SARIMANOK NEWS NETWORK, INC. v. THE COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION ********* SARIMANOK NEWS CTA Case No. 9285 NETWORK, INC., Members: Petitioner, DEL ROSARIO, PJ. ,Chairperson, -versus- UY, and MINDARO-GRULLA, JJ. COMMISSIONER OF Promulgated: INTERNAL REVENUE, J UL U 5 '' '] , ; 3 i 1\ ;o"""" Respondent. X - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ~- - - - - - -~- - - - - - - - X JUDGMENT ON COMPROMISE AGREEMENT For resolution is the parties' uJoint Motion for Approval of Compromise Agreement1" filed on September 3, 2018; together with respondent's ucompliance with Submission" filed on April 16, 2019.2 The parties' Joint Motion for Approval of Compromise Agreement In support of the Joint Motion for Approval of Compromise, the parties attached the following documents: 1. Original copy of the Judicial Comprom ise Agreemene ; 2. Payment Forms (BIR Form No. 0605) and their corresponding eFPS Payment Details and Filing Reference Nos.4 representing payments for deficiency Income Tax, 1 Docket (Vol. V), pp. 2238 to 2242. 2 Docket (Vol. V), pp. 2336 to 2359. 3 Docket (Vol. V), pp. 2243 to 225 0. 4 Docket (Vol. V), pp. 225 1 to 2269.

RESOLUTION CIA Case No. 9285 Value-Added Tax, Expanded Withholding Tax, Withholding Tax on Compensation and Documentary Stamp Tax. As regards to the Compromise Agreement embodied in the joint motion, the same reads as follows: "JUDICIAL COMPROMISE AGREEMENT KNOWN ALL MEN BY THESE PRESENTS: This JUDICIAL COMPROMISE AGREEMENT ("Agreement"), made and executed, by and between: SARIMANOK NEWS NETWORK, INC., a domestic corporation duly organized and existing under the laws of the Republic of the Philippines, with principal office at 2nd Floor, Main Building, ABS-CBN Broadcast Center, Sgt. Esguerra Avenue corner Mother lgnacia Street, Quezon City, represented by its Chief Financial Officer, MR. ROLANDO P. VALDUEZA; -and- The BUREAU OF INTERNAL REVENUE ("BIR"), with principal office at Bureau of Internal Revenue, National Office Building, Agham Road, Diliman, Quezon City, represented by the Commissioner, HON. CAESAR R. DULAY (collectively, the "PARTIES"); -Witnesseth That- WHEREAS, the BIR issued to the TAXPAYER a Final Assessment Notice ("FAN") dated 10 April 2014 covering the taxable period of CY 2009 for the alleged deficiency internal revenue taxes in the amount of Eighty- Eight Million Three Hundred Fourteen Thousand One Hundred Fifty-Three Pesos and Sixty-Eight Centavos (Php88,314, 153.68) broken down as follows: TAX TYPE BASIC SURCHARGE INTEREST COMP. PENALT TOTAL Income Tax 21,007,276.86 0.00 17,015,894.2( 38,073,171.1 Value Added Tax 17,578,808.13 14,238,834.5 50,000.00 36,262,344.n 4,394,702.03 50,000.00 Expanded WT 3,270,393.77 0.00 2,681 '722.8 25,000.00 5,977,116.66 491,014.09 0.00 402,631.54 16,000.00 909,645.61 Compensation 25,000.00 DST 3,401,872.24 850,468.06 2,789,535.24 25,000.00 7,066,875.54 Others- Misc. Taxes 0 DO 0.00 0.00 191,000.00 25,000.00 Total 45,749,365.09 5,245,170.09 37,128,618.5 88,314,153.6B

