PREMIUMLEISURE AND AMUSEMENT, INC. (PLAI) v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC PREMIUMLEISURE AND CTA EB NO. 2712 AMU SEMENT, INC. (PLAI), (CTA Case No. 10060) Petitioner, Mem bers : DEL ROSARIO, P.J. - versus - RINGPIS-LIBAN, MANAHAN, BACORRO-VILLENA, MODESTO-SAN PEDRO, REYES-FAJARDO, CUI-DAVID, FERRER-FLORES, and ANGELES, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENEU, Respondent. )( - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - _.- - - - - - - - )( DECISION FERRER-FLORES, .f..: This is a Petition for Review filed by petitioner PremiumLeisure and Amusement, Inc. (PLAI) appealing the Court of Ta)( Appeals (CTA) First Division's Decision, dated May 26, 2022,1 (assailed Decision) and Resolution, dated October 18, 2022,2 (assailed Resolution) pursuant to Section 18, Republic Act (R.A.) No. 1125,3 as amended by R.A. No. 9282.4 \ ~ncurrence 1 Rollo, pp. 35-63. Penned by Associate Justice Marian Ivy F. Reyes-Fajardo with by Associate Justice Catherine T. Manahan but with Dissenting Opinion of Presiding Justice Roman G. Del Rosario. 2 Rollo, pp. 65-84. Penned by Associate Justice Marian Ivy F. Reyes-Fajardo with Dissenting Opinion of Presiding Justice Roman G. Del Rosario and Separate Opinion ofAssociate Justice Catherine T. Manahan. 3 AN ACT CREATING THE COURT OF TAX APPEALS. 4 AN ACT EXPANDING THE JURlSDlCTlON OF THE COU RT OF TAX APPEALS (CTA) ELEVATING ITS RANK TO THE LEVEL OF A COLLEGIATE COURT WITH SPECIAL JURISDICTION AND ENLARGING ITS MEMBETSHIP, AMENDING FOR THE PURPOSE CERTAIN SECTIONS OF REPUBLIC ACT NO. 1125 , AS AMENDED, OTHERWlSE KNOWN AS THE LAW CREATING THE COURT OF TAX APPEALS.

DECISION CTA EB NO. 27I2 (CTA CASE NO. I0060) Page 2 of26 THE PARTIES Petitioner is a domestic corporation duly organized and existing under the laws of the Philippines with principal office at 10/F One -E-Com Center, Harbor Drive, Mall of Asia Complex, CBP lA, Pasay City.5 Respondent is the duly appointed Commissioner oflnternal Revenue (CIR) vested under the appropriate laws with the authority to carry out the functions, duties, and responsibilities of said Office, including inter alia, the duty to act upon and approve claims for refund or tax credit pursuant to the provisions of the National Internal Revenue Code (NIRC) of 1997, as amended, and other tax laws, rules, and regulations.6 FACTUAL ANTECEDENTS Petitioner is one of the members of The Consortium composed of SM Investments Corporation, SM Land, Inc., SM Hotels Corporation, SM Commercial Properties, Inc., SM Development Corporation, and petitioner PLAI. On December 12, 2008, the Philippine Amusement and Gaming Corporation (PAGCOR) granted a Provisional License7 to The Consortium to establish and operate casinos in the project8 located within the Bagong Nayong Pilipino Entertainment City Manila. On October 25, 2012, a Cooperation Agreemene was entered into among SM Investments Corporation (for itself and on behalf of the other companies of the SM Group), Belle Corporation, petitioner PLAI, 10 and MCE Leisure (Philippines) Corporation [for itself and on behalf of MCE Holdings (Philippines) Corporation and MCE Holdings No.2 (Philippines) Corporation] 11 to regulate the relationship among the parties as Licensees and to provide for the contribution of certain amounts to the project, in each case on and from closing. MCE Leisure (Philippines) Corporation (MCE Leisure) was irrevocably designated as the special purpose vehicle and the \ 5 Paragraph 2, The Parties, Petition for Review, Rollo, p. 6. 6 Paragraph 3, Ibid. 7 Exhibit "P-4", Docket- Vol. Ill, pp. I595-I605. 11 "Project" means the development within the Bagong Nayong Pilipino Entertainment City Manila specifically located at the "SM Mall of Asia Complex"./d., p. I595. 9 Exhibit '�P-7", Docket- Vol. Ill, pp. I605-1669. 10 Referred to as the Philippine Parties, !d., p. I605. 11 Referred to as the MCE Parties, Ibid.

DECISION CTA EB NO. 2712 (CTA CASE NO. 10060) Page 3 of26 sole and exclusive representative of the Licensees in connection with the casino license and the operation and management of the project. 12 On January 28, 2013, an Amended Certificate of Affiliation and Provisional License 13 was issued by PAGCOR certifying that The Consortium, composed (this time) of SM Investments Corporation, petitioner PLAI, Belle Corporation, MCE Leisure, MCE Holdings (Philippines) Corporation, and MCE Holdings No. 2 (Philippines) Corporation, will be the co-licensees and holders of the Provisional License, dated December 12, 2008, previously issued by PAGCOR in accordance with Presidential Decree (P.D.) No. 1869, 14 as amended by R.A. 9487, 15 and that the Licensee is entitled to the customs duties and tax exemptions specified under Title IV, Section 13 of the PAGCOR Charter, as amended. The Affiliation and Provisional License applies to casinos located in the Bagong Nayong Pilipino Manila Bay Entertainment City, Parafiaque City, and in the Newport City Integrated Resort, Pasay City. 16 On March 13, 2013, The Consortium executed an Operating Agreement17 appointing MCE Leisure as special purpose entity, pursuant to the Cooperation Agreement, 18 to operate and manage the project for the purpose of generating revenue. 19 MCE Leisure undertakes to determine and distribute to petitioner a variable amount as the latter's share in the gaming revenues based on a payment formula. 20 On April 17, 2013, the Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) No. 33-2013 21 to clarify the income tax and franchise tax due from PAGCOR and its contractees and licensees in line with the enactment ofR.A. No. 933722 which removed PAGCOR from the list of exempt entities under Section 27(C) of the NIRC of 1997, as amended. The said RMC No. 33-2013 provides that PAGCOR and its contractees and licensees authorized to perform gambling casinos, gaming clubs and other similar recreation or amusement places, and gaming pools are subject to income tax under the NIRC of 1997, as amended. ~ 12 Section 3.02(a)(i), and (iii), !d, p. 1609. 13 Exhibit "P-5", Docket- Vol. Ill, p. 1605. 14 CONSOLIDATING AND AMENDING PRESIDENTIAL DECREE NOS. 1067-A, A067-B, 1067-C, 1399 AND 1632, RELATIVE TO Tille FRANCHISE AND POWERS OF THE PHILIPPINE AMUSEMENT AND GAMING CORPORATION (PAC;COR). 15 AN ACT FURTHER AMENDING PRESIDENTIAL DECREE NO. 1869, OTHERWISE KNOWN AS PAGCOR CHARTER 16 Exhibit "P-5", supra. 17 Exhibit "P-9", Docket- Vol. III, pp. 1671-1696. 18 /d.,p.l672. 19 Ibid. 20 Exhibit "P-9-a", Docket- Vol. Jll, pp. 1697-1705. 21 Income Tax and Franchise Tax Due From the Philippine Amusement and Gaming Corporation (PAGCOR), Its Contractees and Licensees. 22 AnActAmendingSections27,28,34.106.107.108, 109,110.111.112.113,114.116.117.119,121, 148. 151. 236, 237 and 288 of the National Internal Revenue Code of 1997, as Amended. and for Other Purposes.

