MELCO RESORTS LEISURE (PHP) CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SECOND DIVISION MELCO RESORTS LEISURE CTA CASE N0.10514 (PHP) CORPORATION, Members: Petitioner, -versus- RINGPIS-LIBAN, Chairperson, MODESTO-SAN PEDRO, and FERRER-FLORES,]] Promulgated: COMMISSIONER OF INTERNAL REVENUE, JAN 0 6 1016 x----------------------------------~~~~d:~~~------------------~----~------------------x Y /:rr~ DECISION RINGPIS-LIBAN, PJ.: THE CASE The Petition for Review prays that the Court render judgment: (1) declaring petitioner entided to a refund or issuance of tax credit certificate in the amount of P24,798,420.00, representing erroneously withheld tax on gaming revenues, and unutilized or excess creditable withholding taxes (CWTs) on income for taxable year 2018; and (2) ordering, respondent to grant petitioner a refund or issuance of tax credit certificate in the amount of P24,798,420.00.1 THE PARTIES Petitioner Melco Resorts Leisure (PHP) Corporation is a corporation duly organized and existing under the laws of the Republic of the Philippines, with principal address at Asean corner Roxas Boulevard, Barangay Tambo, Paraiiaque City 1701, Philippines.2 It is engaged in the business of developing and operating tourist facilities, including hotel casino entertainment complexy 1 Statement of the Case, Pre-Trial Order dated l\Iay 11, 2022, Docket- Vol. I, p. 433. 2 Par. 1, Stipulation of Facts, Joint Stipulation ofFacts and Issues QSFI), Docket- Vol. I, p. 412.

DECISION CTA Case No. 10514 with hotel, retail and amusement areas and themed development components, without being engaged in retail trade, and engaged in casino gaming activities.3 Petitioner is registered with the Bureau of Internal Revenue (BIR) under Taxpayer Identification Number (TIN) 008-362-871-00000.4 Respondent is the duly appointed Commissioner of Internal Revenue who holds office the BIR National Office Building located at BIR Road, Diliman, Quezon City.5 ANTECEDENTS (ADMINISTRATIVE LEVEL) On January 28, 2013, the Philippine Amusement and Gaming Corporation (PAGCOR) issued an Amended Certificate ofAffiliation & Provisional ~ License to petitioner with other co-licensees and holders of the Provisional \ / License, as a consortium, in accordance with PAGCOR Charter (Presidential Decree [PD] No. 1896), as amended by Republic Act (RA) No. 9487, and that LICENSEE is entitled to the customs duties and tax exemptions specified under Title IV, Section 13 of the PAGCOR Charter (as amended). The said Amended Certificate ofAffiliation & Provisional License applies to casino(s) located in the Bagong Nayong Filipino Manila Bay Entertainment City, Parafiaque City, and in the Newport City Integrated Resort, Pasay City.6 Subsequently, in accordance with the same law, PAGCOR issued the Gaming License dated April 29, 2015 and the Gaming License (Amended) dated August 8, 2018, valid until July 11, 2033, in favor petitioner with other co- licensees, as a consortium, applicable to casino(s) located in the Entertainment City, Parafiaque City, and in the Newport City Integrated Resort, Pasay City, specifically to the licensees' casino located along Asean Avenue and Roxas Boulevard, Tambo, Parafiaque City, with the brand name of City of Dreams Manila. 7 Petitioner filed with the BIR its Annual Income Tax Return (ITR) (BIR Form No. 1702) for taxable year 2018, through the Electronic Filing and Payment System (eFPS) on April 15, 2019, and manually filed the same on April26, 2019.8 7 Thereafter, on April 12, 2021, pet:1t:1oner then filed an administrative claim for refund with the Large Taxpayers Service of the BIR amounting 3 Refer to Exhibit "P-1", Docket- Vol. 2, pp. 724 to 729. 4 Exhibit "P-5", Docket- Vol. 2, pp. 733 to 735. 5 Par. 2, Stipulation of Facts, JSFI, Docket- Vol. I, p. 412. 6 Exhibit "P-2", Docket- Vol. 2, p. 730. 7 Exhibits "P-3" and "P-4", Docket- Vol. 2, pp. 731 to 732. 8 Exhibits "P-7", "P-7-1", and "P-7-2", Docket- Vol. 2, pp. 744 to 756.

