DIDDLEY BOW INVESTMENTS HOLDING B.V. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY S..oecial Third Division DIDDLEY BOW CTA CASE NO. 9759 INVESTMENTS HOLDINGS B.V., Petitioner, Members: -versus- UY, Chairperson, RINGPIS-LIBAN, and MODESTO-SAN PEDRO ,]]. COMMISSIONER OF Promulgated: INTERNAL REVENUE, Respondent. MAR 0 2 2023 X------------------------------------------------------~ --------------.-9--.-' O--t-)-P--�-_--.--'------------X DECISION RINGPIS-LIBAN, J: The Case The Petition for Review prays that the Court render judgment ordering respondent to refund or issue a tax credit certificate (TCC) in the amount of P8,389,431.00, allegedly representing final withholding tax (FWT) erroneously withheld on the interest income derived by petitioner from January 26, 2016 to August 17, 2016.1 The Parties Petitioner Diddley Bow Investments Holdings B.V. is a corporation established or incorporated in the Netherlands, with address at Oude Lindestraat 70, 6411 EJ Hedeen, the Netherlands.2 It is not registered as a corporation or partnership with the Philippine Securities Exchange Commission, and it is not engaged in trade or business in the Philippines.3 ~ 1 Pre-Trial Order dated July 4, 2019, Docket- Vol. 1, p. 327. 2 Exhibit "P-1", Docket- Vol. 1, pp . 489 to 500; and Exhibits "P-2" and "P-3", Docket- Vol. 2, pp. 501 to 506. 3 Par. 2, Statement of the Facts, Joint Stipulation of Facts and Issues (JSFI), Docket - Vol. 1, p . 312; Exhibit "P-4", Docket- Vol. 2, p. 507.

DECISION CTA Case No. 9759 Respondent is the duly appointed Commissioner of Internal Revenue, vested with authority, among others, to act upon and approve claims for refund or tax credit of overpaid or erroneously paid internal revenue taxes, including final income tax withheld on interest income received by non-residents. He holds office at the S'h Floor, Bureau of Internal Revenue (BIR) National Office Building, Agham Road, Diliman, Quezon City.4 Antecedents (Administrative Level) Petitioner, through its custodian, JP Morgan Chase Bank N.A., and its sub-custodian, Hongkong & Shanghai Banking Corp. (HSBC), invested in various Treasury Bonds (T-Bonds), with maturities of more than one (1) year. The yield of the T-Bonds was represented by coupons, which are computed as a percentage of the face value of the T-Bonds on a per annum basis and payable semi-annually. 5 During the period from January to August 2016, peuuoner derived interest income from its investments in T-Bonds in the total amount of P41,947,155.00, which was subjected to FWT at the rate of twenty percent (20%), equivalent to a total amount of P8,389,431.00.6 The FWT on petitioner's interest income from Philippine T-Bonds were withheld and remitted to the BIR by the Bureau of Treasury (BoTr).7 On October 2, 2017, petitioner ftled with the BIR an administrative claim for the refund of or the issuance of a TCC in the amount of P8,389,431.00, representing the FWT erroneously withheld on the interest income derived by petitioner during the period from January 26, 2016 to August 17,2016.8 Proceedings Before This Court To preserve its right to judicially claim a refund of the FWT erroneously withheld on its interest income for the period from January 26, 2016 to August 17, 2016, petitioner ftled the present Petition for Review with this Court on January 26, 2018.9;"1"' 4 Par. 1, Statement of the Facts, JSFI, Docket- Vol. 1, p. 312. 5 Par. 3, Statement of the Facts, JSFI, Docket- Vol. 1, p. 313. 6 Par. 4, Statement of the Facts, JSFI, Docket- Vol. 1, p. 313. 7 Par. 5, Statement of the Facts, JSFI, Docket- Vol. 1, p. 313. 8 Par. 6, Statement of the Facts, JSFI, Docket- Vol. 1, p. 313. 9 Docket- Vol. 1, pp. 10 to 28; and Par. 7, Statement of the Facts, JSFI, Docket- Vol. 1, p. 313.