DECISION CTA EB NO. 2712 (CTA CASE NO. 10060) Page 4 of26 On December 20, 2014, the Supreme Court, in the case of Philippine Amusement and Gaming Corporation vs. Bureau of Internal Revenue (PAGCOR case),23 pronounced that the PAGCOR Charter remains in effect and the income derived by it from gaming operations remains subject to the five percent (5%) franchise tax, in lieu of all other taxes. On April 29, 2015, PAGCOR issued a Gaming License24 to The Consortium applicable to the casinos located in the Entertainment City, Paraiiaque City, and in the Newport City Integrated Resort, Pasay City, specifically to the Licensees' casino located along Asean Avenue and Roxas Boulevard, Tambo, Paraiiaque City, with the brand name City of Dreams Manila. The Gaming License is valid until July 11, 2033.25 On August 10, 2016, the Supreme Court promulgated Bloomberry Resorts and Hotels, Inc. vs. Bureau of Internal Revenue26 (Bloomberry case), confirming that the tax exemption privilege of PAGCOR from all other taxes, including corporate income tax realized from the operation of casinos, inures to the benefit of its contractees and licensees upon payment of the five percent (5%) franchise tax. For calendar year (CY) 2016, petitioner filed its first, second, and third quarterly income tax returns on May 26, 2016, August 25, 2016, and November 28, 2016, respectively, while the 2016 annual income tax return (AITR) was filed on April 7, 2017, all through the BIR Electronic Filing and Payment System (eFPS)Y Petitioner subjected its gaming revenue share to corporate income tax in compliance with RMC No. 33-2013. Based on the aforementioned pronouncements of the Supreme Court, petitioner, on February 14, 2019, filed a letter dated January 31, 2019 to claim the refund of its alleged erroneously paid income tax for CY 2016 in the amount of 1"98,851,263.00.28 The claim for refund was amended on April4, 2019 to increase its claim for refund to Pl15,384,991.00.29 On April 6, 2019, petitioner filed the Petition for Review with the Court in Division.30 On the other hand, respondent filed his Answer on July 23,201931 and an Amended Answer on July 30,2019.32 "\ 23 G.R. No. 215427, December 10,2014. 24 Exhibit �'P-6", Docket- Vol. III, p. 1605. 25 Ibid. 26 G.R. No. 212530, August 16,2016. 27 Exhibits "P-14" to "P-17", Docket- Vol. I11, pp. 1824-1857. 28 Exhibit"P-20". Docket- Vo\.111, pp. !942-194R. 29 Exhibit "P-2 I", Docket- Vol. III, pp. 1949-1951. Jo Docket- Vol. I, pp. 9-21. 31 Docket- Vol. I, pp. 457-465. 32 Docket- Vol. I, pp. 476-490.

DECISION CTA EB NO. 2712 (CTA CASE NO. 10060) Page 5 of26 After the case had undergone trial, the CTA First Division rendered its decision on May 26, 2022 dismissing the petition for lack of merit, the dipositive portion of which reads: WHEREFORE, in light of the foregoing considerations, the instant Petition for Review is DISMISSED for lack of merit. SO ORDERED. Unsatisfied, petitioner filed its Omnibus Motion (I) Motion for Reconsideration (Re: Decision dated May 26, 2022) (2) Urgent Motion to Reopen Case on June 23, 2022;33 however, the Court a quo, denied the same in the now assailed Resolution, thefallo of which reads: WHEREFORE, in light of the foregoing considerations, the Court finds no compelling reason to reconsider or modify the assailed Decision. Petitioner's Omnibus Motion (1) Motion for Reconsideration (Re: Decision dated May 26, 2022 (2) Urgent Motion to Reppen Case is DENIED for lack of merit. SO ORDERED. Having failed to obtain an affirmative relief from the Court in Division, petitioner filed the instant Petition for Review on November 25, 202234 praying that this Court reverse and set aside the assailed Decision and Resolution. On the other hand, respondent, in his Comment [Re: Petition for Review dated 9 November 2022}, prays that this Court render judgment denying the petition and affirming the assailed Decision and Resolution.35 This case was submitted for decision on March 22, 2023.36 ISSUES 1. Whether petitioner, as licensee of PAGCOR, is exempt from payment of income tax; and, 2. Whether petitioner is entitled to its claim for refund or issuance of tax credit certificate m the amount of P115,384,991.00 allegedly representing erroneously paid income tax for CY 2016. \ 33 Docket- Vol IV, pp. 2049-2066. 34 Rollo, p. 27. " Rollo, pp. 98-99. 36 Resolution dated March 22, 2023, Rollo. pp. 103-105.

DECISION CTA EB NO. 2712 (CTA CASE NO. 10060) Page 6 of26 Petitioner's arguments: Petitioner, as licensee of PAGCOR, is entitled to the tax exemption under Section 13(2) of P.D. No. 1869; thus, it is entitled to the refund of erroneously paid income tax for CY 2016. Petitioner was able to establish that it remitted the license fees to PAGCOR, which fees were inclusive of the franchise tax. Assuming arguendo that it failed to prove PAGCOR's remittance to the National Government of the five percent (5%) franchise tax, jurisprudential rulings only require proof of payment of five percent (5%) franchise tax by the licensees or contractees. Respondent's counter-arguments: Respondent maintains that the Court in Division correctly denied the original petition. Even assuming that petitioner is exempt as a co-licensee or grantee of PAGCOR, petitioner is not entitled to the refund or issuance of a tax credit certificate because it has not proven its entitlement thereto. RULING OF THE COURT EN BANC We find merit in the instant Petition for Review. Timeliness of the Petition for Review Before proceeding to the merits of the arguments of the parties, the Court En Bane deems it necessary to delve on the timeliness of the instant Petition for Review. Records show that, on June 8, 2022, petitioner received a copy of the assailed Decision of the Court in Division to which petitioner timely filed its Omnibus Motion: (1) Motion for Reconsideration (Re: Decision dated May 26, 2022; and, (2) Urgent Motion to Reopen Case on June 23, 2022. On October 18, 2022, the Court in Division issued the assailed Resolution denying petitioner's Omnibus Motion which was received by the latter on October 27, 2022. Consequently, petitioner had fifteen (15) days from its receipt, or until November 11, 2022, within which to file a petition for review before the CTA En Bane. On November 11, 2022, petitioner filed a Motion for Extension ofTime to File Petition for Review seeking an additional period of thirty (30) days, or \

DECISION CTA EB NO. 2712 (CTA CASE NO. 10060) Page 7 of26 until November 26, 2022, within which to file the petition.37 The Court En Bane, however, granted a final and non-extendible period of fifteen (15) days only from November II, 2022, or until November 26, 2022 to file its Petition for Review pursuant to Section 3(b), Rule 8 of the Revised Rules of the Court of Tax Appeals (RRCTA). 38 On November 25, 2022, petitioner timely filed the instant Petition for Review. 39 We shall now proceed to the merits of the case. The exemption ofPAGCORfrom income tax, as a holder ofa franchise under P.D. No. 1869, inures to the benefit ofits licensees and contractees, such as petitioner. In the assailed Resolution, the Court in Division ruled that petitioner is not entitled to its claim for refund and that, as licensee of PAGCOR, which operates its own casino, petitioner is not entitled to the tax incentives granted to PAGCOR. The Court a quo cited the Supreme Court case of Thunderbird Pilipinas Hotels and Resorts, Inc. vs. Commissioner of Internal Revenue,40 which pronounced that PAGCOR' s exemption extends only to entities or individuals with whom PAGCOR has a contractual relationship in connection with its casino operations but not to its licensees. Petitioner argues otherwise. Petitioner alleges that, under Section 13(2) of P.D. No. 1869, the exemption privilege ofPAGCOR from all kinds of taxes upon payment of the five percent (5%) franchise tax inures to the benefit ofPAGCOR's contractees and licensees. Corollarily, as a licensee of PAGCOR, the tax exemption privilege granted to PAGCOR should also be accorded it. Petitioner cites the PAGCOR case and the Bloomberry case to bolster its claim. We agree with petitioner. The provisions of Section 13(a) and (b) ofP.D. No. 1869 are clear. The exemption of PAGCOR and those which PAGCOR has a contractual 37 Rollo, pp. 1-3. 38 Minute Resolution, dated November II, 2022, Rollo, p. 4. 39 Rollo, pp. 5-28. 40 G.R. No. 211327, November II, 2020.

