the assessment in evidence, a prima facie case of liability on the part of the taxpayer is made. If a taxpayer files a petition for review in the CTA and assails the assessment, the prima facie presumption is that the assessment made by the 81 R is correct, and that in preparing the same, the BIR personnel regularly performed their duties. This rule for tax initiated suits is premised on several factors other than the normal evidentiary rule imposing proof obligation on the petitioner-taxpayer: the presumption of administrative regularity; the likelihood that the taxpayer will have access to the relevant information; and the desirability of bolstering the record-keeping requirements of the NIRC. However, the prima facie correctness of a tax assessment does not apply upon proof that an assessment is utterly without foundation, meaning it is arbitrary and capricious. Where the BIR has come out with a 'naked assessment,' i.e., without any 41 BIR Records, p. 18. 42 G.R. No. 136975, March 31, 2005. ~

DECISION CTA Case No. 8709 Page 17 of29 foundation character, the determination of the tax due is without rational basis. In such a situation, the U.S. Court of Appeals ruled that the determination of the Commissioner contained in a deficiency notice disappears. Hence, the determination by the CTA must rest on all the evidence introduced and its ultimate determination must find support in credible evidence." (Emphases and underscoring supplied) Considering the finding of Unrecorded Gain on Sale of Motor Vehicle in the amount of P646, 148.08 is utterly without foundation, the same shall be cancelled. B. Disallowed professional fee due to non-withholding of tax - P55,650.00 Respondents' verification disclosed that petitioner failed to withhold and remit the correct withholding taxes on its income payments of professional fees in the amount P55,650.00, pursuant to Section 34(K) and in accordance with Section 57 of the NIRC of 1997, as amended, which expressly provides that "any amount paid or payable which is otherwise deductible from, or taken into account in computing gross income or for which depreciation or amortization may be allowed under this Section, shall be allowed as a deduction only if it is shown that the tax required to be deducted and withheld therefrom has been paid to the Bureau of Internal Revenue." Thus, the said amount was disallowed as a deduction from petitioner's gross income. However, petitioner claims that the professional fee was paid to a general professional partnership (GPP) which is exempted from withholding in accordance with Section 2.57.5(8)(4) of RR No. 2-98, as amended. The Court agrees with petitioner. GPPs are partnerships formed by persons for the sole purpose of exercising their common profession, no part of the income of which is derived from engaging in any trade or business.43 Section 26 of the NIRC of 1997 provides the taxation of GPPs as follows: 43 Section 22(B), NIRC of 1997. ~

DECISION CTA Case No. 8709 Page 18 of29 "SEC. 26. Tax Liability of Members of General Professional Partnerships. - A general professional partnership as such shall not be subject to the income tax imposed under this Chapter. Persons engaging in business as partners in a general professional partnership shall be liable for income tax only in their separate and individual capacities. For purposes of computing the distributive share of the partners, the net income of the partnership shall be computed in the same manner as a corporation. Each partner shall report as gross income his distributive share, actually or constructive received, in the net income of the partnership." (Emphasis supplied) As a consequence of the non-imposition of income tax on GPPs, Section 2.57.5 of RR No. 2-9844, as amended by Section 4 of RR No. 14-0245, exempts the same from withholding of creditable withholding tax, to wit: "Sec. 2.57.5. Exemption from Withholding. - The withholding of creditable withholding tax prescribed in these Regulations shall not apply to income payments made to the following: (A) National government agencies and its instrumentalities including provincial, city, municipal governments and barangays except government-owned and controlled corporations. (B) Persons enjoying exemption from payment of income taxes pursuant to the provisions of any law, general or special, such as but not limited to the following: XXX XXX XXX (4) General professional partnerships 44 SUBJECT: Implementing Republic Act No. 8424, "An Act Amending the National Internal Revenue Code, as amended" relative to the Withholding on Income subject to the Expanded Withholding Tax and Final Withholding Tax, Withholding of Income Tax on Compensation, Withholding of Creditable Value-Added Tax and Other Percentage Taxes. 45 SUBJECT: Amending Further Pertinent Provisions of Revenue Regulations No. 2-98, as Amended. t