DECISION CTA case No. 9759 Respondent's Answer was posted on May 4, 2018,10 interposing the following special and affirmative defenses, to wit: "SPECIAL AND AFFIRMATIVE DEFENSES 4. Petitioner's claim for refund is subject to administrative investigation and/ or examination by the respondent. As a matter of fact, the said claim for tax refund has been denied by the revenue officer who handled the case for failure to submit the required documents to support the claim for tax refund. In order to validly claim for tax refund, it is imperative for petitioner to prove its compliance with the submission of complete documents. 5. Taxes paid and collected are presumed to have been paid 111 accordance with law and regulations, hence, not refundable. 6. Accordingly, the claimants of those refunds bear the burden of proving the factual basis of their claims and of showing, by words too plain to be mistaken, that the legislature intended to exempt them. 7. And fmally, basic is the rule that tax refunds are in the nature of tax exemptions and are to be construed strictissimijuris against the entity claiming the same. Moreover, statutes in derogation of sovereignty such as those containing exemption from taxation should be stricdy construed in favor of the State. In this regard, taxation is the rule and exemption is the exception. The law does not look with favor on tax exemptions and that he who would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted." On July 16, 2018, respondent transmitted the BIR docket for the case, consisting of thirty-eight (38) pages. 11 Respondent's Pre-Tnal Brief was flied on July 19, 2018,12 while Petitioner's Pre-Trial Briefwas submitted on July 20, 2018Y The Pre-Trial Conference was initially scheduled on July 24, 2018.14 However, upon posting of petitioner's Urgent Motion to Defer Pre-Tnal Conference on July 17, 2018,15 the said Pre-Trial Conference was reset to October 23, 2018. 16 /" 1o Docket- Vol. 1, pp. 78 to 80. 11 Compliance dated July 16, 2018, Docket- Vol. 1, pp. 92 to 93. 12 Docket- Vol. 1, pp. 119 to 121. u Docket- Vol. 1, pp. 122 to 130. 14 Docket- Vol. 1, pp. 81 to 82. 1s Docket- Vol. 1, pp. 131 to 135. 16 Resolution dated July 27, 2018, Docket- Vol. 1, p. 139.

DECISION CTA Case No. 9759 Petitioner filed another Urgent Motion to Defer Pre-Trial Conference on October 17, 2018Y In the Resolution dated October 19, 2018,18 the Court granted the said Urgent Motion, and cancelled the previously scheduled Pre-Trial Conference, and reset the same to January 29, 2019. On January 23, 2019, petitioner again filed an Urgent Motion to Defer Pre- Trial Conference,19 which was granted by the Court in the Resolution dated January 28, 2019.20 The Pre-Trial Conference was then finally scheduled and held on May 7, 2019.21 On May 27, 2019, the parties filed their Joint Stipulation of Facts and Issues OFSI).22 In the Resolution dated June 14,2019,23 the Court approved the said JSFI, and deemed the termination of the Pre-Trial. The Pre-Trial Order dated July 4, 2019 was then issued by the Court.24 Trial ensued. During trial, pennoner presented its documentary and testimonial evidence. It offered the testimonies of the following individuals, namely: (1) Atty. Rachelle Anne D. Gutierrez,25 a Junior Associate at Salvador Llanillo & Bernardo, Attorneys-at-Law; (2) Ms. Ms. Bettina Marie B. Tuazon,26 a Vice President at the Client Service Section of the Securities Services Department of HSBC Philippine Branch; (3) Mr. Paul Arthur Olivarez Bautista,27 Assistant Vice President - Corporate Actions at the Securities Services Department of HSBC; and (4) Ms. Janice Co,28 a Vice President at the Service Delivery Team of the Securities Services Department of HSBC Philippine Branch. On January 6, 2019, petitioner filed its Formal Offer ofEvidence (with Motion to Set Commissioner's Hearing). 29 In the Resolution dated January 16, 2020,30 the Court granted the said Motion to Set Commissioner's Hearing. Thereafter, / 17 Docket- Vol. 1, pp. 140 to 144. 18 Docket- Vol. 1, p. 149. 19 Docket - Vol. 1, pp. 153 to 157. 20 Resolution dated January 28, 2019, Docket- Vol. 1, p. 159. 21 Resolution dated January 28, 2019, Docket- Vol. 1, p. 159; Minutes of the hearing held on, and Order dated, May 7, 2019, Docket- Vol. 1, pp. 308 to 310. 22 Docket- Vol. 1, pp. 312 to 320. 23 Docket - Vol. 1, p. 322 24 Docket- Vol. 1, pp. 327 to 333. 25 Exhibit "P-15", Docket - Vol. 1, pp. 182 to 192; Minutes of the hearing held on, and Order dated, August 29, 2019, Docket- Vol. 1, pp. 405 to 407. 26 Exhibit "P-16", Docket - Vol. 1, pp. 242 to 249; Minutes of the hearing held on, and Order dated, September 26, 2019, Docket- Vol. 1, pp. 408 to 410. 27 Exhibit "P-17", Docket - Vol. 1, pp. 260 to 276; Minutes of the hearing held on, and Order dated, November 28, 2019, Docket- Vol. 1, pp. 463 to 465. 28 Exhibit "P-18", Docket - Vol. 1, pp. 420 to 431; Minutes of the hearing held on, and Order dated, November 28, 2019, Docket- Vol. 1, pp. 463 to 465. 29 Docket- Vol. 1, pp. 476 to 488. 30 Docket - Vol. 2, p. 596.