DECISION CTA EB NO. 27I2 (CTA CASE NO. I0060) Page 8 of26 relationship with from the payment of tax of any kind or form, income or otherwise, as well as fees, charges or levies of whatever nature, whether national or local, except the five percent (5%) franchise tax, is provided for by law, to wit: SEC. 13. Exemptions. (I) Customs duties. taxes and other imposts on importations.- xxx (2) Income and other taxes.- (a) Franchise Holder.� No tax of any kind or form, income or otherwise, as well as fees, charges or levies of wltatever nature, whether National or Local, shall be assessed and collected under this Franchiseji�om the Corporation: nor shall anyfin�m o( lax or charge attach in any way /o the earnings o( the Cmporalion except a Franchise Tax o.f.five (5%) percent of the gross revenue or earnings derived by the Cot710ration from its operation under this Franchise. Such tax shall be due and payable quarterly to the National Govemment and shall be in lieu of all kinds of taxes. levies, fees or assessments of any kind. nature or description, levied. established or collected by any municipal. provincial. or national government authority. (b) Others: The exemptions herein granted for earnings derived from the operations conducted under the franchise specifica!lyfi'om the payment o(any lax. income or otherwise. as well as any.filrm ofcharges. fees or levies. shall inure to the benefit of and extend to corporation(5), association(5), agency(ies), or individual(\) witlt wltom the Corporation or operator ltas any contractual relations/tip in connection witlt the operations of the casino(s) authorized to be conducted under this Franchise and to those receiving compensation or other remuneration from the Corporation or operator as a result of essential facilities furnished and/or teclmical services rendered to the Corporation or operator. xxx (Italic and boldfacing supplied) The exemption of PAGCOR and its licensees and contractees from payment of all kinds oftaxes, except the five percent (5%) franchise tax, has been upheld by the Supreme Court in the Bloombeny case, where it disposed of the issue in this manner: The Court through Justice Diosdado M. Peralta, categorically followed what was simply provided under the PAGCOR Charter (PO No. 1869, as amended by RA No. 9487), by proclaiming that despite amendments to the NIRC of 1997, the said Charter remains in effect. Thus, income derived by PAGCOR from its gaming operations such as the operation and licensing of gambling casinos, gaming clubs and other similar recreation or amusement places, gaming pools and related operations is subject only to 5% franchise tax, in lieu of all other taxes, including corporate income tax. The Court concluded that the CIR committed grave abuse of discretion amounting to lack or excess of jurisdiction when it issued RMC No. 33-2013 subjecting both income from gaming operations and other related se��vices to corporate income tax and 5"/o franchise tax considering that it unduly expands the Court's Decision \

DECISION CTA EB NO. 2712 (CTA CASE NO. 10060) Page 9 of26 dated 15 March 2011 without due process, which creates additional burden upon PAGCOR. Noticeably, however, the High Court in the abovementioned case intentionally did not rule on the issue of whether or not PAGCOR's tax privilege of paying only the 5% franchise tax in lieu of all other taxes inures to the benefit of third parties with contractual relationship with it in connection with the operation of casinos, such as petitioner herein. The Court sitting En Bane simply stated that: The resolution of the instant petrt10n is limited to clarifying the tax treatment of [PAGCOR's] income vis-a- vis our Decision dated March 15, 2011. This Decision (dated 10 December 2014) is not meant to expand our original Decision (dated 15 March 20 II) by delving into new issues involving [PAGCOR's] contractees and licensees. For one, the latter are not parties to the instant case, and may not therefore stand to benefit or bear the consequences of this resolution. For another, to answer the fourth issue raised by [PAGCOR] relative to its contractees and licensees would be downright premature and iniquitous as the same would effectively countenance sidesteps to judicial process.1221 Bearing in mind the parties involved and the similarities of the issues submitted in the present case, we are now presented with the prospect of finally resolving the confusion caused by the amendments introduced by RA No. 9337 to the NIRC of 1997, and the subsequent issuance of RMC No. 33-2013, affecting the tax regime not only of PAGCOR but also its contractees and licensees under the existing laws and prevailing jurisprudence. Section 13 of PD No. 1869 evidently states that payment of the 5% franchise tax by PAGCOR and its contractees and licensees exempts them from payment of any other taxes, including corporate income tax, quoted hereunder for ready reference: Sec. 13. Exemptions.- xxxx (2) Income and other taxes. - (a) Franchise Holder: No tax of any kind or form, income or otherwise, as well as fees, charges or levies of whatever nature, whether National or Local, shall be assessed and collected under this Franchise from the Corporation; nor shall any form of tax or charge attach in any way to the earnings of the Corporation, except a Franchise Tax of five (5%) percent of the gross revenue or earnings derived by the Corporation from its operation under this Franchise. Such tax shall be due and payable quarterly to the National Government and shall be in lieu of all kinds of taxes, levies, fees or assessments of any kind, nature or description, levied, established or collected by any municipal, provincial, or national government authority. \

DECISION CTA EB NO. 27I2 (CTA CASE NO. I0060) Page IO of26 (b) Others: The exemptions herein granted for earnings derived from the operations conducted under the franchise specifically from the payment of any tax, income or otherwise, as well as any form of charges, fees or levies, shall inure to the benefit of and extend to corporation(s), association(s), agency(ies), or individual(s) with whom the Corporation or operator has any contractual relationship in connection with the operations of the casino(s) authorized to be conducted under this Franchise and to those receiving compensation or other remuneration from the Corporation or operator as a result of essential facilities furnished and/or technical services rendered to the Corporation or operator. (Emphasis and underlining supplied) As previously recognized, the above-quoted provision providing for the said exemption was neither amended nor repealed by any subsequent laws (i.e. Section l ofR.A. No. 9337 which amended Section 27(C) of the NIRC of 1997); thus, it is still in effect. Guided by the doctrinal teachings in resolving the case at bench, it is without a doubt that, like PAGCOR, its contractees and licensees remain exempted from the payment of corporate income tax and other taxes since the law is clear that said exemption inures to their benefit. We adhere to the cardinal rule in statutory construction that when the law is clear and free from any doubt or ambiguity, there is no room for construction or interpretation. As has been our consistent ruling, where the law speaks in clear and categorical language, there is no occasion for interpretation; there is only room for application. As the PAGCOR Charter states in unequivocal terms that exemptions granted for earnings derived from the operations conducted under the franchise specifically from the payment of any tax, income or otherwise, as well as any form of charges, fees or levies, shall inure to the benefit of and extend to corporation(s), association(s), agency(ies), or individual(s) with whom the PAGCOR or operator has any contractual relationship in connection with the operations of the casino(s) authorized to be conducted under this Franchise, so it must be that all contractees and licensees ofPAGCOR, upon payment of the 5% franchise tax, shall likewise be exempted from all other taxes, including corporate income tax realized from the operation of casinos. For the same reasons that made us conclude in the l 0 December 2014 Decision of the Court sitting En Bane in G.R. No. 215427 that PAGCOR is subject to corporate income tax for "other related services", we find it logical that its contractees and licensees shall likewise pay corporate income tax for income derived from such "related services." Simply then, in this case, we adhere to the principle that since the statute is clear and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation. This is the plain meaning rule or verba legis, as expressed in the maxim index animi sermo or speech is the index of intention. 1241

DECISION CTA EB NO. 27 I2 (CTA CASE NO. I0060) Page II of26 Plainly, too, upon payment of the 5% franchise tax, petitioner's income from its gaming operations of gambling casinos, gaming clubs and other similar recreation or amusement places, and gaming pools, defined within the purview of the aforesaid section, is not subject to corporate income tax. In fact, the respondent confirms the exemption of PAGCOR and its licensees and contractees from the payment of taxes realized from the operation of casinos upon payment of the five percent (5%) franchise tax through the issuance ofRMC No. 32-2022 on March 29, 2022 banking on the wordings of Section 13 of P.D. No. 1869 and the ruling in the Bloomberry case, to quote: REVENUE MEMORANDUM CIRCULAR NO. 032-2022 SUBJECT : Clarifying the Tax Treatment of the Philippine Amusement and Gaming Corporation (PAGCOR), Its Licensees and Contractees TO The Philippine Amusement and Gaming Corporation (PAGCOR), Its Licensees and Contractees, Internal Revenue Officials, Employees and Others Concerned I. BACKGROUND XXX XXX XXX II. TAX TREATMENT OF PAGCOR XXX XXX XXX III. TAX TREATMENT OF PAGCOR's LICENSEES P.D. No. 1869, as amended, expressly provides that the payment of the five percent (5%) franchise tax of PAGCOR inures to the benefit of its Contractees and Licensees (Bloomberry Resorts and Hotels, Inc. v. BIR) viz: "SEC I3. Exemptions. - (2) Income and other taxes- (b) Others: The exemptions herein granted for earnings derived from the operations conducted under the franchise specifically ji'om the payment ofany tax, income or otherwise, as well as any form ofcharges, fees or levies, shall inure to the benefit of and extend to corporation(s), association(s), agency(ies), or individual(s) with whom the Corporation or operator has any contractual relationship in wnnection with the operations of the casino(s) authorized to be conducted under this Franchise and to those receiving compensation or \