RESOLUTION CIA Case No. 9285 WHEREAS, the TAXPAYER then filed with the BIR its Protest Letter with Request for Reinvestigation dated 9 May 2014 denying the merit of the FAN dated 10 April 2014; WHEREAS, the BIR issued a FINAL DECISION ON DISPUTED ASSESSMENT ("FDDA") dated 23 September 2015, which denied the Protest filed by the TAXPAYER. The amount appearing in the FDDA is broken down as follows: TAX TYPE BASIC SURCHARG INTEREST COMP. PENALTY TOTAL 41,238,722.31 Income Tax 19,483,785.2 0.00 21 ,704,937.0~ 50,000.00 42,063,351.43 Value Added Tax 17,578,808.1 4,394,702.0 20,039,841.2 50,000.00 4,612,709.75 1,067,752.18 ExpandedWT 2,141,787.9 0.00 2,445,921.8 25,000.00 8,072,286.12 Compensation 491,014.m 0.00 560,738.0~ 16,000.00 25,000.00 97,079,821.79 DST 3,364,250.0 841,062.51 3,841,973.5 25,000.00 Others- Misc. Taxes 0.00 0.00 0.00 25,000.00 Total-Part I and II 43,059,645.4! 5,235,764.54 48,593,411.78 191,000.00 WHEREAS, the TAXPAYER filed its Request for Reconsideration dated October 22, 2015 with the BIRon October 23, 2015 which sought the cancellation of the findings in the FDDA; WHEREAS, the TAXPAYER received the Final Decision ("Final Decision") dated February 4, 2016 of the BIR which denied the appeal letter dated October 22, 2015 of the TAXPAYER; WHEREAS, the TAXPAYER instituted an action against the BIR entitled "Sarimanok News Network, Inc. vs. Commissioner of Internal Revenue", docketed as CTA Case No. 9285, pending before the Honorable First Division of the Court of Tax Appeals ("CTA"), seeking the reversal of the Final Decision, and the cancellation of the FAN� ' WHEREAS, the TAXPAYER has submitted its proposal to the BIR with the intention to enter into a judicial compromise pursuant to the provisions of the Civil Code of the Philippines, jurisprudence, relevant decisions of the Honorable CTA and relevant laws on judicial compromise; WHEREAS, the Honorable CTA issued a Resolution dated 15 May 2018 stating that the parties

RESOLUTION CTA Case No. 9285 are not prohibited from entering into a compromise agreement at any time; WHEREAS, the Honorable CTA has issued rulings allowing judicial compromises similar to the instant case. WHEREAS, the BIR has evaluated the TAXPAYER's proposal for amicable settlement and believes that a judicial compromise to allow immediate tax collection and also put an end to litigation as provided in the Civil Code of the Philippines, serves the interest of the Government; WHEREAS, the PARTIES, ensure that the terms of the amicable settlement as contained in this Agreement do not circumvent the limitations provided in Section 204 of the National Internal Revenue Code on administrative compromise proceedings; WHEREAS, the PARTIES, for the purpose of avoiding and putting an end to a protracted, expensive and mutually prejudicial litigation, have agreed to amicably settle the above-mentioned case, upon terms and conditions hereinafter set forth; NOW, THEREFORE, for and in consideration of the foregoing premises, the PARTIES hereto have agreed as follows: Section 1. Judicial Compromise Amount. In order to settle the above-mentioned case, the TAXPAYER has offered and the BIR has accepted the amount equivalent to forty percent (40%) of the Basic Income Tax, Basic Value Added Tax, and Documentary Stamp Tax assessed, as well as the amount equivalent to one hundred percent (100%) of the Basic Expanded Withholding Tax and Withholding Tax on Compensation in the total compromise amount of Seventeen Million Eight Hundred Thirty-Seven Thousand Seven Hundred Twenty-One Pesos and Eighteen Centavos (Php17,837, 721.18) ("Judicial Compromise Amount").

RESOLUTION CTA Case No. 9285 This amount is broken down as follows: TAX TYPE BASIC TAX ALREADY ADJUSTED COMPROMISE COMPROMISE PAID BASIC TAX RATE AMOUNT INCOME TAX 19,483,785 VAT 17,578,808 1,437,027 18,046,759 40% 7,218,703.46 EWT 17,578,808 40% 7,031,523.25 COMPEN 2,141,788 74,799 2,066,989 100% 2,066,989.37 DST 491,014 199,474 100% 291,836 291,540 40% 291,539.62 TOTAL 3,364,250 2,003,136 3,072,414 1,228,965.48 43,059,645 41,056,509 17,837,721.18 Section 2. Submission to the Honorable CTA. This Agreement fully signed by the PARTIES shall be submitted for the approval to the Honorable CTA in CTA Case No. 9285. The PARTIES undertake to perform any and all acts and submit any and all documents required by the Honorable CTA to be able to render a Judgment by Compromise Agreement in the said case. Section 3. Effectivity of the Agreement. This Agreement shall only take effect and bind the PARTIES upon final approval by the Honorable CTA. This Agreement shall thereafter remain in force and effect until completion and fulfillment of the covenants and undertaking of the PARTIES hereto. Section 4. Deliverables of the PARTIES upon approval of this Agreement by the Honorable CTA. Upon final approval by the Honorable CTA of this Agreement the Taxpayer undertakes to submit to the BIR the Judicial Compromise Amount. Upon receipt of the Judicial Compromise Amount, the BIR undertakes to execute and deliver to the Taxpayer any and all documents as may be required to effectively and fully implement the provisions of this Agreement withdrawing and cancelling the FAN dated 10 April 2014. Section 5. Authority to Enter Compromise Agreement. The BIR, through Commissioner Caesar R. Dulay warrant that he has the necessary authority and capacity under the law to enter, sign, and execute this Agreement, and to deliver its implementing documents upon its approval of the Honorable CTA. The TAXPAYER through its Chief Financial Officer, MR. ROLANDO P. VALDUEZA, similarly warrants that he