DECISION CTA Case No. 9759 petitioner ftled its Supplemental Formal Offer of Evidence on February 7, 2020.31 The Court ordered respondent to file his comment/opposition on petitioner's Formal Officer of Evidence and Supplemental Formal Offer of Evidence. 32 Respondent, however, failed to ftle to do soY In the Resolution dated September 11, 2020,34 the Court admitted petitioner's offered exhibits. On February 1, 2020, respondent filed via email a Maniftstation, 35 stating that he will no longer present any witness in the instant case. Thus, in the Resolution dated February 2, 2020,36 the Court cancelled respondent's presentation of evidence, and granted the parties thirty (30) days from notice to submit their respective memorandum. On March 15, 2021, petitioner filed its Memorandum with the CourtY Respondent, however, failed to file his memorandum.38 The present case was deemed submitted for decision on April19, 2022.39 The Issue The parties submitted the following Issue for the resolution of this Court, to wit: "Whether or not Petitioner is entided to the refund and/or the issuance of a tax credit certificate in the amount of Php8,389,431.00, representing erroneously withheld FWT on the interest income derived by Petitioner during the period of January 26, 2016 to August 17, 2016 on its investments in Philippine T- Bonds."40/ 31 Docket- Vol. 2, pp. 600 to 606. 32 Resolution dated January 14, 2020, Docket - Vol. 2, p. 594; Resolution dated February 13, 2020, Docket- Vol. 2, p. 614. 33 Records Verification Report dated June 18, 2020 issued by the Judicial Records Division of this Court, Docket- Vol. 2, p. 618. 34 Docket- Vol. 2, pp. 620 to 622. 35 Docket- Vol. 2, pp. 623 and 624. 36 Docket- Vol. 2, pp. 627 to 628. 37 Docket - Vol. 2, pp. 629 to 652. 38 Records Verification Report dated April 6, 2022 issued by the Judicial Records Division of this Court, Docket- Vol. 2, p. 663. 39 Resolution dated April 19, 2022, Docket- Vol. 2, p. 665. 40 Proposed Issue for Stipulation, JSFI, Docket- Vol. 1, p. 313.

DECISION CTA Case No. 9759 Petitioner's arguments: 2twpiPeii2rhnn0nexeh0hetc1ttfei1eiieuol6cBtmr6irinmhepeoItpdspRsontetttoiPa.enAwisfeirrnenre'AtiusocicctstgThomueoiiuuimnoig-mbnvBstnuijeeetneeesotdrc1ctrhinednto7esdebea2,mtsdytrr02thgiiew1vn0eufp6teco1oetoedgao6rs-txwrym,iofttFetaahirasheaoWsomesnarnmfdtoaeeTrppoumrricerPrtmneoroafohistnfrnotiucilosPnlledrnieemgihtopdtphqiupfetlutorsiiiioioetnvpftlssnymerepPPati8il4atnTnspyJe,d1eu3vae-,m,Bb8nre9Tfoij9sur4iooe-fnt,oa7ncBd4mimr,tds321yoeetf1s0d5rnniF.ax%15d0tftWes,o.0sit;0dovr20iTwfen0atob;Fh1anfryasrPWte6dnohthlrhdmpaaTteietotwlemh;ijrppi;pauitAitpesotedthtttiudriheniiacitgntadoteihifuavtoderlasteTonhptJnsmec-eeaFtdBl3rmtnaWi1Jdopiiute,mnaieanaTnontri2rdsetndiuy0svsreaoe1fetrir1oosni6nd'ys,str