DECISION CTA EB NO. 2712 (CTA CASE NO. 10060) Page 12 of26 other remuneration from the Corporation or operator as a result ofessentialfacilities furnished and/or technical services rendered to the Corporation or operator. The fee or remuneration offoreign entertainers contracted by the Corporation or operator in pursuance of this provision shall be free ofany tax. " Hence, following the ruling in Bloomberry, like PAGCOR, its Contractees and Licensees shall be exempt from the payment of comorate income tax realized from the operation of casinos upon payment of the five (5%) franchise tax since the law is clear that said exemption inures and extends to their benefit. xxx (Underlining supplied) A perusal of the records shows that petitioner is a holder of a Casino License41 granted by PAGCOR, pursuant to the Provisional License issued to The (original) Consortium on December 12, 2008.42 The Consortium is authorized to establish and operate casinos for both local and foreign patrons. Petitioner additionally presented the Amended Certificate of Affiliation & Provisional License issued by PAGCOR on January 13, 2013, this time, to The (second) Consortium, bearing a note that The Consortium will be the co- licensees and holders ofthe Provisional License issued on December 12, 2008. Petitioner likewise offered in evidence the Gaming License which was issued to The Consortium43 which authorized the operation of casinos located in the Entertainment City, Parafiaque City, and in the Newport City Integrated Resort, Pasay City, specifically to the casinos located along Asean Avenue and Roxas Boulevard, Tambo, Parafiaque City, with the brand name City of Dreams Manila. Having the Provisional License, the Amended Certificate of Affiliation & Provisional License, and the Gaming License, petitioner was able to prove that it is a licensee ofPAGCOR authorized to establish and operate casino(s) in different locations for both local and foreign patrons. As regards the application of the Thunderbird case to case at bar, which according to the Court a quo modifies the ruling in the Bloomberry case, in that PAGCOR' s exemption extends only to entities or individuals with whom PAGCOR has contractual relationship with in connection with its casino operations but not to its licensees, this Court adopts the explanation of Presiding Justice Roman G. Del Rosario in expounding the dissimilarity between the two case laws, as follows: While I am not unaware of the pronouncement of the Third Division of the Supreme Court in Thunderbird, with utmost respect, I am of the 41 Section l, Article IV, Exhibit �'P-4", Docket- Vol. Ill, p. 1595. " Exhibit "P-4", Docket- Vol. Ill, pp. 1595-1605. 43 Exhibit "P-6", Docket-� Vol. lll, p. 1605.

DECISION CTA EB NO. 2712 (CTA CASE NO. 10060) Page 13 of26 humble view that Thunderbird could not have reversed the doctrine laid down in Bloomberry which was also decided by the Third Division of the Supreme Court, albeit with different composition. Parenthetically, the doctrine in determining the taxation of income from gaming operations derived by contractees and licensees of PAGCOR, as laid down in Bloomberry, remains entitled to respect until and unless modified by the Supreme Court En Bane. Section 4(3), Article VIII of the 1987 Constitution is categorical. XXX XXX XXX Moreover, Thunderbird itself acknowledges that Bloomberry is not similar to Thunderbird as the facts in Bloomberry occurred after PD No. 1869 was amended by RA No. 9487. RA No. 9487, which took effect in 2007, granted PAGCOR the authority to license casinos and other gaming operations. Notably, the taxable year involved in Thunderbird is 2006 (or prior to the effectivity of RA No. 9487 in 2007) during which PAGCOR had no authority to license casinos and other gaming operations. Section 10 of PD No. 1869 prior to and after its amendment by RA No. 9487 is quoted hereunder: Section I 0 of PD No. 1869 Section 10 of PD No. 1869, as amended by RA No. 9487 "SEC. 10. Nature and Term of Franchise. - Subject to the terms SEC. I0. Nature and Term of and conditions established In this Franchise. - Subject to the terms Decree, the Corporation is hereby and conditions established Ill this granted for a period of twcnty-tlve Decree, the Corporation is hereby (25) years. renewable li.1r another granted from the expiration of its twenty-live (25) years. the rights, original tern1 on July lL 2008, privilege and authority to operate another period or twenty-live (25) and maintain gambling cas mos. years. renewable for another clubs and other recreation or twenty-live years, the rights, amusement places. sports. gaming privileges and authority to pools. J.e. basketball. football, operate and license gambling lotteries. etc. whether on land or casinos, gaming clubs and other sea, witbin the territorial similar recreation or amusement jurisdiction of the Republic or the places, gammg pools, I.C. Philippines. basketball. football. bingo, etc. except jai-alai, whether on land or sea, within the territorial jurisdiction of the Republic of the Philippines. Simply put, PAGCOR had no authority to license gambling casinos prior to 2007. Thunderbird Pilipinas Hotels and Resorts, Inc. (TPHRI) was then authorized by PAGCOR to construct and operate a casino complex pursuant merely to a Memorandum of Agreement dated April 11, 2006. Considering that TPHRI was not a licensee under Section 13(2)(b) of PD No. 1869, as amended by RA No. 9487, the tax exemption granted to licensees (as confirmed in Bloombeny) did not apply to TPHRI.

DECISION CTA EB NO. 2712 (CTA CASE NO. !0060) Page 14 of26 Indeed, a careful perusal of the following disquisition in Thunderbird readily reveals that the pronouncement therein pertains to TPHRI alone, as there is nothing in Thunderbird which suggests, even remotely, that the doctrine laid in Bloomberry is reversed or modified. It is downright obvious that the conclusions in Thunderbird applies to said case only under the specific circumstances therein obtaining. Pertinent portions of Thunderbird are quoted hereunder: XXX XXX XXX Indeed, in 2006, the operation of casinos was centralized into PAGCOR. In constructing and operating a casino complex pursuant to its April 11, 2006 Memorandum of Agreement with PAGCOR. TPHRI was not a licensee as contemplated under PD No. 1869, as amended by RA No. 9487. Thus, Thunderbird concluded that TPHRI does not fall within the purview of Section 13(2)(b) of PD No. 1869; consequently, TPHRI's revenues from its casino operations were not exempt from income tax. More importantly, it is worthy to note that the doctrine laid down in Bloomberry was reiterated in Commissioner of Internal Revenue vs. Travellers International Hotel Group, Inc. on May 3, 2021 or six (6) months after Thunderbird. In Travellers, which involves taxable year 2010 or after PD No. 1869 was amended by RA No. 9487, the Second Division of the Supreme Court was categorical: "Even assuming that the delegation of authority was valid, the CTA En Bane also correctly found that respondent's gaming revenues as a PAGCOR licensee were exempt from regular corporate income tax after payment of the five percent (5%) franchise tax per the Court's pronouncement in Bloomberry Resorts and Hotels, Inc. v. Bureau of Internal Revenue. Hence, the CTA En Bane correctly set aside the deficiency tax assessment against respondent." (Boldfacing and underscoring supplied). Prescinding from above, it is clear that the ruling in Thunderbird case does not apply to petitioner. The Bloomberry case is categorical in stating that the tax exemption privilege of PAGCOR inures to the benefit of its contractees and licensees. The records are clear that petitioner was granted a Provisional License on December 12, 2008 pursuant to PAGCOR's authority under P.D. No. 1869, as amended. Its tax exemption privilege was based on Section 13(2) ofP.D. No. 1869, in relation to Section 10 of the same decree, as amended by R.A. No. 9487, being a PAGCOR licensee. In effect, the amendment introduced by R.A. No. 9487 in Section 10 of P.D. No. 1869 grants the licensee the privileges and benefits accorded to PAGCOR with re'pect to t.x exemptioo ioceotiv" uod" the !ott"'' \

DECISION CTA EB NO. 27I2 (CTA CASE NO. I0060) Page IS of26 legislative franchise. It follows, therefore, as PAGCOR's licensee, petitioner enjoys the tax exemption benefits ofPAGCOR. Nevertheless, petitioner's claim cannot instantaneously be granted. Petitioner must comply with the requirements in claiming refund of erroneously paid income tax under the law and jurisprudence. Requisites for the recovery oftax erroneously collected Sections 204(C)44 and 22945 of the NIRC of 1997, as amended, govern the claim for refund of erroneously or illegally collected taxes. A reading of the said prov1s10ns shows the following are the pre- requisites that must be satisfied for such claim to prosper: 1) that an administrative claim for refund or credit must be filed with the BIR before filing a judicial claim with this Court, both within two (2) years from the date of payment of tax; and, 2) that the subject tax paid is an erroneous or illegal tax, that is, "one levied without statutory authority, or upon property not subject to taxation, or by some officer having no authority to levy the tax, or one which in some other similar aspect is illegal".46 44 SEC. 204. Authority of the Commissioner to Compromise/Abate and Refund or Credit Taxes.- The Commissioner may - XXX XXX XXX (C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion. redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided, however, that a return filed showing an overpayment shall be considered as a written claim for credit or refund. xxx 45 SEC. 229. Recovery of Tax Erroneously or Illegally Collected. - No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless ofany supervening cause that may arise after payment: Provided. hmr(!rer, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid. 46 Black's Law Dictionary, S'h Ed., p. 486 cited in Commissioner of Internal Revenue vs. Pilipinas Shell Petroleum Corporation. G.R. No. 188497, April25, 2012.