DECISION CTA Case No. 8709 Page 19 of29 XXX XXX xxx." (Emphases supplied) To support its claim, petitioner presented the official receipt46 issued by Sicangco Menor Villanueva and Co., a GPP, as evidenced by its Amended Articles of Partnership47 and Withdrawal of Partner with Amended Articles of Partnership48. Hence, the Court finds respondents' disallowance of petitioner's claimed deduction for professional fees in the amount of P55,650.00 without factual or legal basis. Consequently, the deficiency income tax assessment arising from the disallowed professional fees shall likewise be cancelled. C. Unaccounted rent expense- P55,000.00 Respondents' analysis of petitioner's BIR Form No. 1601-E and Audited Financial Statements showed unaccounted payments for rentals in the amount of P55,000.00. As a result, the same was considered undeclared income and was assessed deficiency income tax pursuant to Section 32 of the NIRC of 1997, as amended, computed as follows: 49 Income Per FS/ITR Per 1601-E Unaccounted Payments Expense p - P55,000.00 Rental P55,000.00 Petitioner avers that as evident from the Contract of Lease50 entered into with Mr. Hitoshi Sakamoto, the term of lease was from May 1, 2009 to April 30, 2010. According to petitioner, it reported all the rental payments made from May 1, 2009 to December 31, 2009; and the amount of P440,000.00 constitutes eight (8) months of rental which was duly reported in its Annual ITR for calendar year 2009. Thus, petitioner questions respondents' insistence that there are unaccounted rental payments for taxable year 2009, because the amount of P55,000.00 assessed by respondents represents rental payment for January 2010, which should not be included in the assessment for 2009. 51 46 Exhibit "P-5-b", Docket, p. 365. 47 Exhibit "P-10", Docket, pp. 373 to 384. 48 Exhibit "P-9", Docket, pp. 385 to 393. 49 Exhibit "P-3", FDDA, Details of Discrepancy, Docket, p. 349. 50 Exhibit "P-4C", Docket, pp. 356 to 360. 51 Petitioner's Memorandum, Docket, pp. 502 to 503. ~

DECISION CTA Case No. 8709 Page 20 of29 We rule in favor of petitioner. It must be pointed out that respondents' assessment was actually based on petitioner's remittance of the amount of P2, 750.00 representing 5o/o withholding tax on the rental payment of P55,000.00 for the month of May 2009, as clearly indicated in petitioner's SIR Form Nos. 1601-E52 (Monthly Remittance Return of Creditable Income Taxes Withheld [Expanded] for May 2009) and 1604-E53 (Annual Information Return of Creditable Income Taxes Withheld [Expanded]llncome Payments Exempt from Withholding Tax for 2009). Verily, petitioner had rental expense in the amount of P55,000.00 which was not declared b~ petitioner as deduction from its gross income as shown in its AFS 4 and Annual ITR55. For the reason that the amount in petitioner's BIR Form No. 1601-E is higher than those reflected in the AFS and ITR, respondents inferred that petitioner had undeclared income. The Court disagrees with respondents. The three (3) elements on the imposition of income tax are: (1) there must be gain or profit, (2) that the gain or profit is realized or received, actually or constructively, and (3) it is not exempted by law or treaty from income tax. 56 Income tax is assessed on income received from any property, activity or service.57 Such being the case, the imposition or assessment of income tax is not based on an undeclared disbursement, but only when there was an income, and such income was received or realized by the taxpayer. In this case, said elements are not present. The BIR merely imposed income tax on petitioner simply because there was an "Unaccounted rent expense", nothing more. Furthermore, it must be emphasized that for income tax purposes, a taxpayer is free to deduct from its gross income a lesser amount, or not claim any deduction at all. What is prohibited by the 52 BIR Records, p. 75. 53 BIR Records, p. 83. 54 Note 14, AFS, BIR Records, p. 5. 55 BIR Records, p. 34. 56 Commissioner of Internal Revenue vs. Court of Appeals, et al., G.R. No. 108576, January 20, 1999. 57 Supra. ~