Respondent's arguments: tebatfahaaxcedexiceamleuomrssirranepdmtihtapsRoieenota.refcinadspebstpieuvwotaarienndinttiddedrhoeennvnaleacirteoewrowafltltora;eogpnctsurhdtbuoeeaesbdortemfcttg;hhaoiuetnanaltatdnschttdliperaoupeinrmetatesihidtqdaihauotsanintdrardteiera,crebdxt'ihsesdeseprinocnmerlccefaideuusij,emumunnrndmeiisosefneodttdarasrgbreeatytftoaiounxtinhssndtuehraepattrbhfvpheuleeeovene;redtnnbtniuhaettisseiatetutyncorscleufaclfpbailimaoiacjmeiie;fmdcrattithnfnaoittaxgnosrt The Court's Ruling We rule in favor of petitioner. Govemingprovisions for refund claims. Sections 204(C) and 229 of the National Internal Revenue Code (NIRC) 1997 read: of or "SEC. 204. Authority of the Commissioner to Compromise/ Abate and Refund Credit Taxes. -The Commissioner may- XXX XXX XXX rhuspetinesafnfmuiadtnlpitfdssioecroswr(Ceufhti)sitmeeoaCnnxpar,eonethssddreeeiotydrdreefawpoeurmereintndhraroeoetltruhtfuiuetercninshradeuavsdntahhgltiaouaenlxreliegutubsyonpe,uooesrdanreelrlfdcpoouonrwnsnoedtdeooadiumfttsihoupoleyfsnndlvetbeoahsyslrasturtteuhtihhclelotaeeivgfpotaeunailnrl.xycbtpeheNaraernyosneaeeclcrerr,reirfveaneieldnvdeddieestn,reoiuoindnrer /

DECISION CTA Case No. 97S9 w(r2er)tiutyrinneagfrlwsiediatfhsthetrohwethiCnegopmaanymmoivseesnritopanoyefmrtheanectltsaahixamlol frboepr eccnoraenldstiyidt:eoPrerrodrveiadfseudn,a dhwowwrietivtteehrn,intchltaawtimoa for credit or refund." (Emphasis added) "SEC. 229. Recovery of Tax Erroneously or Illegally Collected.- No suit or piicerplneroxlrotfeocleucglcereneaesncedlesaldtdiyeloviindnreargglcesywrsvsmeheeiodaastnirhlystlueoebhibdunaeetstommaarbaxnaaeucyiietnonhhnttlmeaaolderiirnnaeucieeantltyydedfndt,,eefi,wlnrrioeohardwraenltwryoolhoefiefcngtrhaogeaonufdntryruhytlentlpfooyoCestrnuohcsammtuoahlcvltmelyheeairscetclasbltclixeeaoeo,gdvienme,penederreuyn;dneabtotrloiuttrflyoot,anhasnhoueayarccovvlhunesaeuasismtlmbubiyoieetnhfeeooaaonnrslrr been paid under protest or duress. In any case, no such suit or proceeding shall be filed after the epwprexeartpnyiutimatrrenlaetnytunicpot:lronaePnigmroowafvrihtddhtiewlcedehr,osehsfpoo(aw2ryo,e)mvferyree,aenfnuatTynrwhsdaassftourrmopthmecaerrdveetde,Chintseoiumnacdnghmaytipcsetaasayixuoom,sfneweepnrhtateyhamrpemaaptyeoe,nanmrtesatvohyceeflneaatfhrarwlcieyseietthtooaoaxfhufatttohveeerar been erroneously paid." (Emphases added) prmftttaeaiihadlmkusiyemnpesemgot.idc4nen1oboaiTndstegftehtTenretnahfiohstzttouleiefaevfbsdn,ceetcpaplfseawrxocaooi,lrymioavetlmihfiotmshiifnaesniteolngiwjmnntuacagasdaslsoitanciwfaittdifsmhratoaelelteatjhudocn(jecd2lrutalyi)bdeic-tmemaiyiaacarfexin:oulaafdrsolrcewotrlcajrrilurfeiftamiehriglipriifmilssneunedtwgnmniwaicdftteslttwahtluinsefyootct,tlnahehfraaldeyia(lnej2,nude)cpdadioateniwdyhucrdwemieiiratoatrhilstidrthnipsh.cnuoirilsesnaffttmirTwrmltaoaihsaotwmm,iuetvu.cte(ehr2Chlet)iiBhsnolcyypeeuolCeasertoasihtrodmrriuocasocotardlefuftawn,ritntomhihotaoomahesnfsft