DECISION CTA EB NO. 27I2 (CTA CASE NO. I0060) Page 16of26 The administrative andjudicial claims were timely filed. In ACCRA Investments Corporation vs. The Honorable Court of Appeals, et al.,47 CIR vs. TMX Sales, Inc., et al.,48 and CIR vs. Philippine American Life Insurance Co., et al.,49 all cited in CIR vs. Court ofAppeals, et al. ,50 the two (2)-year prescriptive period for filing of claim for refund, both in the administrative and judicial levels, should be reckoned from the time the final adjustment return or AITR was filed, since it is only at that time when the corporate taxpayer will determine whether it paid an amount exceeding its annual income tax liability, to wit: xxx. In Commissioner ofInternal Revenue v. TMX Sales, Inc., this Court, in rejecting the contention that the period of prescription should be counted from the date of payment of the quarterly tax, held: ... [T]he filing of a quarterly income tax return required in Section 85 [now Section 68] and implemented per BIR Fonn 1702-Q and payment of quarterly income tax should only be considered mere installments of the annual tax due. These quarterly tax payments which are computed based on the cumulative figures of gross receipts and deductions in order to arrive at a net taxable income, should be treated as advances or pottions of the annual income tax due, to be adjusted at the end of the calendar or fiscal year. This is reinforced by Section 87 [now Section 69] which provides for the filing of adjustment returns and final payment of income tax. Consequently, the two-year prescriptive period provided in Section 292 [now Section 230 o[the Tax Codel should be computed from the time of filing the Adjustment Return or Annual Income Tax Return and final pavment of income tax. On the other hand, in ACCRA Investments Corporation vs. Court of Appeals, where the question was whether the two-year period ofprescription should be reckoned from the end of the taxable year (in that case December 31, 1981 ), we explained why the period should be counted from the filing of the final adjustment return, thus: Clearly, there is the need to tile a return first before a claim for refund can prosper inasmuch as the respondent Commissioner by his own rules and regulations mandates that the corporate taxpayer opting to ask for a refund must show in its final adjustment return the income it received from all sources and the amount of withholding taxes remitted by its withholding agents to the Bureau of Internal Revenue. The petitioner corporation filed its final adjustment return for its 1981 taxable year on April 15, 1982. In our Resolution dated April I 0, 1989 in the case of Commissioner ofInternal Revenue v. Asia Australia Express, Ltd. (G.R. No. 85956), we ruled that the two-vear prescriptive period within which to claim a retimd 47 G.R. No. 96322, December 20, 1991. 48 G.R. No. 83736, January 15, 1992. 49 G.R. No. 105208, May 29, 1995. 50 G.R. No. 117254, January 21, 1999.

DECISION CTA EB NO. 2712 (CTA CASE NO. 10060) Page 17 of26 commences to run, at the earliest. on the date o(the filing o(the adjusted final tax return. Hence, the petitioner corporation had until April 15, 1984 within which to file its claim for refund. XXX XXX XXX It bears emphasis at this point that the rationale in computing the two-year prescriptive period with respect to the petitioner corporation's claim for refund from the time it tiled its final adjustment return is the fact that it was only then that ACCRAIN could ascertain whether it made profits or incurred losses in its business operations. The "date of payment", therefore. in ACCRAIN's case was when its tax liability, ifany, (ell due upon its filing o(its final adjustment return on April 15, 1982. Finally, in Commissioner ofInternal Revenue v. Philippine American Life Insurance Co., we held: Clearly, the prescriptive period of two years should commence to run only fi-om the time that the refund is ascertained, which can only be determined afier a final adjustment return is accomplished. In the present case, this date is April 16, 1984, and two years from this date would be April 16, 1986. The record shows that the claim for refund was filed on December I 0, 1985 and the petition for review was brought before the CTA on January 2, 1986. Both dates are within the two-year reglementary period. Private respondent being a corporation, Section 292 [now Section 230] cannot serve as the sole basis for determining the two-year prescriptive period for refunds. As we have earlier stated in the TMX Sales case. Sections 68, 69, and 70 on Quarterly Corporate Income Tax Payment and Section 321 should be construed in conjunction with it. XXX XXX XXX Thus, it can be deduced from the foregoing that, in the context of �230, which provides for a two-year period of prescription counted "from the date of payment of the tax" for actions for refund of corporate income tax, the two-year period should be computed from the time of actual filing of the Adjustment Return or Annual Income Tax Return. This is so because at that point, it can already be determined whether there has been an overpayment by the taxpayer. Moreover, under �49(a) of the NIRC, payment is made at the time the return is filed. (Underscoring supplied) The Supreme Court explained, in the case of Metropolitan Bank & Trust Company vs. The CIR,51 the ratio decidendi in the above-cited cases wherein it ruled, viz: 51 G.R.No.l82582,Aprill7,2017.

DECISION CTA EB NO. 2712 (CTA CASE NO. I0060) Page 18 of26 [T]he cases cited by Metrobank involved corporate income taxes, in which the corporate taxpayer is required to file and pay income tax on a quarterly basis, with such payments being subject to an adjustment at the end of the taxable year. As aptly put in CIR v. TMX Sales, Inc., "payment of quarterly income tax should only be considered [as] mere installments of the annual tax due. These quarterly tax payments which are computed based on the cumulative figures of gross receipts and deductions in order to arrive at a net taxable income, should be treated as advances or portions of the annual income tax due, to be adjusted at the end of the calendar or fiscal year. x x x Consequently, the two-year prescriptive period x x x should be computed from the time of filing of the Adjustment Return or Annual Income Tax Return and final payment of income tax." Verily, since quarterly income tax payments are treated as mere "advance payments" of the annual corporate income tax, there may arise certain situations where such "advance payments" would cover more than said corporate taxpayer's entire income tax liability for a specific taxable year. Thus, it is only logical to reckon the two (2)-year prescriptive period from the time the Final Adjustment Return or the Annual Income Tax Return was ruled, since it is only at that time that it would be possible to determine whether the corporate taxpayer had paid an amount exceeding its annual income tax liability. Applying the above jurisprudence to the case at bar, petitioner filed its AITR for CY 2016 on April 7, 2017. Counting two (2) years from April 7, 2017, petitioner had until April 7, 2019, within which to file its claim for refund. Since petitioner filed its administrative claims for refund on February 14, 2019 and April 4, 2019 while the judicial claim was filed with the Court in Division on April 5, 2019, both claims were filed within the two (2)-year prescriptive period. Having established that the administrative and judicial claims for refund were timely filed, petitioner must next prove its payment of the five percent (5%) franchise tax on gross gaming revenue earned from casino operations as a condition sine qua non for its entitlement to the exemption from payment of income tax. Petitioner paid the five percent (5%) franchise tax. In the assailed Decision, the Court in Division ruled that petitioner failed to prove its entitlement to the claim for refund because it failed to establish that PAGCOR remitted the franchise tax to the National Government. The Court a quo held that it is the payment of the franchise tax by PAGCOR that will create the tax exemption incentives under its franchise which may inure to the benefit of its contractees and licensees. Petitioner opines otherwise. Petitioner, as part of The Consortium, earns gammg revenues in the operation of casino located in the City of Dreams ~.

DECISION CTA EB NO. 27I2 (CTA CASE NO. I0060) Page I 9 of26 Manila. Pursuant to the Operating Agreement, MCE Leisure distributes to petitioner variable amounts constituting its (petitioner) share in the gaming revenues of the City of Dreams Manila. The amounts received by petitioner from MCE Leisure were already net of the applicable PAGCOR license fees which were remitted by the MCE Leisure to PAGCOR. Petitioner avers that the remitted license fees toPAGCOR were inclusive ofthe five percent (5%) franchise tax and that PAGCOR is the one responsible of remitting the franchise tax to the National Government pursuant to Section 21, Article IV ofthe Provisional License. We agree with petitioner. Based on Section 13 of P.D. No. 1869, the Bloomberry case, and the Provisional License, the requirements that must be established by petitioner are: (1) that it is a licensee of PAGCOR; (2) that it derives income from the casino operations as a licensee; (3) that it pays license fee, which must be inclusive of the five percent (5%) franchise tax; and, (4) that it paid income tax for CY 2016. Under Section 20, in relation to Section 21, of the Provisional License, petitioner is required to pay license fee inclusive of the five percent (5%) franchise tax to PAGCOR and it is PAGCOR which is responsible in remitting the five percent (5%) franchise tax to the National Government, to quote: SECTION 20. LICENSE FEE. As an essential condition for the License to be issued by PAGCOR to LICENSEE to establish and operate the Casino within the Project, LICENSEE must remit to PAGCOR on monthly basis, starting from the date the Casino commences operation, the following License Fees, in lieu of all taxes with reference to the Income Component of the Gross Gaming Revenues: (a) 15% of Gross Gaming Revenues generated from High Roller tables; (b) 25% of Gross Gaming Revenues generated from non-High Roller Tables; (c) 25% of Gross Gaming Revenues generated from slot machines and electronic gaming machines; (d) 15% of Gross Gaming Revenues generated from Junket Operation. XXX XXX XXX SECTION 21. FRANCHISE TAX. PAGCOR shall pay the franchise tax on actual Gross Gaming Revenues generated by the Casino ('Franchise Tax'). The License Fees as stipulated under Section 20. hereof is inclusive of the Franchise Tax. As provided under the PAGCOR Charter. the Franchise Tax shall be due and payable quarterly to the national government by PAGCOR. (Underlining supplied) \

