COMMISSIONER OF INTERNAL REVENUE v. FIRST PHILIPPINE UTILITIES CORPORATION

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY E NBANC COMMISSIONER OF INTERNAL CTA EB NO. 2025 REVEN UE, (CTA Case N o . 8993) P etitio ner, -versus- FIRST PHILIPPINE UTILITIES CORPORATION, Resp o nd ent. X- - - - - - - - - - - - - - - - - - - - - - - - - - X FIRST PHILIPPINE UTILITIES CTA EB NO. 2030 CORPORATION, (CTA Case No. 8993) P e titio n er , Present: DE L ROSARIO, P.J., CASTANE DA, JR., U Y, -versus- RINGPIS-LIBAN, MANAHAN, BACORRO-VILLENA, and MODESTO-SAN PEDRO,JJ. COMMISSIONER OF INTERNAL REVENUE , ~~ase2021 Resp o nd en t. X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - I - - - - - - - - -X JUDGMENT ON COMPROMISE AGREEMENT Por resolution are the following: 1) The parties' "Joint Mo tion for Judgment Based on Compromise Agreement"\ flied on February 23, 2021; and /V 1 Rollo, pp. 160-161.

JUDGMENT ON COMPROMISE AGREEMENT CTA EB Nos. 2025 & 2030 (CTA Case No. 8993) 2) Commissioner of Internal Revenue's "Compliance"2, filed on June 14, 2021. "Compliance" filed on June 14, 2021 On May 20, 2021, a Resolution3 was issued: 1) noting Commissioner of Internal Revenue's "Compliance"; and 2) ordering the Commissioner of Internal Revenue to submit within fifteen (15) days from notice, a proof supporting the approval of the compromise agreement by the National Evaluation Board ("NEB") of the Bureau of Internal Revenue (BIR) pursuant to Section 204 of the National Internal Revenue Code (NIRC) of 1997, as amended and Section 6 of Revenue Regulations ("RR") No. 30-2002. On June 14, 2021, the Commissioner of Internal Revenue filed a "Compliance" submitting a certified true copy of the signature page of the Certificate of Availment showing the fact that the Compromise Agreement on the deficiency tax assessments covering taxable year 2009 of First Philippine Utilities Corporation was approved by the NEB. The Court NOTES said "Compliance". We now proceed to resolve the "Joint Motion for Judgment Based on Compromise Agreement". 'Joint Motion for Judgment Based on Compromise Agreement" filed on February 23, 2021 On September 17, 2020, the Court En Bane received a "Mediator's Report" (PMC-CTA Form 5) dated September 15,2020, signed by (Ret.) Justice Rodrigo V. Cosico stating that there was successful settlement between the part.les4/v" 2 Id., pp. 180-181. 3 !d., pp. 167-179. 4 !d., pp. 108-122.

JUDGMENT ON COMPROMISE AGREEMENT CTA EB Nos. 2025 & 2030 (CTA Case No. 8993) In the Resolutions dated November 03, 20205,January 07, 2021 6,January 29, 2021 7, and May 20, 2021 8, the Court required the parties to submit a copy of the Compromise Setdement with the date when the same was signed by the parties, proof that a majority of all the members of the NEB approved the compromise agreement, and other documents proving that Petitioner has availed of the provisions of RR No. 30-2002. In compliance with the said Resolutions, the parties flled on February 18, 2021 9 and June 14, 2021 10, the following documents: 1) a certified true copy of the Certificate of Availment No. CAC20170001343311 dated January 21, 2021 signed by Clavelina S. Nacar, OIC-Assistant Commissioner Head of TWG on Compromise, pertaining to the 2009 deficiency tax assessments of First Philippine Utilities Corporation, amounting to Php289,733,393.80; 2) an original copy of the Compromise Agreement12 duly signed by both parties on September 01, 2020 and attested by (Ret.) Justice Rodrigo V. Cosico as mediator; 3) BIR Payment Form (BIR Form No. 0605) 13 dated August 24, 2020 showing payment of Php69,883,551.78 compromise, in full satisfaction of the 2009 tax assessment against First Philippine Utilities Corporation; and 4) a certified true copy of the signature page14 of the Certificate of Availment showing the fact that the Compromise Agreement on the deficiency tax assessments covering taxable year 2009 of First Philippine Utilities Corporation was approved by the NEB. Section 6 of RR No. 30-2002, as amended by RR No. 9-2013, provides, to wit: ~ s Id., pp. 127-130. ' Id., pp. 141-143. 7 Id., pp. 146-149. 8 Id., Compliance dated February 18, 2021, pp. 150-153. 9 Id., Compliance dated June 14, 2021, pp. 183. 10 Id., pp. 167-179. 11 Id., p. 154. 12 Id., pp. 155-156. 13 Id., pp. 157-159. 14 Id., p. 184.