DECISION CTA Case No. 8709 Page 21 of29 income tax law is to claim a deduction beyond the amount authorized therein. 58 Hence, even granting that there is indeed an unaccounted rent expense, the same is not prohibited by law. Notably, the imputation of alleged undeclared income is based on a mere presumption that since there was an undeclared expense, there was likewise undeclared income which corresponds to it. While it is axiomatic that all presumptions are in favor of the correctness of tax assessments, the assessment itself should not be based on presumptions no matter how logical the presumption might be. In order to stand the test of judicial scrutiny, the assessment must be based on actual facts. 59 Thus, for lack of factual and bases, the deficiency income tax assessment corresponding to the alleged undeclared income from unaccounted rent expense of P55,000.00 shall be cancelled. D. Disallowed NOLCO (P148,550.00), excess MCIT carried over (P8,800.00), and amount carried over to succeeding years (P36,911.67) Respondents disallowed the NOLCO and MCIT incurred for the year 2009 and the carry-over of excess tax credit which were obtained from Lines 238, 27, and 31, respectively, of the Annual ITR60 . The reasons for the said disallowances are indicated in the Details of Discrepancies in the FDDA dated August 16, 2013, to wit:61 �!� Net Operating Loss Carry-Over, P148,550.00- Verification disclosed that petitioner's operation showed taxable income instead of net operating loss as previously claimed in its ITR. The tax benefit of this amount has already been forwarding to succeeding period as provided for under Section 34(D)(3) of the NIRC which states that 'The net operating loss of the business or enterprise for any 58 Commissioner ofInternal Revenue vs. Phoenix Assurance Co. Ltd., G.R. No. L-19727, May 20, 1965. 59 Collector ofInternal Revenue vs. Benipayo, G.R. No. L-13656, January 31, 1962. 60 BIR Records, p. 34. 61 Exhibit "P-3", Docket, p. 350; BIR Records, p. 330. ~

DECISION CTA Case No. 8709 Page 22 of29 taxable year immediately preceding the current taxable year, which had not been previously offset as deduction from gross income shall be carried over as deduction from gross income for the next (3) consecutive taxable years immediately following the year of such loss.' �!� Excess MCIT carried over to next period, P8,800.00- Verification disclosed that petitioner's final return filed resulted to excess MCIT amounting to P8,800.00. This was excluded in the computation of deficiency income tax because this shall be carried forward and credited against petitioner's normal corporate income tax for the (3) immediately succeeding taxable year pursuant to Section 27 (E)(2) of the 1997 Tax Code. �!� Excess Credit Carried-Over to Succeeding year- P36,911.67- The excess tax credit reflected in petitioner's Annual Income tax return cannot be credited against the deficiency income tax considering the said amount has already been forwarded to succeeding periods as provided by Section 76 (B) of the Nation Internal Revenue Code and Section 2.58 (C) of Revenue Regulation 2-98. The Court believes that it was improper for respondents to disallow the said NOLCO, excess MCIT, and excess tax credits because any tax benefit derived by petitioner from the carry-over of the said amounts redounds to the succeeding years. Since the tax benefit will be in the succeeding year, at most, petitioner may only be assessed in the said succeeding year. Furthermore, based on the Court's findings as discussed above, petitioner is not liable for any deficiency income tax for taxable year 2009; hence, there is no factual or legal basis for respondents to disallow the said NOLCO, excess MCIT, and excess tax credits, and must perforce be allowed to be carried-over to the succeeding year. In sum, the Court finds petitioner not liable for any deficiency income tax. Petitioner is partly liable to the subject VAT assessment. r