DECISION CTA EB NO. 2712 (CTA CASE NO. 10060) Page 20 of26 The PAGCOR's obligation to pay the franchise tax to the National Government on a quarterly basis is mandated under Section 13(2)(a) ofP.D. No. 1869. As a franchise holder, it is PAGCOR that is required to pay the five percent (5%) franchise tax to the National Government pursuant to P.D. No. 1869 while the licensee is obligated to pay license fees based on gross gaming revenues pursuant to the Provisional License granted by PAGCOR. Records show that petitioner earned a net gaming revenue share, which was determined in accordance with the Operating Agreement with MCE Leisure, using the following formulas: For Mass Market Payment: 52 !\lass :\Iarket Gross Win less the PAGCORLicense Fee (Mass Market) .\'lass :\Iarkct :\'et Win 15% ofMass Market less Management Allowance (2%) (Mass Market) Net Win (PLAI NW) Mass .\'larkct !'let \Vin after Management Allm\ance (i\1as s 1\-larkct) less Mass Market Casino Operating Expenses .\lass 1\..Jarket Casino Gaming EBITDA less Deductible (7%) (Mass Market) l\lass .\larkct Casino Gaming EBITDA after Deductible (l\"lass 50% of Mass Market Market) Cas ina Gaming EBITDA after For VIP Payment: 53 Deductible (Mass Markel) (PLAI MM VIP Market Gross Win EBITDA) less PAGCORLicense Fee (VIP) Less Commissions and Incentives and VIP Bad Debt Expenses 2% of VIP Net Win VIP Net Win (PLAI VIP NW) less Management Allowance (2%) (VIP) \1P Net Win after :\-lanagement Allowance less VIP Operating Expenses VIP Casino Gamin2: EBITDA 50% of VIP Casino less Deductible (7%) (VIP) Gaming EBITDA after Deductible VIP Casino Gaming EBITDA after Deductible (VIP) (VIP)(PLA I VIP EBITIJA) 52 Docket- Vol. III. p. 1698. 53 Docket- Vol. III, p. 1700.

DECISION CTA EB NO. 2712 (CTA CASE NO. 10060) Page 21 of26 Pursuant to Schedule 254 ofthe Operating Agreement, the monthly Mass Payment to petitioner shall be the higher of (1) fifteen percent (15%) of Mass Market Net Win and (2) fifty percent (50%) of Mass Market Casino Gaming Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) after Deductible (Mass Market).55 On the other hand, the monthly VIP Payment is computed with the higher of (1) two percent (2%) of VIP Net Win and (2) fifty percent (50%) of VIP Casino Gaming EBITDA after Deductible (VIP), less the sum of the monthly VIP Payments made during the relevant fiscal period to date. 56 A scrutiny of the above formulae shows that the license fees due to PAGCOR are being deducted from the mass and VIP markets gross wins before computing the petitioner's share. This means that, when petitioner receives its net share in the gross gaming revenue of the casino, the license fee, which is inclusive of the five percent (5%) franchise tax, was already deducted from the gross win revenue. On the basis of the above formulae, petitioner reported its net gaming revenue share in the amount ofi'1,642,976,365.00 for CY 2016 in its audited Income Statement,57 computed as follows: Gaming revenue share (Gross) P2,171,573,454.00 Less: PAGCOR license fee paid by MCE Leisure Gaming revenue share (NET) 528.597 089.00 1'1.642.976.365.0058 From the above computation, it can be observed that the license fee due to PAGCOR in the amount ofi'528,597,089.00 was indeed deducted by MCE Leisure from the gross gaming revenue share of petitioner. The deducted license fee was then remitted/paid by MCE Leisure to PAGCOR as part of the following official receipts:59 \ 54 Docket- Vol. Ill, p. 1697. 55 Exhibit"P-22", Docket- Vol.ll, 1048. 56 !d.. pp. 1048-1049. 57 Exhibit "P-13", Docket- Vol. Ill, pp. 1790-1822. 58 /d., p. 1814. 59 Docket- Vol. lll, pp. 1742-1789.

DECISION CTA EB NO. 27I2 (CTA CASE NO. I0060) Page 22 of26 Remittance of license Fees to CY 2016 Exhibit Amount PAGCOR (Nature) January In Dollar In Peso Junket Operations January Casino Operations February "P-12-a" $ 127,373.26 Casino Operations February Poker Tournament February "P-12-b" I' 170.252,725.43 Texas Holder Poker Operations February February "P-12-c" 7.630,454.20 Casino Operations March March "P-12-d" 173,585.00 Junket Operations March Poker Toumament April "P-12-e" 2,018,951.25 Casino Operations March Texas Holder Poker Operations April "P-12-r' 205,315,708.71 Texas Holder Poker Operations April Junket Operations "P-12-g" 163,462.40 COD Poker Tournament May May "P-12-h" 163,554.00 Casino Operations May "P-12-i" 152,359,442.82 Poker Tournament May Texas Holder Poker Operations June "P-12-j" 2.109.509.38 Casino Operations June Junket Operations June "P-12-k" 2,052,943.13 COD Poker Tournament July Texas Holder Poker Operations August "P-12-1" 269.149.44 Casino Operations August COD Poker Tournament August "P-12-m" 95,245.00 Texas Holder Poker Operations August COD Poker Tournament September "P-12-n" 227.849,277.2.\ Casino Operations July Junket Operations July "P-12-o" 842,320.00 COD Poker Tournament July Casino Operations September "P-12-p" 2.955.528.13 Texas Holder Poker Operations September Junket Operations September "P-12-q" 230,855,484.97 Texas Holder Poker Operations October Casino Operations October "P~ 12~r" 137.525.28 Junket Operations October Junket Operations October "P~l2~s" 135,655.00 COD Poker Tournament November Texas Holder Poker Operations November "P~ 12~t" 1,962,818.75 Casino Operations November COD Poker Tournament November "P~12~u" 202,527,830.03 Texas Holder Poker Operations December Casino Operations December "P-12-v" 467.382.50 Junket Operations December Junket Operations December "P~ 12~w" 3,327,407.50 Casino Operations December COD Poker Tournament January "P~12~x" 1,613.840.00 Texas Holder Poker Operations Texas Holder Poker Operations "P~12~y" 487,546,487.94 COD Poker Tournament "P~l2~z" 1,441,230.15 TOTAL "P-12-aa" 227.645.00 "P�12-bb" 226,629,295.30 "P�12�cc" 2.660,621.25 "P-12-dd'' 97.173.66 "P-12-ff' 1.935.670.63 "P.J2.gg" 393.917,157.42 "P�l2-hh" 381.062.92 "P-12-ii" 609,289.10 "P-12-"ii 159.875.00 "P-12-kk" 2,305.843.75 "P�l2-!!" 463,503,056.28 "P-12-mm" 382,130.00 "P~l2~nn" 2.444,259.38 "P-12~oo" 442,233.728.00 "P-12-pp" 612,935.09 "P�l2�qq" 355,686.66 "P-12~rr" 580.048,3 51. I 5 "P-12-ss" 978.852.50 "P~l2-tt" 2,778,434.38 "P~12-uu" 1,657,442.50 "P~J2~\'V" 54.095.00 $ 4,194,887.96 p 3,824,172,608.52 We find the above documents sufficient to prove that the license fee in the sum ofP528,597,089.00, inclusive of the five percent (5%) franchise tax, w" poid by petitionee to PAGCOR thmugh MCE L'"""� \