DECISION CTA Case No. 10514 P24,798,420.00, allegedly representing erroneously withheld and unutilized CWTs for taxable year 2018.9 PROCEEDINGS BEFORE THIS COURT Petitioner flied the present Petition for Review via electronic mail on April 14, 2021. 10 On October 25, 2021, respondent filed his Answer,11 interposing certain special and affirmative defenses, to wit: (1) petitioner's reliance on the theory that Section 13(2)(b) in relation to Section 13(2)(a) of PD No. 1869 exempts it from payment of income taxes is misplaced; (2) even assuming arguendo that petitioner is included in the exemption as a co-licensee or grantee of PAGCOR, it still has not proven entitlement to the refund claimed; and, (3) assuming, further, that petitioner can claim exemption from payment of income tax, it is submitted that its claim was filed out of time. Respondent submitted the BIR Records for the case on October 26, 2021, consisting of one (1) folder, consecutively numbered as pages 1 to 1433Y The Pre-Trial Conference was set and held on March 10, 2022. 13 Respondent's Pre-Trial Brief was flied on February 22, 2022,14 while the Pre-Trial Brieffor Petitionerwas submitted on March 4, 2022.15 On April 11, 2022, the parties flied their Joint Stzpulation of Facts and Issues, 16 which was admitted and approved by this Court in its Resolution dated April 19, 2022, 17 thereby deeming the termination of the Pre-Trial. Subsequently, the Court issued the Pre-Trial Order dated May 11, 2022.18 Trial ensued. Petitioner presented its documentary and testimonial evidence. It offered the testimonies of the following individuals, namely: (1) Ms. E u ? 9 Exhibits "P-11" and "P-11-1, Docket- Vol. 2, pp. 786 to 798. 10 Docket- Vol. I, pp. 8 to 40 (N .B.: The hard copies of the Petition.for Review were received by the Court only on 1-Iay 18, 2021). II Docket- Vol. I, pp. 243 to 258. 12 Compliance dated October 26, 2021, Docket- Vol. I, pp. 260 to 262. 13 Notice of Pre-Trial Conflrence dated November 12, 2021, Docket - Vol. I, pp. 264 to 265; Minutes of the hearing held on, and Order dated March 10, 2022, Docket- Vol. I, pp. 400 and 402 to 403, respectively. I+ Docket- Vol. I, pp. 266 to 269. 15 Docket- Vol. I, pp. 272 to 286. 16 Docket- Vol. I, pp. 412 to 425. 17 Docket- Vol. I, p. 427. 18 Docket- Vol. I, pp. 433 to 440.

DECISION CTA Case No. 10514 Rekha P. Pobre,19 petitioner's Tax Manager; (2) Mr. Rafael B. Taladtad, Jr.,20 petitioner's Director of Operational Accounting; and (3) Ms. Ma. Milagros F. Padernal,21 the Court-commissioned Independent Certified Public Accountant (ICPA). 22 The Amended Report of the ICPA was submitted on December 1, 2022.23 On :March 20, 2023, pet1t1oner filed its Formal Offer of Evidence. 24 Respondent, however, did not file his comment thereon. 25 In the Resolution dated August 4, 2023,26 the Court admitted petitioner's exhibits, except Exhibits "P-31-1-1845" and "P-37-422" to "P-37-423", for not being found in the records. Petitioner then flied its Motion For Partial Reconsideration [of Resolution dated August 4, 2023] with Manifestation on August 30, 2023_27 Respondent flied his Comment thereto, 28 to which petitioner flied a Motion to Admit Rep!J [To Respondent's Comment on Petitioner's Motion For Partial Reconsideration with Manifestation dated October 9, 2023} on October 25, 2023. 29 In the Resolution dated April 25, 2024, 30 the Court granted petitioner's Motion For Partial Reconsideration with Manifestation [of Resolution dated August 4, 2023), and thus, admitted Exhibits "P-37-422 to P-37-423". For his part, respondent presented the lone testimony of Revenue Officer Setie Naira B. Deron.31 On June 14, 2024, respondent flied his Formal Offer ofEvidence,32 to which petitioner filed its Comment (On Respondent's Formal Offer ofEvidence dated June 14, 2024) on June 28, 2024.33 In the Resolution dated October 3, 2024/4 the Court admitted all of respondent's offered exhibits. ~ l9 judicialAjjidavit rifEunice Rekha P. Pobre, Docket - Vol. I, pp. 291 to 305; Ivlinutes of the hearing held on, and Order dated, July 28,2022, Docket- Vol. I, pp. 477,479 to 480, respectively. 20 Judicial Affidavit rifRafael B. Ta!adtad, Jr., Docket- Vol. I, pp. 180 to 188; Minutes of the hearing held on, and Order dated, November 17, 2022, Docket- Vol. 2, pp. 570, 573 to 574, respectively. Zl Judicial Affidavit rifMa. Mi!agros F. Paderna! (re. Amended ICPA Report dated December 1, 2022), Docket- Vol. 2, pp. 641 to 649, Minutes of the hearing held on, and Order dated, February 16, 2023, Docket- Vol. 2, pp. 650 to 653. 22 Oath rifCommission dated July 2[8], 2022, Docket- Vol. I, p. 478; Minutes of the hearing held on, and Order dated, July 28,2022, Docket- Vol. I, pp. 477,479 to 480, respectively. 23 Exhibits "P-21" and "P-21-1", Docket- Vol. 2, pp. 576 to 635. 2~ Docket- Vol. 2, pp. 656 to 723. 2; Records Verification Report dated April 3, 2023, issued by the Judicial Records Division of this Court, Docket- Vol. 2, p. 826. 26 Docket- Vol. 2, pp. 830 to 835. 27 Docket- Vol. 2, pp. 836 to 843. 28 Docket- Vol. 2, pp. 849 to 851. 29 Docket- Vol. 2, pp. 853 to 860. 30 Docket- Vol. 2, pp. 951 to 953. 3l Exhibit "R-6", Docket- Vol. I, pp. 394 to 399; and i\Iinutes of the hearing held on, and Order dated, June 6, 2024, Docket- Vol. I, pp. 954, and 956 to 957, respectively. 32 Docket- Vol. 2, pp. 958 to 962. 33 Docket- Vol. 2, pp. 964 to 965. 3~ Docket- Vol. 2, pp. 968 to 969.