JUDGMENT ON COMPROMISE AGREEMENT CTA EB Nos. 2025 & 2030 (CTA Case No. 8993) "SEC. 6. Approval rif O.ffer rif Compromise. - Except for offers of compromise where the approval is delegated to the REB pursuant to the succeeding paragraph, all compromise setdements within the jurisdiction of the National Office (NO) shall be approved by a majority rifall the members ofthe NEB composed of the Commissioner and the four (4) Deputy Commissioners. All decisions of the NEB, granting the request rifthe taxpayer orfavorable to the taxpayer, shall have the concurrence of the Commissioner. XXX XXX XXX The compromise offer shall be paid l!J the taxpayer upon filing rif the applicationfor compromise settlement. No applicationfor compromise settlement shall be processed without the full settlement rif the offered amount. In case rif disapproval rifthe application for compromise settlement, the amountpaid upon filing ofthe aforesaid application shall be deductedfrom the total outstanding tax liabilities." The "Compromise Agreement" states as follows: "WHEREAS, on February 23, 2015, FPUC ftled a Petition for Review (CTA Case No. 8993) challenging the validity of the Final Decision on Disputed Assessment issued by respondent Commissioner of Internal Revenue in connection with deficiency tax assessments for taxable year 2009, the aggregate sum of which amounts to Two Hundred Eighty-Nine Million Seven Hundred Thirty-Three Thousand Three Hundred Ninety-Three Philippine Pesos and Seventy-Nine Centavos ([Php]289,733,393.79) together with the penalties and interest. Under the Final Decision on Disputed Assessment, FPUC was required to pay the basic tax due in the amount of One Hundred Fifty-Three Million Seven Hundred Sixty-Seven Thousand One Hundred Three Philippine Pesos and Fifty-Six Centavos ([Php]153,767,103.56). WHEREAS, the Court of Tax Appeals 2"" Division rendered a Decision dated on November 5, 2018 in CTA Case No. 8993, which cancelled the deficiency income tax and miscellaneous tax assessments and ordered FPUC to pay only the basic DST assessment in the aggregate amount of One Hundred Thirty-Nine Million Seven Hundred Sixty-Seven Thousand One Hundred Three Philippine Pesos and Fifty-Six Centavos ([Php]139,767,103.56) without interest and penalties. WHEREAS, on April 2019, both [p]arties ftled their respective Petitions for Review with the Court of Tax Appeals En ;"'1/

JUDGMENT ON COMPROMISE AGREEMENT CTA EB Nos. 2025 & 2030 (CTA Case No. 8993) Bane to appeal the Decision of the Court of Tax Appeals 2"d Division, which case was docketed as CTA EB Case [Nos. 2025 and 2030]. WHEREAS, during mediation proceedings before the Philippine Mediation Center- Court of Tax Appeals for CTA EB Case [Nos. 2025 and 2030], FPUC has offered to amicably settle the case for Sixty-Nine Million Eight Hundred Eighty-Three Thousand Five Hundred Fifty-One Philippine Pesos and Seventy- Eight Centavos ((Php]69,883,551.78), representing fifty percent (50%) of the basic DST assessment, to avoid prolonged litigation, as authorized by A.M. No. 11-1-05-SC-PHILJA. NOW THEREFORE, in view of the limitation in Section 204 of the 1997 National Internal Revenue Code, FPUC has offered and the Commissioner of Internal Revenue has accepted the amount of Sixty-Nine Million Eight Hundred Eighty-Three Thousand Five Hundred Fifty-One Philippine Pesos and Seventy- Eight Centavos ((Php]69,883,551.78), representing [fifty percent (50%)] of the basic tax assessed, as full satisfaction of the 2009 tax assessment subject to the approval of the Honorable Court of Tax Appeals." A compromise agreement is a contract whereby the parties make reciprocal concessions in order to resolve their differences and, thus, avoid or put an end to a lawsuit. They adjust their difficulties in the manner they have agreed upon, disregarding the possible gain in litigation and keeping in mind that such gain is balanced by the danger of losing. It must not be contrary to law, morals, good customs and public policy, and must have been freely and intelligently executed by and between the parties. A compromise agreement may be executed in and out of court. Once a compromise agreement is given judicial approval, however, it becomes more than a contract binding upon the parties. Having been sanctioned by the court, it is entered as a determination of a controversy and has the force and effect of a judgment.15 Finding the subject compromise agreement to be in order and in compliance with established laws, rules and regulations, taking into consideration the documents submitted by the parties in support thereof, the same is approved. WHEREFORE, in view of the foregoing, the parties' Joint Motion for Judgment Based on Compromise Agreement" is GRANTED. The Compromise Agreement dated September 01, 2020 is APPROVED and judgment is hereby rendered in accordance therewith. Accordingly, the r/ 15 David M. David v. Federico M. Paragas, Jr., G.R. No. 176973, February 25, 2015.

JUDGMENT ON CciMPROMISEAGREEMENT CTA EB Nos. 2025 & 2030 (CTA Case No. 8993) proceedings in the instant consolidated cases are considered CLOSED and TERMINATED. SO ORDERED. Presiding Justice Ja{J~AN�IGTO'Cc . CA.ST~ ANE~ DA,,9J.R.-.. ERL~P.UY Associate Justice Associate Justice QN.~ ./C ?~' /- .&.. ~~-< - MA. BELEN M. RINGPIS-LIBAN CATHERINE T. MANAHAN Associate Justice Associate Justice JEAN MARIE,.K."'B\\CORRO-VILLENA Assflciate Justice CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Judgment on Compromise Agreement were reached in consultation before the case was assigned to the writer of the opinion of the Court. Presiding Justice