DECISION CTA EB NO. 2712 (CTA CASE NO. 10060) Page 23 of26 Moreover, the net gaming revenue share was supported by the following official receipts issued by petitioner to MCE Leisure, viz:60 CY 2016 Exhibit Zero Rated Sales Withholding Tax Amount Due January I' I04,905,122.00 !' 2,409,865.00 !' I02,495,257.00 February "P-11-a" March "P-11-b" 117,458,260.00 2,691,677.00 114,766,583.00 April "P-11-c" 102,954,087.00 2,359,901.00 I 00,594,186.00 May 121,565,572.00 1,476,218.00 120,089,354.00 June "P-11-d'' 132,742,404.00 2,654,847.72 130,087,556.28 July "P-11-e" 121,569,646.00 2,431,393.07 119,138,252.93 August "P-11-f' 127,468,739.00 2,549,374.78 124,919,364.22 September "P-11-g" 146,556,385.63 2,931,127.72 143,625,257.91 October "P-11-h" 129,273,990.05 2,585,479.80 126,688,510.25 November "P-11-1" 154,280,320.60 3,085,606.41 151,194,714.19 December "P-11-j" 147,533,208.95 2,950,664.18 144,582,544.77 TOTAL "P-11-k" 235,867,590.67 4,717,351.81 231,150,238.86 "P-11-1" !'I ,642,175,325.90 I' 32,843,506.49 I' 1,609,331,819.41 which petitioner reported in its 2016 audited Income Statement in the sum of Pl ,642,976,365.00.61 While we note that the amount in the official receipts issued by petitioner is less than the amount reported in the audited Income Statement, this Court believes that it is not an issue to the present refund case. What is material is for petitioner to show that its gaming revenue share generated from the casino operations was subjected to five percent (5%) franchise tax in order to be exempt from the payment of corporate income tax. The records show that, the bigger amount ofPl ,642,976,365.00 was the basis of petitioner in computing its income tax liability for the CY 2016 in the amount of P98,851 ,263.0062 which was then reconciled and reflected in the 2016 AITR, detailed as follows: Gaming revenue share (Gross) f' 306,874,483 I' 2,171,573,454.00 Less: PAGCOR license fee paid by MCE Leisure 185,188,482 528,597,089.00 Gaming revenue share Add: Interest income I'I ,642,976,365.00 Total 6,300,329.00 Less: I' I,649,276,694.00 Cost of Services General and Administrative Expenses 492,062,965.00 Income before income tax f' 1,157,213,729.00 Less: Provision for current income tax Net Income after income tax 98,851,263.00 PI ,058,362,466.00 60 Docket- Vol. Ill, pp. 1730-1741. See also Sworn Statement ofJackson T. Ongsip, Exhibit �'P-22", Docket -Vol. 11, pp. 1053-1056. 61 The reported revenue per audited Income Statement is bigger than the official receipts offered in evidence. 62 !d., p. 1796.

DECISION CTA EB NO. 2712 (CTA CASE NO. 10060) Page 24 of26 Schedule 9- Reconciliation ofNet Income Per Books Against Taxable Income Net Income per books 1'1,058,362,466.00 98,851,263.00 Add: Non-deductible Expenses/Taxable Other Income 18,317,892.00 Provision for income tax I' 1,175,531,621.00 Non deductible expenses under Optional Standard Deduction 846,027,412.00 p 329,504,209.00 Total Less: Interest income subject to final tax I' 6,300,329.00 Non-taxable net revenue 620,057,610.00 Optional standard deduction 219,669,473.00 Total Net Taxable Income (declared in the AITR) Tax Due (P329,504,209.00 x 30%) p 98,851,262.70 Less: Income Tax Payments I' 84,517,225.00 Quarterly Income Tax Payments 30,867,686.00 115,384,911.00 Creditable Withholding Taxes (I' 16,533,648.30) Total Amount Payable/(Overpayment) Considering that petitioner is exempt from the payment of corporate income tax, its total payment of P115,384,911.00 appears to have been erroneously paid which may be refundable pursuant to Sections 204(C) and 229 of the NIRC of 1997, as amended. Petitioner must, however, still prove the actual payment of the subject income tax. Records show that, out of P115,384,911.00, petitiOner was able to establish the actual income tax payment in the sum ofP115,384,908.62 based on the following evidence,63 to wit: Exhibit Amount Payment under Regular/Nonml Rate nP-15" and "P-IS-a" I' 49,I42,799.47 from Previous Quarters "P-16" and 11 P-16-a" 35,374,424.64 First Quarter 2016 Second Quarter 2016 "P-18-a" 14,334,038.7 I Tax Withheld per BIR Form 2307 7,9I 1,895.41 April to June 2016 11 P-18-b" 8,621, 750.39 July to September2016 I' 115,384,908.62 October to December 2016 ~~P-18-c" Total Income Tax Payment In sum, petitioner was able to prove that it is a licensee of PAGCOR entitled to the tax exemption privileges pursuant to Section 13(2)(b) of P.D. No. 1869. Being exempt from all kinds of taxes, except the five percent (5%) franchise tax, petitioner's income tax payment for the CY 2016 becomes erroneous and respondent is bound to refund the same. Well-entrenched in our jurisprudence that tax refunds are in the nature of tax exemptions. As such they are regarded as in derogation of sovereign 63 Docket- Vol. Ill, pp. 1835-1848 and 1858-1860.

DECISION CTA EB NO. 2712 (CTA CASE NO. 10060) Page 25 of26 authority and to be construed strictissimi juris against the person or entity claiming the exemption.64 The burden of proof is upon him who claims the exemption in his favor and he must be able to justify his claim by the clearest grant of organic or statute law.65 Here, petitioner was able to discharge the burden of proof as required by law, thereby, entitling it to the refund sought. WHEREFORE, the instant Petition for Review filed by petitioner PremiumLeisure and Amusement, Inc. (PLAI) is hereby GRANTED. Accordingly, the assailed Decision dated May 26, 2022 and Resolution dated October 18, 2022 rendered by the CTA First Division in CTA Case No. 10060 are REVERSED and SET ASIDE. The respondent is ORDERED to refund to petitioner the amount of One Hundred Fifteen Million Three Hundred Eighty-Four Thousand Nine Hundred Eight Pesos and Sixty-Two Centavos (Pl15,384,908.62), n~presenting erroneously paid income tax for calendar year 2016. SO ORDERED. WE CONCUR: Presiding Justice 9lA. h!._ , '---- MA. BELEN M. RINGPIS-LIBAN Associate Justice C41&-J' ;: ~ CATHERINE T. MANAHAN Associate Justice 64 Commissioner ofInternal Revenue v. S.C. Johnson and Son, Inc., G.R. No. 12705, June 25, 1999. 65 Ibid.

DECISION CTA EB NO. 27I2 (CTA CASE NO. 10060) Page 26 of26 MA~: JEAN'~ A. BACORRO-VILLENA [Jbsociate Justice MARlAR Wi:::::::}:tl.it~Ditt:. ~!1::- MARIAN IVY F. REYES-FAJARDO Associate Justice ~~t!AJil LANEE S. CUI-DAviD Associate Justice HENRY l.NGELES 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. Presiding Justice

REPUBLIC OF THE PHILIPPINES COURT OFTAX APPEALS QUEZON CITY ENBANC PREMIUMLEISURE AND CTA EB No. 2712 AMUSEMENT, INC. (PLAI), (CTA Case No. 10060) Petitioner, Present: -versus- DEL ROSARIO, U, RINGPIS-LIBAN, MANAHAN, BACORRO-VILLENA, MODESTO-SAN PEDRO, REYES-FAJARDO, CUI-DAVID, FERRER-FLORES, and ANGELES,Jl COMMISSIONER OF Promulgated: INTERNAL REVENUE, ~APR 2 2 2024 Respondent. X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - DISSENTING OPINION REYES-FAJARDO, J.: My esteemed colleagues allowed petitioner to refund or credit, the amount of P115,384,908.62, representing its alleged erroneously paid income tax (IT) for calendar year (CY) 2016. Specifically, it was ruled that petitioner successfully proved payment of the five percent (5 %) franchise tax because the latter's Consortium, through co- licensee MCE Leisure (Philippines) Corporation (MCEL), remitted license fees, inclusive of petitioner's five percent (5 %) franchise tax to the Philippine Amusement and Gaming Corporation (PAGCOR). Hence, the majority concluded that petitioner is exempted from paying IT under Section 13(2) of Presidential Decree (PD) No. 1869, despite the lack of proof of remittance by PAGCOR of said franchise tax to the Bureau ofInternal Revenue (BIR).