RESOLUTION CTA Case No. 9285 is duly authorized by the Board of Directors of the TAXPAYER and has full legal capacity to enter, sign, and execute this Agreement, and to delivery payment of the above-agreed additional amount. Section 6. Full and Final Settlement. This Agreement is executed by the PARTIES for the purpose of amicably settling and ending CTA Case No. 9285. Upon performance by the TAXPAYER of its obligations under Section 4 hereof, the BIR recognizes the full satisfaction of the supposed tax liability, including any alleged deficiency interest, surcharge, and other penalties thereon, of the TAXPAYER in connection with CTA Case No. 9285 and acknowledges that the TAXPAYER no longer has any tax liability whatsoever based upon, arising from or in connection with the particular subject of CTA Case No. 9285 (TAXPAYER's alleged deficiency internal revenue taxes for CY 2009). Section 7. Disapproval of this Agreement by the Honorable CTA. In the event that this Agreement is disapproved by the Honorable CTA, the PARTIES agree to a curing period of sixty (60) days from receipt of the Order/Resolution disapproving this Agreement. During such curing period, the PARTIES mutually agree to perform any and all acts necessary to rectify or correct the deficiency, defect or imperfection which caused its disapproval, and re-submit the rectified or corrected Agreement for approval of the Honorable CTA. However, in case the deficiency, defect or imperfections is not or cannot be rectified or corrected within the said curing period, or still not approved by the Honorable CTA after it is rectified or corrected by the parties: 1. The amount insofar already paid by the TAXPAYER to the BIR shall be deemed a tax credit which may be applied against internal revenue taxes for which the TAXPAYER may be directly liable, as allowed under existing rules and regulations; and 2. The proceedings of CTA Case No. 9285 shall continue and the discussions pursuant to the disapproved Agreement cannot be used by the PARTIES in said proceeding unless consent of the other party be obtained.

RESOLUTION CIA Case No. 9285 Section 8. Nullification of this Agreement by the Honorable Supreme Court. In the remote event that this Agreement is later nullified by the Honorable Supreme Court, the PARTIES likewise agree to a curing period of sixty (60) days from receipt of the Order/Resolution nullifying this Agreement. During such curing period, the PARTIES mutually agree to perform any and all acts necessary to rectify or correct the deficiency, defect, or imperfection which caused its nullification, and re-submit the rectified or corrected Agreement for approval of the Honorable Supreme Court. In case the deficiency, defect or imperfection, however, is not or cannot be rectified or corrected within the said curing period, or still not approved by the Honorable Supreme Court after it is rectified or corrected: 1. The amount insofar already paid by the TAXPAYER to the BIR shall be deemed a tax credit which may be applied against internal revenue taxes for which the TAXPAYER may be directly liable, as allowed under existing rules and regulations; and 2. The proceedings of CTA Case No. 9285 shall continue and the discussions pursuant to the disapproved Agreement cannot be used by the PARTIES in said proceeding unless consent of the other party be obtained. Section 9. No Admission of Liability. The execution of this Agreement shall not constitute or be interpreted in any way as an admission or acknowledgment of error or liability by the PARTIES. Section 10. Non-Performance. The PARTIES agree that the failure of any PARTY to comply with any of the terms and conditions of this Agreement shall entitle the aggrieved PARTY to file an appropriate motion with the Honorable CTA for the immediate implementation and execution of the terms and conditions of this Agreement or the judgment or order of the Honorable CTA approving the same. Section 11. Signatures and Counterparts. This Agreement may be signed in counterparts, each of which

