HI-EISAI PHARMACEUTICAL INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES Court ofTax Appeals QUEZON CITY Third Division HI-ESAI PHARMACEUTICAL, CTA CASE NO. 10706 INC., Petitioner, Members: MODESTO-SAN PEDRO, Chairperson, and -versus- FERRER-FLORES, JJ COMMISSIONER OF Promulgated: n INTERNAL REVENUE, Respondent. 'JUI 6 ?()?f; x -----------------------------------------------------------------~-==9-La_,__)!!.:_~_!______ x JUDGMENT ON COMPROMISE AGREEMENT MODESTO-SAN PEDRO, J.: For the Court's resolution is a Joint Motion to Render Judgment Based on Compromise Agreement, filed by the parties on May 5, 2026. Attached to the Joint Motion are the following documents: (a) A Judicial Compromise Agreement, signed by Jonnahs V. Singian (petitioner's President and General Manager), Atty. Alvin. T. Pagayatan, Atty. Daisy L. Parker (both of whom are petitioner's legal counsel, from Aranas Cruz Araneta Parker & Faustino Law Offices), and respondent Commissioner oflntemal Revenue ("CIR"); (b) A Secretary's Certificate, signed by Samuel V. Torres (petitioner's Corporate Secretary), showing the authority of Aranas Cruz Araneta Parker & Faustino Law Offices to represent petitioner;) (c) Print-outs of eFPS Payment Details with their corresponding f Bureau of Internal Revenue ("BIR") Form No. 0605s, showing petitioner' s payment of the following amounts:

JUDGMENT ON COMPROMISE AGREEMENT CTA Case No. I0706 Page 2 of6 Tax Type Amount Date IT P14, 103 ,426.22 December 22, 2025 P2,428,968.08 December 22, 2025 VAT P431,957.38 December 22, 2025 EWT P539,375.64 December 22, 2025 IAET Pl ,090,3 88.06 December 22, 2025 WTC P37,274.35 December 22, 2025 FBT P18,631 ,389. 73 Total (d) A letter, dated December 17, 2025, signed by Atty. Sylvia R. Alma Jose, Chief of the BIR Litigation Division, stating that the National Evaluation Board ("NEB") had accepted petitioner's compromise offer; and (e) A Certificate of Availment, dated April 19, 2026, signed by Assistant Commissioner of Internal Revenue James H. Roldan, certifying the NEB's approval of petitioner's compromise offer. A review ofthe aforementioned documents shows that the Compromise Agreement is in order. Section 204(a) of the National Internal Revenue Code of 1997, as amended ("NIRC'), provides for the authority of the CIR to compromise the payment of any revenue tax: SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. - The Commissioner may - (A) Compromise the payment of any internal revenue tax, when: (1) A reasonable doubt as to the validity ofthe claim against the taxpayer exists; or (2) The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax. The compromise settlement of any tax liability shall be subject to the following minimum amounts: For cases of financial incapacity, a minimum compromise rate equivalent to ten percent (1 0%) of the basic assessed tax; and For other cases, a minimum compromise rate equivalent to forty percent (40%) of the basic assessed tax./

JUDGMENT 0 ' COMPROMISE AGREEMENT CTA Case No. I0706 Page 3 of6 Where the basic tax involved exceeds One million pesos (PI,000. 000) or where the settlement offered is less than the prescribed minimum rates, the compromise shall be subject to the approval of the Evaluation Board which shall be composed of the Commissioner and the four (4) Deputy Commissioners. . . . (Italics supplied) Based on the foregoing, a compromise settlement 1s deemed valid provided that the following requirements are present: (1) That the application for compromise should be based on either the doubtful validity of respondent 's assessment or taxpayer's financial incapacity to pay such assessment; (2) In case the basis of the compromise offer is doubtful validity, the minimum payment of compromise settlement shall be at the rate equivalent to forty percent (40%) ofthe basic assessed tax, while if the ground is financial incapacity, the minimum payment should be at the rate equivalent to ten percent ( 10%) of the basic assessed tax; and (3) The approval of the NEB which is composed of the respondent and his four (4) Deputy Commissioners if the subject assessment exceeds One Million pesos (P1,000,000. 00) or where the settlement offered is less than the prescribed minimum rates. To review, petitioner filed the instant Petition for Review to assail the assessment against it. The protest casts doubt on the validity ofthe assessment. Hence, the first requirement is present: the assessment is allegedly of doubtful validity. Being based on the assessment' s doubtful validity, the compromise amount should be, at minimum, 40% of the basic tax assessed, which, in the present case, would be as follows: Tax Type Basic Amount 40% P70 ,517 , 131.08 P28,206,85 2.43 IT P l 2 , 144 ,840.4 2 P4,857,936.17 VAT P2, 159,786.91 P863 ,914.76 EWT P2,696,878.19 Pl ,078,751.28 IAET P5,451 ,940.28 P2,180,776.11 WTC P l 8 6 ,3 71.76 P74,548.70 FBT P93,156,948.64 P37,262,779.45 Total