jurisdiction to entertain the latter. eotarnrxeoantieloeoMnvu,isoeoldryreobowvyreitsrihl,oloemguteaht leloysftfacfitocouerltleroegchroytaeivndiga.nugthpnAoroornivtayt"use,ttrhoroonorsrniteyuoaplutlooosnwloevrpytirhlotlehepgeearrtltaeyxtca,oxnvo"eorritoys nsdeuoebwffijnehceitcatdhxeatiosss some other similar aspect is illegal.42 ! othnelyseusbTtjahebucltsis,FhfWothrTatthpietaihpdarsefastlielmnuetnlycdleaflirimetdhfeiotsrabrreoefvfuuenn-dsdtacttloaeidmprd,oeistfpimneirut,isotpnleitkoietfiwo"ineseerrrpomrnoeuvoseut stnhooatrt illegal tax". 41 Commissioner of Internal Revenue vs. San Miguel Corporation, et seq., G.R. Nos. 180740 and 180910, November 11, 2019. Corporation, G.R. No. 188497, Revenue vs. Ptlipinas Shell Petroleum DICTIONARY, Fifth Edition, p. 42 Commissioner ofInternal definition provided in BLACK'S LAW April 25, 2012, citing the 486.

DECISION crA Case No. 9759 Petitioner complied with the two- year prescn'ptive period under the Jaw. cpcbaoledeatumfiiomptiironoeinnIbsnetotprrhtatahihthysiisvamiedCcneaonucstultneahr,toieitmtlnh4oJeJa4anadBnnmfulouJlaieaaTnrdnryiryusptoa2r2arna99yit,di,vO2a22e0cn061t,1dao86nbr,2.e4de03amr1t8ijC2uttth,deoweiduc2eni0etar1toaeli7rntllgihweeaevsitnttewB,hdlsioIw.nRthiyteetthhhaCierenslseuFawbtfrW wrslhoyeoi,mqcf-hyuopeesneatnuotrtcitthhifpaeoiplednefpraeiiertiroesta'sdst,l prescribed by law. The subject FWT has been erroneously or illegaUy paid or coUected. Section 28(B)(5)(a) of the NIRC of 1997, as amended, provides as follows: "SEC. 28. Rates ofIncome Tax on Foreign Corporations.- XXX XXX XXX (B) Tax on Nonresident Foreign Corporation.- XXX XXX XXX (5) Tax on Certain Incomes Received by a Nonresident Foreign Corporation.- rinatteereosft(atw)oneInnttfyeorreepsiegtrnocennloFtaon(r2se0ig%cno) nLitsoraahcetnersde.b-yoAnimfoipnraolsaweftdietrhohnAoultdghiuensgtamta1,xou1an9tt8t6ho;e"f (Emphasis added) Relative thereto, Section 2.57-1(1)(5) of Revenue Regulations (RR) No. 2-98, as amended, reads: "Sec. 2.57-1. Income Payments Subject to Final Withholding Tax. - The following forms of income shall be subject to fmal withholding tax at the rates herein specified: XXX XXX XXX (I) Income Derived FfroolmlowaiilnSgousrcheasllWbztehinsutbhejePchtiltzoppifniensalbywNitohnh-Roelsdidinengt Corporation. - The 1 Foreign 43 Exhibit "P-12", Docket- Vol. 2, pp. 571 to 574. Par. 6, Statement of Facts, JSFI, Docket- Vol. 44 Exhibit "P-13", Docket- Vol. 2, pp. 575 to 582; 1, p. 313.