RESOLUTION CTA Case No. 9285 when executed and delivered shall constitute a duplicate original, but all of which shall be taken together as a single instrument. Until and unless each party has received a counterpart hereof signed by the other party hereto, the Agreement shall have no effect and no party shall have any right or obligation hereunder. IN WITNESS WHEREOF, the PARTIES have mutually and voluntarily agreed to the foregoing stipulations and have hereunto signed these presents at the date and place indicated above. SARIMANOK NEWS NETWORK, BUREAU OF INTERNAL INC. REVENUE By: (SGD) By: (SGD) MR. ROLANDO P. VALDUEZA HON. CAESAR R. DULAY Chief Financial Officer Commissioner" Records show that in the Resolution dated October 15, 2018, the parties were given thirty (30) days from notice to establish by way of filing the appropriate pleading and supporting documents that the subject compromise settlement was executed in full compliance with legal requirements. Thereafter, petitioner's Joint Motion for Approval of Compromise Agreement shall be submitted for the resolution of the Court. Subsequently, petitioner filed a Compliance on November 16, 20185 which was NOTED in the Resolution dated December 21, 2018.6 On the other hand, respondent likewise filed a Compliance on January 11, 20197, attaching thereto a Certificate of Availment (Compromise Settlement)8 ; as well as, a Compliance with Submission9 on April 16, 2019, praying for the following to be admitted and be considered for sufficient compliance with the Resolution dated February 11, 2019: (1) Memorandum dated 11 April 2019 from Assistant Commissioner Alfredo V. Misajon stating the basis of his authority to sign the Certificate of Availment in relation to 5 Docket (Vol. V), pp. 2281 to 2295 6 Docket (Vol. V), p. 2308 7 Docket (Vol. V), pp. 2309-2311 8 Docket (Vol. V), p. 2312 9 Docket (Vol. V), pp. 2336 to 2339

RESOLUTION CIA Case No. 9285 the approved Compromise Settlement attached as Annex "A"1o., (2) Certified True Copy of Revenue Delegation Authority Order (RDAO) No. 6-2007 proving his authority to sign the Certificate of Availment in relation to the approved Compromise Settlement attached as Annex "B"11 ; (3) Certified True Copy of Revenue Memorandum Order (RMO) No. 33-2018 proving his authority to sign the Certificate of Availment in relation to the approved Compromise Settlement attached as Annex "C"12; and 4) Certified True Copy of the signature page evidencing approval by the National Evaluation Board (NEB) of the Application for Compromise Settlement (Judicial) attached as Annex "D"13; Accordingly, respondent's Compliance filed on January 11, 2019 and Compliance with Submission filed on April 16, 2019 are hereby NOTED. We shall now resolve the instant "Joint Motion for Approval of Compromise Agreement14". As a rule on compromise settlement, Section 204(A) of the National Internal Revenue Code (NIRC) of 1997 provides that for cases other than financial incapacity, the minimum compromise rate is forty percent (40%) of the basic assessed tax, and in case the basic tax exceeds P1 ,000,000.00 or where the settlement offered is less than the said prescribed minimum rates, the compromise must be approved by the Evaluation Board, which is composed of respondent and the four (4) Deputy Commissioners of the BIR15. 10 Docket (Vol. V), pp. 2340 to 2359 " Docket (Vol. V), pp. 2344 to 2347 12 Docket (Vol. V), pp. 2348 to 2358 13 Docket (Vol. V), p. 2359 14 Docket (Vol. V), pp. 2238 to 2242. 15 "SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. - The Commissioner may- (A) Compromise the payment of any internal revenue tax, when: (I) A reasonable doubt as to the validity of the claim against the taxpayer exists; or (2) The financial position of the taxpayer demonstrates a