DECISION CTA Case No. 8709 Page 23 of29 Respondents assessed petitioner of deficiency VAT in the amount of P253, 103.18, as follows: 62 II. VALUE-ADDED TAX P904,467.00 p 440,000.00 Gross Sales per VAT returns 55,000.00 Add: Income not subjected to VAT 959,467.00 P1 ,399,467.00 Unaccounted rent expense VATable sales per audit Output tax p 31,131.63 p 167,936.04 Less: Input tax 31 '131.63 - Less: Unsupported input tax p 167,936.04 VAT due Less: Payment 21,668.37 Basic tax due p 146,267.67 Add: Interest (1.26.1 0 to 9.20.13) TOTAL AMOUNT DUE 106,835.51 P253,103.18 Thus, respondents' deficiency VAT assessment is anchored on the following items, to wit: A. Income not subjected to VAT P904,467.00 B. Unaccounted rent expense C. Unsupportedinput~x p 55,000.00 p 31,131.63 A. The sale of the motor vehicle is subject to VAT. The assessed income not subject to VAT in the amount of P904,467.00 pertains to the alleged proceeds from sale of motor vehicle as discussed earlier. Respondents found that petitioner's retirement or disposal of motor vehicle was not subjected to VAT in violation of pertinent provisions of the Tax Code. On the other hand, petitioner contends that the sale of motor vehicle owned by petitioner was merely an isolated transaction since it is not directly related to its regular business activity of leasing out real properties. Thus, such sale was not done in the course of business. Consequently, VAT cannot be imposed on such sale. 62 Exhibit "P-3", Docket, pp. 347 to 350. ~

DECISION CTA Case No. 8709 Page 24 of29 Respondents are partly correct. In Mindanao II Geothermal Partnership vs. Commissioner of Internal Revenue, etc. ,63 the Supreme Court ruled: "Mindanao II asserts that the sale of a fully depreciated Nissan Patrol is not an incidental transaction in the course of its business; hence, it is an isolated transaction that should not have been subject to 10% VAT. Section 105 of the 1997 Tax Code does not support Mindanao ll's position: SEC. 105. Persons Liable. - Any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to value-added tax (VAT) imposed in Sections 106 to 108 of this Code. The value-added tax is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services. This rule shall likewise apply to existing contracts of sale or lease of goods, properties or services at the time of the effectivity of Republic Act No. 7716. The phrase 'in the ordinary course of trade or business' means the regular conduct or pursuit of a commercial or an economic activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a nonstock, nonprofit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity. The rule of regularity, to the contrary notwithstanding, services as defined in this Code rendered in the Philippines by nonresident foreign persons shall be considered as being rendered in the course of trade or business. (Emphasis supplied) Mindanao II relies on Commissioner of Internal Revenue v. Magsaysay Lines, Inc. (Magsaysay)64 and 63 G.R. Nos. 193301 and 194637, March 11,2013. 64 529 Phil. 64 (2006). ~

DECISION CTA Case No. 8709 Page 25 of29 Imperial v. Collector of Internal Revenue (lmperial/5 to justify its position. Magsaysay, decided under the NIRC of 1986, involved the sale of vessels of the National Development Company (NDC) to Magsaysay Lines, Inc. We ruled that the sale of vessels was not in the course of NDC's trade or business as it was involuntary and made pursuant to the Government's policy for privatization. Magsaysay, in quoting from the CTA's decision, imputed upon Imperial the definition of 'carrying on business.' Imperial, however, is an unreported case that merely stated that 'to engage' is to embark in a business or to employ oneself therein.' Mindanao ll's sale of the Nissan Patrol is said to be an isolated transaction. However, it does not follow that an isolated transaction cannot be an incidental transaction for purposes of VAT liability. Indeed, a reading of Section 105 of the 1997 Tax Code would show that a transaction 'in the course of trade or business' includes 'transactions incidental thereto.' Mindanao ll's business is to convert the steam supplied to it by PNOC-EDC into electricity and to deliver the electricity to NPC. In the course of its business, Mindanao II bought and eventually sold a Nissan Patrol. Prior to the sale, the Nissan Patrol was part of Mindanao ll's property, plant, and equipment. Therefore, the sale of the Nissan Patrol is an incidental transaction made in the course of Mindanao ll's business which should be liable for VAT." (Emphases and underscoring supplied) It is clear from the foregoing jurisprudential pronouncements that it does not follow that an isolated transaction cannot be an incidental transaction for purposes of VAT liability; and that a criteria for determining whether a sale of an asset may be treated as an incidental transaction is that when said asset was part of the taxpayer's property, plant and equipment. In this case, petitioner admits that the sale of motor vehicle, as found by respondents, refer to a 1996 Honda Accord 2.2 AfT and was the subject of the Deed of Sale dated July 30, 2006 with a selling price of P200,000.00; and that the same is fully depreciated when it was sold.66 As a corollary, according to the Accounting and Financial 65 97 Phil. 992 (1955). 66 Exhibit "P-4-a" vis-a-vis Purpose for which the said Exhibit was offered, Docket, p. ~