JUDGMENT ON COMPROMISE AGREE~IENT CTA Case No. I0706 Page 4 of6 However, petitioner offered and paid only 20% of the basic amount, as follows: Tax Type Amount 20% P70,517, 131.08 P14,103,426.22 IT P l 2, 144, 840.42 P2 ,428 ,96 8.08 VAT P2,159,786.91 P431 ,957.38 EWT P2,696,878.19 P539,375.64 IAET P5,451 ,940.28 PI ,090,388.06 WTC P186,37 1.76 P37,274.35 FBT P93,156,948.64 P18,631 ,389.73 Total Thus, the compromise amount is P 18,631 ,3 89.72 lower than the minimum prescribed by law, or a centavo over half of said minimum. This does not, however, immediately invalidate the compromise agreement. To recall, Section 204(a)(2) of the NIRC requires that a compromise agreement shall be subject to the approval of the NEB "where the settlement offered is less than the prescribed minimum rates." Hence, an offer that is lower than said minimum can still be valid if the NEB approves of the offer. Here, Atty. Jose's letter and the Certificate of Availment show that the NEB approved of petitioner's compromise offer, despite it being lower than the 40% minimum prescribed by the NIRC. The compromise agreement thus complies with the third requirement and is deemed compliant with the second requirement. Having complied with all requisites, then, the instant Compromise Agreement must be granted. On the topic of compromise agreements, the Supreme Court explained the purpose of the same in Far East Bane and Trust Co. v. Trust Union Shipping Corp.: 1 A compromise is a contract whereby the parties, by making reciprocal concessions, avoid litigation or put an end to one already commenced. It is an accepted and desirable practice in courts of law and administrative tribunals. Settlement of disputes brought before the courts is, in fact, encouraged. It is settled that contracting parties may establish such stipulations, clauses, terms and conditions as they deem convenient, provided that these are not contrary to law, morals, good customs, public order, or public policy. (Italics supplied) 1 G.R. o. 154716, September 16,2008.

J UDGMENT ON COM PROM ISE AGREEMENT CTA Case No. I0706 Page 5 of6 The Court thus reminds the parties that a compromise agreement approved by the courts has the force and effect of a judgment that is subject to execution and attains the effect and authority of res judicata, as discussed in Viesca v. Gilinsky:2 A compromise agreement has been described as a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced. A compromise agreement that is intended to resolve a matter already under litigation is normally called a judicial compromise. Once it is stamped with judicial imprimatur, it becomes more than a mere contract binding upon the parties. Having the sanction ofthe court and entered as its determination ofthe controversy, it has the force and effect ofany other judgment. Such agreement has the force oflaw and is conclusive be/vt!een the parties. It transcends its identity as a mere contract binding only upon the parties thereto, for it becomes a judgment that is subject to execution in accordance with the Rules. Thus, a compromise agreement that has been made and duly approved by the court attains the effect and authority ofres judicata, although no execution may be issued unless the agreement receives the approval of the court where the litigation is pending and compliance with the terms of the agreement is decreed. (Italics supplied) ACCORDINGLY, the parties' Joint Motion to Render Judgment Based on Compromise Agreement, filed on May 5, 2026, is hereby GRANTED. Their Compromise Agreement is hereby APPROVED. This Judgment on Compromise Agreement is rendered in accordance therewith. The parties are hereby ENJOINED to faithfully comply with all the terms and conditions of the aforesaid Compromise Agreement. Accordingly, this case is now deemed CLOSED and TERMINATED. SO ORDERED. MARIARO /CONCUR: c~[~ES Associate Justice G.R. No. 171698, Ju ly 4, 2007.

J UDGM ENT ON CO~ IPROi\IISE AGREE~IE"iT CTA Case o. I0706 Page 6 of6 ATTESTATION I attest that the conclusions in the above Judgment on Compromise Agreement were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. MARIARO 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 Judgment were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. ~. ~I '--- MA. BELEN M. RINGPIS-LIBAN Presiding Justice