DISSENTING OPINION CTA EB No. 2712 I respectfully differ. Prefatorily, the tax exemption is specific to PAGCOR under PD No. 1869. This is supported by the legislative records of the Bicameral Conference Meeting of the Committee on Ways and Means dated October 27, 1997, stating that the exemption of PAGCOR from the payment of corporate income tax was due to the acquiescence of the Committee on Ways and Means to the request of PAGCOR that it be exempt from such tax. 1 Meanwhile, the tax exemption of its contractees and licensees is simply derived from PAGCOR' s tax exemption. Section 13(2)(a) and (b) of PD No. 1869 attest to this, thus: SECTION 13. Exemptions. - (2) Income and other taxes. - (a) Franchise Holder: No tax of any kind or form, income or otherwise, as well as fees, charges or levies of whatever nature, whether National or Local, shall be assessed and collected under this Franchise from the Corporation; nor shall any form of tax or charge attach in any way to the earnings of the Corporation, except a Franchise Tax of five (5%) percent of the gross revenue or earnings derived by the Corporation from its operation under this Franchise. Such tax shall be due and payable quarterly to the National Government and shall be in lieu of all kinds of taxes, levies, fees or assessments of any kind, nature or description, levied, established or collected by any municipal, provincial, or national government authority. (b) Others: The exemptions herein granted for earnings derived from the operations conducted under the franchise specifically from the payment of any tax, income or otherwise, as well as any form of charges, fees or levies, shall inure to the benefit of and extend to corporation(s), association(s), agency(ies), or individual(s) with whom the Corporation or operator has any contractual relationship in connection with the operations of the casino(s) authorized to be conducted under this Franchise and to those receiving compensation or other remuneration from the Corporation or operator as a result of See Philippi11e Amusell/ellt and Gaming Corporation v. The Commissioner of Internal Revenue, et nl., G.R. Nos. 210689-90, November 22, 2017.

DISSENTING OPINION CTA EB No. 2712 essential facilities furnished and/ or technical services rendered to the Corporation or operator. 2 Black defines the term "in lieu of' as "instead of; in place of; in exchange or return for." 3 Reading this in conjunction with Section 13(2)(a) and (b) of PD No. 1869, the payment of five percent (5%) franchise tax to the National Government is in place of tax liability/ ies which may possibly be incurred by PAGCOR, its contractors, and licensees. Precisely, proof of payment of the five percent (5%) franchise tax to the National Government is indispensable for tax exemption in said law to arise. Bloomberry Resorts and Hotels, Inc. v. Bureau of Internal Revenue4 confirmed: As the PAGCOR Charter states in unequivocal terms that exemptions granted for earnings derived from the operations conducted under the franchise specifically from the payment of any tax, income or otherwise, as well as any form of charges, fees or levies, shall inure to the benefit of and extend to corporation(s), association(s), agency(ies), or individual(s) with whom the PAGCOR or operator has any contractual relationship in connection with the operations of the casino(s) authorized to be conducted under this Franchise, so it must be that all contractees and licensees of PAGCOR, upon payment of the 5% franchise tax, shall likewise be exempted from all other taxes, including corporate income tax realized from the operation of casinos. Plainly, too, upon payment of the 5% franchise tax, petitioner's income from its gaming operations of gambling casinos, gaming clubs and other similar recreation or amusement places, and gaming pools, defined within the purview of the aforesaid section, is not subject to corporate income tax5 Here, petitioner, through MCEL, remitted license fees to PAGCOR in relation to the gaming revenues. So too are these license fees inclusive of its five percent (5%) franchise tax. Yet, the remittance alone does not equate to valid payment to the National Government for purposes of tax exemption in Section 13(2) of PD No. 1869. 2 Boldfacing supplied. 3 Black's Law Dictionary, p. 791 (7th Edition, 1999). Citations omitted. G.R. No. 212530, August 10, 2016. 5 Emphasis and underscoring supplied.

DISSENTING OPINION CTA EB No. 2712 Payment is described as delivery of money or performance of obligation.6 One of the conditions for payment to be valid is that it must be made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authorized to receive it.? In this regard, the collection of national internal revenue taxes is among the mandates and duties of the Bureau of Internal Revenue (BIR).s National internal revenue taxes covers " ... [s]uch other taxes as are or hereafter may be imposed and collected by the [BIR]."9 The five percent (5%) franchise tax referred to in Section 13(2) of PD No. 1869 is no exception. Thus, the agent of the National Government to whom the five (5%) percent franchise tax must be paid is the BIR, and not PAGCOR. Significantly, and of late, Revenue Memorandum Circular No. 32-2022 IO elucidated that the license fees paid by licensees to PAGCOR is distinct from the five percent (5%) franchise tax payable to the BIR. Also, said franchise tax must directly be paid to the BIR: VI. REMITTANCE OF THE 5% FRANCHISE TAX The license/regulatory fees paid by Licensees to PAGCOR is different and distinct from the 5% franchise tax payable to the BIR. The license fee is being paid to PAGCOR by virtue of the license to establish and operate a casino and does not include the franchise tax mandated to be paid to the government under Section 13 (2) (a) of PD No. 1869, as amended. Such franchise tax is payable directly to the BIR, specifically to the concerned Revenue District Office (RDO) where the Licensee is registered. The Licensee shall remit the franchise tax to the BIR using BIR Form 2553 indicating the Alphanumeric Tax Code (ATC) OT 010.11 Though RMC No. 32-2022 has yet to be issued at the time petitioner's refund came to the fore, the subsequent issuance thereof by the BIR strengthens the premise that it is the latter who is the agent of the National Government, insofar as payment of the five 6 Article 1232 of Republic Act No. 386 (Civil Code). 7 Article 1240 of the Civil Code; and Culnbn, et nl. v. CA. G.R. No. 125862, April15, 2004. 8 See Section 2, 1997 N ationa! Internal Revenue Code (NIRC), as amended. See Section 21(g), NIRC, as amended. 10 SUBJECT: Clarifying the Tax Treatment of the Philippine Amusement and Gan1ing Corporation (PAGCOR), Its Licensees and Contractees. ll Emphasis supplied.

DISSENTING OPINION CIA EB No. 2712 percent (5%) franchise tax in Section 13(2) of PD No. 1869 rs concerned.12 Summing it up, there must be proof that the franchise tax remitted to PAGCOR reached the hands of the BIR, or, at the very least, proof that PAGCOR is the duly-constituted agent of the BIR in collecting said tax. Sans such proof, there is no valid payment to the National Government, and consequently, no tax exemption to speak of in Section 13(2) of PD No. 1869. The stringency of my construal regarding proof of payment to the BIR as precondition for tax exemption in Section 13(2) of PD No. 1869 is plain and evident-just as PAGCOR is commanded by said law to establish payment of the five percent (5%) franchise tax to the BIR, for it to be exempt from taxes on its gaming operations, under paragraph (a) thereof, with more reason should said precondition be applied on its licensees and contractees-the entities whose authorities and tax-exempt privileges were merely derived from PAGCOR itself. Simply put, if PAGCOR failed to prove that it remitted the five percent (5%) franchise tax to the BIR, then it cannot claim tax exemption under Section 13(2) of PD No. 1869. The same treatment should be accorded to its licensees and contractees. After all, the spring cannot rise above its source. To stress, what was established here is that MCEL remitted the license fees, inclusive of petitioner's five percent (5%) franchise tax to PAGCOR. There was a dearth of proof showing that PAGCOR remitted said franchise tax to the BIR; nor was agency relationship13 12 In CBK Power Co111pn11y Limited v. Co111111issio11er of Illtemnl Reve11ue, G.R. No. 247918, February 1, 2023, the principle of conten1poraneous construction was discussed as follows: "... The Court has the ultimate authority to determine the validity of implementing rules and regulations. However, in the absence of any showing that such implementing rules and regulations go beyond the language and intent of the law that it seeks to enforce or that they violate any other law or rule or are manifestly erroneous, such rules and regulations, which constitute an administrative agency1s contemporaneous interpretation of the law, carries persuasive value. It is well settled tl1at an adn1inistrative agencis contemporaneous interpretation of the law that it is duty bound to enforce deserves great weight." 13 In Yun Kwtmg Byun v. Plzilippille Amuseme11t and Gaming Corporation, G.R. No. 163553, December 11, 2009, it was held that: "the law makes no presumption of agency and proving its existence, nature and extent is incumbent upon the person alleging it."

DISSENTING OPINION CTA EB No. 2712 between the BIR and PAGCOR with respect to collection of such franchise tax exhibited by petitioner. It means that the payment of the five percent (5%) franchise tax to the National Government (BIR), essential for petitioner's tax exemption under Section 13(2) of PD No. 1869 was not met. A fortiori, the IT for CY 2016 paid by petitioner is not an illegal or erroneous tax. Precisely, the refund based on Section 204(C) and 229 of the NIRC, as amended, desired by the latter must be rejected. ON THESE ACCOUNTS, I VOTE to: (1) DENY the Petition for Review in CTA EB No. 2712; and (2) AFFIRM the Decision dated May 26,2022 and Resolution dated October 18,2022 in CTA Case No. 10060. ~ IJM f. ~-F~�~ iwt MARIAN F. REY'ES-FATARDO Associate Justice