DECISION CTA Case No. 9759 tax based on the gross amount of income and at the rate of tax prescribed therefor: XXX XXX XXX (5) Interest on foreign loans contracted on or after August 1, 1986 - Twenty percent (20%)". (Emphases added) Based on the foregoing proVIsions, the law requires that interest on foreign loans contracted on or after August 1, 1986, is subject to income tax, and must be subject to FWT, at the rate of 20%. Relative thereto, Section 32(A)(4), and (B)(S) of the NIRC of 1997 provides as follows: "SEC. 32. Gross Income.- (A) General Definition. - Except when otherwise provided in this Title, gross income means all income derived from whatever source, including (but not limited to) the following items: XXX XXX XXX (4) Interests; XXX XXX XXX (B) Exclusions from Gross Income. - The following items shall not be included in gross income and shall be exempt from taxation under this Title: XXX XXX XXX (5) Income Exempt under Treaty. - Income of any kind, to the extent required by any treaty obligation binding upon the Government of the Philippines." (Emphases supplied) Based on the foregoing provisions, ''interests" are regarded, in general, as covered under the definition of 'gross income"under the law. Said item, however, is excluded as such, and exempt from income taxation, to the extent required by any treaty obligation binding upon the Government of the Philippines. Thus, the above-stated 20% withholding tax rate for interests on foreign loans may be reduced to the extent required by a tax treaty entered into by the Government of the Philippines/

DECISION CfA Case No. 9759 TtNhreeethaPetryrelv)aI,ennnAdtisrotthnaiicnsoldefcFt1hai1essceRoa, lefppEweuvbthailsiticciioohonnfrewetrhaietdihnPsv,Rhoiielnsikppeppesciantrettthso, efaoTsraCfxtoohenleslvoAeownnvtosiIoi:ndncaonmbceeetw(oeRefnDP-otNhuebelteKhieTnragldxaoanmtdiosnoTfaatnhxde "ARTICLE 11 INTEREST 1. Interest arising in one of the States and paid to a resident of the State may be taxed in that other State. other 2. baHneondwefeaicvciecarol,rodswiuncnghertionotfettrhheeestilnmatweasryesaotlsftohtehbateatxtaSsxtoeadtceh,ianrbgtuheted State in which it if the recipient shall not exceed: arises is the a) 10 per cent of the gross amount if such interest is paid: (i) in connection with the sale on creclit of any industrial, commercial or scientific equipment, or (ii) on any loan of whatever other financial institution, kind granted by a bank, or any (iii) in respect of public issues of bonds, debentures or similar obligations. b) 15 per cent of the gross amount of the interest in all other cases. 3. Notwithstanding the provisions of paragraph 2: a)inSlGbtoteooacrntaveedlse;,t"ranau(mEdrtihmeseobipnnrehtigantosytiiufsntratheohdednareetode)orSoftfaostthhteheaeolSlrrtbaosetfiemsaexiapleanomrdliptpiotcabaifldlriogsimauntbirodteanisxvpiesioncifot ntohthfoaeatr aooubftlhitgoharetiTitoyShnettahotReefrsPteh-oNaefneGsdthhoaepvllraelbiradennmdeisxneenTmrtaepxostpfTfetrrhcoetaamttoyStftaiasxtaetihnobuortshnoacdftl,eaSatdpraeotteblhi.etaintctaiunlrtseeurbeodsrtivaoirstiihsoiennrgosirnimlooiclnaaelr The Secretary of Finance, through the BoTr,45 is authorized under Section 1 of Republic Act (RA) No. 245,46 as amended, to issue evidences of indebtedness such as treasury bills and bo nds to meet public expenditures or to provide for the purchase, redemption, or refunding of any obligations.47 It is authorized to borrow from time to time on the credit of the Republic of the tl 45 Section 1, Executive Order No. 449 (1997). TO MEET PUBLIC EBAXaNPnEcoNADCDITeTUOARrUoE,TSHeAOt aUR/T.IHZvIOsN.RGRIZeETpDHuEbBliYcSolEAfCWtRh,EeTAPANhRDilYipFpOOinRFesOF,TIeNHtAEaNR! .C,PEGU.RRTP.OONSoBE. OS1.R9R8O75W6, August 16, 2016. 46 47