DECISION CTA Case No. 8709 Page 26 of29 Reporting Policies of petitioner on UProperties and Equipment" as stated in the Notes to its Audited Financial Statements, the treatment for fully depreciated assets is as follows: "Fully depreciated assets are retained in the accounts until they are no longer in use and no further charge for depreciation is made in respect of those assets."67 Correspondingly, since there is no showing that the said sale of motor vehicle is not an incidental transaction and that the subject motor vehicle was retained in the accounts under petitioner's uProperties and Equipment" or was part thereof, the same sale is subject to VAT. However, in view of the fact that the selling price is only P200,000.00, the VAT should only be imposed on the said amount. B. Unaccounted rent expense - P55,000.00 This assessment was based on the finding that petitioner had rent expense of P55,000.00, which was not accounted for in its Audited Financial Statements. As already pointed out, respondents concluded that petitioner had earned income which it failed to declare. As in the case of the income tax imposition, the Court finds respondents' position without merit. It must be ~remembered that the 12�/o VAT is imposed, inter alia, on the seller or lessor of the goods or properties, pursuant to Section 105 of the NIRC of 1997, to wit: "SEC. 105. Persons Liable. -Any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to the value-added tax (VAT) imposed in Sections 106 to 108 of the Code. XXX XXX xxx." (Emphases supplied) 355 and 330, respectively. Cf Petitioner's Memorandum, Docket, p. 67 BIR Records, p. 17. ~

DECISION CTA Case No. 8709 Page 27 of29 Furthermore, the VAT, insofar as leasing of goods or properties is concerned, is assessed on the "gross receipts derived from the sale or exchange of services, including the use or lease of properties".68 In this connection, the law defines "gross receipts" as follows: "... the total amount of money or its equivalent representing the contract price, compensation, service fee, rental or royalty, including the amount charged for materials supplied with the services and deposits and advanced payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person, excluding value-added tax."69 Thus, what is critical to be shown, in the imposition or assessment of VAT in the sale and the lease of goods or properties, is that the taxpayer is paid an amount of money or its equivalent, representing the contract price, compensation, service fee, rental, etc. Simply put, the VAT is imposed when one leases goods or properties and is paid therefor, not when one rents out and pays for the rental. Correspondingly, VAT should not be imposed on the supposed "Unaccounted rent expense" amounting to P55,000.00. C. Unsupported input tax - P31,131.63 Respondents disallowed the creditable input taxes claimed by petitioner per VAT Returns for the latter's failure to comply with the invoicing requirement under Section 110 of the NIRC of 1997, as amended, in relation to Sections 113 and 237 of the same Code. 70 Petitioner claims that in compliance with the invoicing requirements under Section 110 of the NIRC of 1997, it submitted to Revenue Officer Norberta De Mesa of BIR ROO No. 52 the schedule of output and input taxes attached to the Letter dated July 19, 2010. The Court is not persuaded by petitioner's assertions. 68 Section 108(A), NIRC of 1997, as amended by RA 9337. r 69 Supra. 70 Details of Discrepancy, FDDA, Exhibit "P-3", Docket, p. 350.