RESOLUTION CTA Case No. 9285 Relative to Section 204(A) of the NIRC of 1997, Section 6 of Revenue Regulations (RR) No. 30-2002, 16 as last amended by RR No. 9-2013, provides: "SEC. 6. APPROVAL OF OFFER OF COMPROMISE. - Except for offers of compromise where the approval is delegated to the REB pursuant to the succeeding paragraph, all compromise settlements within the jurisdiction of the National Office (NO) shall be approved by a majority of all the members of the NEB composed of the Commissioner and the four (4) Deputy Commissioners. All decisions of the NEB, granting the request of the taxpayer or favorable to the taxpayer, shall have the concurrence of the Commissioner. XXX XXX XXX The compromise offer shall be paid by the taxpayer upon filing of the application for compromise settlement. No application for compromise settlement shall be processed without the full settlement of the offered amount. In case of disapproval of the application for compromise settlement, the amount paid upon filing of the aforesaid application shall be deducted from the total outstanding tax liabilities." (Emphases and underscoring supplied) Thus, for a compromise settlement falling within the jurisdiction of the NEB to be valid, it must be shown that the same is approved by a majority of all the members of the NEB, and that there is a full clear inability to pay the assessed tax. The compromise settlement of any tax liability shall be subject to the following minimum amounts: For cases of financial incapacity, a minimum compromise rate equivalent to ten percent (I 0%) of the basic assessed tax; and For other cases, a minimum compromise rate equivalent to forty percent (40%) of the basic assessed tax. Where the basic tax involved exceeds One million pesos (PI ,000.000) or where the settlement offered is less than the prescribed minimum rates, the compromise shall be subject to the approval of the Evaluation Board which shall be composed of the Commissioner and the four (4) Deputy Commissioners." 16 SUBJECT: Revenue Regulations Implementing Sections 7(c), 204(A) and 290 of the National Internal Revenue Code of 1997 on Compromise Settlement of Internal Revenue Tax Liabilities Superseding Revenue Regulations Nos. 6- 2000 and 7-2001.

RESOLUTION CTA Case No. 9285 Page II of 12 settlement of the offered amount. In this case, upon review of the supporting documents attached to the Joint Motion for Approval of Compromise Agreement and Compliance with Submission submitted by the parties, the Court finds that petitioner has fully settled the legally required minimum amounts for compromise settlement, as shown in the BIR Payment Forms, eFPS Payment Details and Filing Reference Nos representing payments for deficiency Income Tax, Value-Added Tax, Expanded Withholding Tax, Withholding Tax on Compensation and Documentary Stamp Tax. Furthermore, the Court notes the submission of the Certificate of Availment (Compromise Settlement) dated December 18, 2018 together with the Certified True Copy of the signature page evidencing approval by the NEB of the Compromise Settlement as sufficient compliance with the legal requirements. In light of the foregoing considerations, the Court finds the parties' Joint Motion for Approval of Compromise Agreement to be in order, as the same has been validly executed by the parties, and the terms and conditions specified therein as not contrary to law, morals, good customs, public order, and public policy. A compromise is a contract whereby the parties, by making reciprocal concessions, avoid litigation or put an end to one already commenced. 17 It is an accepted and desirable practice in courts of law and administrative tribunals. 18 Settlement of disputes brought before the courts is, in fact, encouraged. 19 It is settled that contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided that these are not contrary to law, morals, good � customs, public order, or policy. 2 Corollary thereto, once submitted to the court and stamped with judicial approval, a compromise agreement becomes more than a mere private contract binding upon 17 Civil Code, Art. 2028. 18 Far East Bank and Trust Co., Trust and Investment Group, and FEB Investment Inc., vs. Trust Union Shipping Corp. et. al., G.R. No. 154716, September 16, 2008, citing Philippine National Oil Company-Energy Development Corporation (PNOC-EDC) vs. Abella, G.R. No. 153904, January 17, 2005. 19 Viesca vs. Gilinsky, G.R. No. 171698, July 4, 2007. 20 Civil Code, Art. 1306.

RESOLUTION CTA Case No. 9285 the parties. Having the sanction of the court and entered as its determination of the controversy, it has the force and effect of any judgment. 21 WHEREFORE, in light of the foregoing considerations, the parties' Joint Motion for Approval of Compromise Agreement filed on September 3, 2018 is hereby GRANTED. The Compromise Agreement entered into by the parties is hereby APPROVED and this Judgment On Compromise Agreement is hereby rendered in accordance therewith. The parties are hereby enjoined to faithfully comply with all the terms and conditions of the aforesaid Compromise Agreement. Accordingly, this case is now deemed CLOSED AND TERMINATED. SO ORDERED. ER~P.UY Presiding Justice Associate Justice ~N.M~~-~ CIELITO N. MINDARO-GRULLA Associate Justice " Conchita A. Sonley vs. Anchor Savings Bank/Equicom Savings Bank, G.R. No. 205623, Augusto 10, 2016.