DECISION CTA Case No. 9759 tPohiislsiupepitnheersesfuocrhevsiudmenocerssuomf isnadseibntehdisnoerssh er judgment may be necessary, and of the Philippine Government.48 Thus, the itrnhseuelatbhtijineeoctnetPrtheoTislt-AisBprpotaiinccndcleerssu,1i1anprg(ue3r)os(oaur)baalnoirgtfisattithnoieogntRhsthPee-oNrSfeeefcttrhhtoieeomrnlRaan3er2edp(suBebT)xl(eai5cmx)pTotorffefraottthhymee. Philippines, and income taxation NIRC of 1997, in awmannhondiurcemhitstbhTaarsaoesunibsrcoe-oaccnmnuaedlsplt(,o1upp)dateeyiytadaeintbaia,lrose.HnaseTSerphBm, eetCirh-cy,areinoiennnultdvuageaghoslelftiyetots.dh4f9ecitunhTset-voBafdaoriicnaoendu,svsJawPTlua-eMsBroooenfrpgdtrahsen,esewCTnih-tteBhadsoemnbBdyatsaucnrooikuntipNeaos.npAoes.r,f, JcapeNifanomenon.tuttrAueioipttar.uitloe,orhenysnnfmettHoe2eeroriSp0nn,ntfe1Bthtcr6iwPCoetiloo8matebdois,fms3eesD8nefSPu9oreneee4o,frtcdc41imute3o,c9trmo1hfoi4J.tfeub0iSa7ep0pen,eEs1erouc5ntfuan2iA5rttrr0ioi.iyt0co1temlic06nneeto;mestoaitruthAme.alneDennctoBmtdecguaRcNeornseontueteohmstepnd.esdotbroerce0NtBtnomor2odou6itP2.athT-pt30t0ee0ore311d2dn,s62w56a45A5i-te0ido807tnph41w,tRr7Jhi-2ith52Plee4lie54lp82cdm7.o4M4h0,r-,e0t25on,2s,w50rht0ttg7s%hhoo1.aiew9nwcfTohsgFifhrtrCoW:uoirtnphsshTeasp,esrpecttetaphaioinrieetuBntiropiantotnhonhetdeoenketr International Coupon Date Petitioner's Interest (Gross) Taxes Withheld Interest (Net of Security Holdings Tax) Identification Numbers ( I SIN~)_ PIBD0716A488 27 January 2016 I' 300,630,000.00 I' 10,522,050.00 I' 2,104,410.00 I' 8,417,640.00 PIBD0316D206 25 April 2016 802,940,000.00 6,523,887.50 1 ,304,777.50 5,219,110.00 PIBD0518E723 23 May 2016 328,914,000.00 3,494,711.25 698,942.25 2,795,769.00 PIBD0317E212 22 May 2016 67,910,000.00 976,206.25 195,241.25 780,965.00 PIBD0719K560 22 May 2016 894,540,000.00 3,466,342.50 PIBD1018A451 31 July 2016 33,220,000.00 17,331,712.50 195,167.50 13,865,3 70.00 PIBD0718H511 18 "-\ugust 2016 84,910,000.00 975,837.50 424,550.00 780,670.00 1'2,513,064,000.00 2,122,750.00 1'8,389,431.00 1,698,200.00 1'41,947,155.00 1'33,557,724.00 Re1n,HtSi2tBl0eC1mOT6OeonOttoOps rOooCDfv,eSepceeectthumitraiibtotienertsehreA3p1crB,cesooe2uTn0nrt1te6dNwiotcth.hoeh0vef2eol6rdli-lno0gw1th2ien4Ag8c4fdci-noo5ac5ulu7nmttfaeoxNnretsosth:.eon1p0e4rtih-o0ed00Jc1aonuupaanordny _ _ 1. _ BoTr Statements of Taxes Withheld o n the Coupon Due __ _o_n_th_e_T_-B_ond Holdings of HSBC - Custody Account,5~ 48 EESPxxaerhhc.tiibbi3oiitt,ns"S"1PtP,a-7-tR9e"A,m-aDN"enootoc.t ko2"ef4Pt5t--h9, -eaVcs"oF,laa. cDm2ts,oe,npcJpdkS.eeFdt5I-.,3V6Dotolo.c25k,3ep7tp-. .V5o4l.31t,op.55331.3. 49 50 51

DECISION CTA case No. 9759 which show the details of the T-Bonds recorded under the HSBC's Custody Account, including that of petitioner, which earned interest during the period January 1, 2016 to December 31, 2016. 2. BoTr Journal Entry Vouchers GEVs),52 which show the records of the BoTr of the remittances to BIR of the taxes withheld on interest in Government Securities; 3. Certificates of Final Tax Withheld at Source (BIR Form No. 2306) issued by BoTr;53 4. Certificate from the Revenue Accounting Division (RAD) of the BIR,54 confirming that the International Security Identification Numbers (ISIN) tn relation to the petitioner's claim were verified from the records of its Division and that the same were subjected to FWT. Based on the BoTr's Statements of Taxes Withheld on the Coupon Due on the T-Bond Holding of HSBC-Custody Account, the BoTr withheld final taxes in the total amount of P1 ,264,423,854.19 on its coupon payments of P6,357,169,545.53, and the net amount of P5,092,745,691.34 was remitted by the BoTr to HSBC's Demand