DECISION CTA Case No. 8709 Page 28 of29 Under Section 8 of Republic Act (RA) No. 1125, this Court is described as a court of record. As cases filed before it are litigated de novo, party litigants should prove every minute aspect of their cases. 71 Here, petitioner did not submit the documents supporting its claimed input taxes of P31, 131.63 for the Court's verification so as to ascertain whether the said supporting documents indeed complied with the invoicing requirements prescribed under Sections 113 and 237 of the NIRC of 1997, as amended. Hence, the Court cannot set aside respondents' disallowance of unsupported input tax. In fine, petitioner shall be liable for basic deficiency VAT in the amount of P55, 131.63, as computed below: Gross Sales per VAT returns p 440,000.00 Add: Income not subjected to VAT 200,000.00 Proceeds from Sale of Motor Vehicle p 640,000.00 VATable sales Output tax P31, 131.63 76,800.00 Less: Input tax P31, 131.63 - Less: Unsupported input tax VAT due 76,800.00 Less: Payment 21,668.37 Basic VAT due p 55,131.63 Petitioner is not liable for the subject deficiency EWT assessment in the amount of P55,650.00. The Court has already determined that the subject income payment amounting to P55,650.00 was made to a GPP, which is exempt from income tax pursuant to the aforequoted Section 26 of the NIRC of 1997, and consequently, to withholding tax, as provided under Section 2.57.5(8)(4) of RR No. 2-98, as amended. Thus, respondents' deficiency EWT assessment on the said income payment in the aggregate amount of P9,660.23 shall be cancelled. WHEREFORE, in light of the foregoing considerations, the instant Petition for Review is hereby PARTIALLY GRANTED. The 71 Commissioner of Internal Revenue vs. Manila Mining Corporation, G.R. No. 153204, August 31, 2005. ~

DECISION CTA Case No. 8709 Page 29 of29 deficiency income tax and EWT assessments issued by respondents against petitioner for taxable year 2009 are hereby CANCELLED and SET ASIDE. On the other hand, petitioner is ORDERED TO PAY the deficiency VAT for taxable year 2009 in the modified amount of P68,914.54, inclusive of the twenty-five percent (25o/o) surcharge imposed under Section 248(A)(3) of the NIRC of 1997, as amended, computed as follows: Basic VAT due p 55,131.63 Add: 25% Surcharge 13,782.91 Total Deficiency VAT P68,914.54 In addition, petitioner is likewise ORDERED TO PAY delinquency interest at the rate of 20�/o per annum on the total amount of P68,914.54, computed from September 20, 2013 until full payment thereof pursuant to Section 249(C) of the NIRC of 1997. SO ORDERED. ER~P. UY Associate Justice WE CONCUR: Wtl; N.�M~~ _bh-lL. ( With Separate Opinion ) ROMAN G. DEL ROSARIO CIELITO N. MINDARO-GRULLA Presiding Justice Associate Justice CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. Chairperson Presiding Justice

Republic of the Philippines COURT OF TAX APPEALS Quezon City FIRST DIVISION VIRICSON CORPORATION, CTA CASE NO. 8709 Petitioner, -versus- Members: DEL ROSARIO, Chairperson, COMMISSIONER OF INTERNAL UY, and REVENUE; OFFICE OF THE MINDARO-GRULLA, JJ. REGIONAL DIRECTOR, BUREAU OF INTERNAL REVENUE, REVENUE REGION NO. 8- MAKATI CITY; BUREAU OF INTERNAL REVENUE, REVENUE DISTRICT OFFICE NO. 52, PARANAQUE, Promulgated: _� �)'"D Respondents. JAN 24 ~e ~ x------------------------------------------------------- --x SEPARATE OPINION With due respect, I concur with the result and disquisition of the Decision but dissent from the majority's non-imposition of deficiency interest on deficiency Value Added Tax (VAT). It is my position that the imposition of deficiency interest, under Section 249(8) of the NIRC of 1997 in relation to the provisions of Section 247(a) and 249(a) of the same Code, as an addition to the tax or deficiency tax clearly embraces failure to pay all taxes imposed in the Tax Code, without any regard to the Title of the Code where provisions imposing particular taxes are textually located. 1 Otherwise stated, it applies to all internal revenue taxes and not only to selected taxes, i.e. income tax, estate tax and donor's tax. ~ N. M'-�~-- G~ CIELITO N. MINDARO-GRULLA Associate Justice 1 Paper Industries Corporation of the Philippines (PICOP) v. Court of Appeals, et. al., G.R. No. 106949-50, December 1, 1995.