Deposit Account for the period January 1, 2016 to December 31,2016, to wit: Exhibit Total Interest (Gross) Total Taxes Withheld Interest "P-9-a" p 1,665,999,193.58 p 333,199,838.78 (Net of Tax) "P-9-b" 4,655,438,876.95 924,077,720.41 p 1,332,799,354.80 "P-9-c" 35,731,475.00 7,146,295.00 Total p 6,357,169,545.53 p 1,264,423,854.19 3,731,361 '156.54 28,585,180.00 p 5,092,745,691.34 Likewise, the Certificates of Final Tax Withheld at Source (BIR Form No. 2306) show that the total tax withheld by the BoTr amounted to P1 ,264,423,854.19, to wit: Exhibit Payee Period Covered Tax Withheld "P-11-a" The Hongkong & Shanghai Banking !April1, 2016 to April30, f' 7,146,295.00 "P-11-b" Corp.- Custody Account-(104-0001) 2016 1,257,277,559.19 p 1,264,423,854.19 The Hongkong & Shanghai Banking January 1, 2016 to Corp. (Custody Account)- December 31, 2016 Tota!FWT Of the foregoing amounts, the net coupon entitlement of petitioner's Securities Account No. 026-012484-557 is P33,557,724.00, and the remainder belongs to the other clients of HSBC. 52 Exhibits "P-10-a" to "P-10-e", Docket- Vol. 2, pp. 554 to 566. 53 Exhibits "P-11-a" and "P-11-b", Docket- Vol. 2, pp. 569 to 570. 54 Exhibit "P-12", Docket- Vol. 2, pp. 571 to 574.

DECISION CTA Case No. 9759 To ascertain that the coupon entitlements of petitioner form part of the coupons shown in the BoTr's Statement of Taxes Withheld on the Coupon Due on the T-Bond Holdings of HSBC - Custody Account for the period January 1, 2016 to December 31, 2016, this Court matched the ISIN, coupon payment dates and interest rates of the T-Bonds reported therein with the !SIN/Security ID Nos., coupon payment dates, and interest rates stated in HSBC's Entitlement Report. Verily, the T-Bonds shown in the BoTr's Statement of Taxes Withheld are inclusive of the amounts corresponding to the T-Bonds shown in HSBC's Entitlement Report. Moreover, the BIR, through its RAD, issued a Certification55 confirming that the following ISINs of petitioner's securities, were verified from its records, viZ;: !SIN BoTrJEVNo. Date BIRJEVNo. Date PIBD0716A488 16-01-00608 29 January 2016 2016-01-000116 29 January 2016 PIBD0316D206 16-04-03245 2016-04-000908 PIBD0518E723 16-05-03945 29 April2016 2016-05-001156 29 April 2016 PIBD0317E212 16-05-03945 31 Mav 2016 2016-05-001156 31 May 2016 PIBD0719K560 16-05-03945 31 May 2016 2016-05-001156 31 May 2016 PIBD1018A451 16-08-0597 5 31 Mav 2016 2016-08-001983 31 May 2016 PIBD0718H511 16-08-06280 10 August 2016 2016-08-001983 31 August 2016 22 Au_EUst 2016 31 August 2016 In fine, considering that the interests on the T-Bonds are exempt from income tax under Section 32(B)(S) of the NIRC of 1997, in relation to Article 11 (3)(a) of the RP-Netherlands Tax Treaty, the aggregate amount of P8,389,431.00, representing 20% FWT on the said interest income earned by petitioner from January 2016 to August 2016, was erroneously collected, and thus, must be refunded in favor of petitioner. WHEREFORE, in light of the foregoing considerations, the present Petition for Review is GRANTED. Accordingly, respondent is ORDERED to refund or issue a TCC in favor of petitioner the amount of P8,389,431.00, representing erroneously collected FWT on the interest income earned 1n various T-Bonds issued by the BoTr from January 2016 to August 2016. SO ORDERED. ~- ~ """1~ MA. BELEN M. RINGPIS-LIBAN Associate Justice 55 Exhibit "P-12", Docket- Vol. 2, pp. 571 to 574.

DECISION CTA case No. 9759 WE CONCUR: ERL~.UY Associate Justice MARIA PEDRO ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. E~P.UY Associate Justice Chairperson CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. Presiding Justice