DECISION CTA Case No. 10514 The Memorandum for Petitioner was ft.led on November 13, 2024. 35 Respondent, however, failed to flle his memorandum.36 The present case was considered submitted for decision on January 7, 2025. 37 THE ISSUE RAISED The 1ssue submitted by the parties for resolution of this Court is as follows" "WHETHER OR NOT PETITIONER IS ENTITLED TO A REFUND OR ISSUANCE OF TCC OF THE EXCESS OR UNUTILIZED AND ERRONEOUSLY WITHHELD CWT FOR TAXABLE YEAR 2018 AMOUNTING TO P24,798,420.00 AS PROVIDED UNDER SECTIONS 76 AND 229 OF THE NIRC."38 Petitioner's arguments: Petitioner argues that it timely filed its claim for refund or issuance of tax credit certift.cate of its erroneously or excessively paid creditable withholding tax (CWI) for taxable year 2018 pursuant to Sections 204 and 229 of the National Internal Revenue Code (NIRC); that it is entitled to the refund or issuance of tax credit certift.cate of the excess and unutilized CWTs for taxable year 2018 amounting to P24,798,420.00, covering gaming and non-gaming revenues, as provided under Section 76 of the NIRC; and, that as a licensee of PAGCOR, it is entitled to the refund or issuance of tax credit certift.cate of P12,627,189.40, representing an erroneously withheld in income attributable to its gaming operations under Section 13(2)(b) in relation to Section 13(2)(1) of PD No. 1869, as amended. Respondent's counter-arguments: Respondent contends that petitioner's reliance on the theory that Section t 13(2)(b) in relation to Section 13(2)(a) of PD No. 1869 exempts it from payment of income taxes is misplaced; that even assuming argttendo that petitioner is included in the exemption as a co-licensee or grantee 35 Docket- Vol. 2, pp. 971 to 998. 36 Records Verification Report dated December 11, 2024, issued by the Judicial Records Division of tlus Court, Docket- Vol. 2, p. 999. 37 f..Iinute Resolution dated January 7, 2025, Docket- Vol. 2, p. 1000. 38 Stipulation oflssues, JSFI, Docket- Vol. I, p. 413.

DECISION CTA Case No. 10514 PAGCOR, it still has not proven entitlement to the refund claimed; and, that assuming, finally, that petitioner can claim exemption from payment of income tax, it is submitted that its claim was filed out of time. THE COURT'S RULING The present Petition for Review is partially granted. The tax exemption granted to PAGCOR inured to the benefit ot; and extended, to petitioner. Section 13(2) ofPD No. 186939 provides, in part, as follows: "SEC. 13. Exemptiom. - XXX XXX 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 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 essential facilities furnished and/or technical services rendered to the Corporation or operator. The fee or remuneration of foreign entertainers contracted by the Corporation or operator in pursuance of this provision shall be free of any 39 CONSOLIDATING AND AI\IENDING PRESIDENTIAL DECREE NOS. 1067-A, 1067-B, 1067-C, 1399 AND 1632, RELATIVE TO THE FRANCHISE AND POWERS OF THE PHILIPPINE Ai\IUSEiviENT AND GAJ\IING CORPORATION (PAGCOR).

DECISION XXX xxx." (Emphases and underscoring added) CTA Case No. 10514 XXX Based on the foregoing provision, it is clear that PAGCOR is exempt from the payment of any tax, whether national or local, except for a franchise tax at the rate of 5% of the gross revenue or earning derived by it from its operation under PD No 1869; and that the said tax exemption inures to the benefit of and extend: (1) to corporations, associations, agencies, or individuals with whom PAGCOR or operator has any contractual relationship in connection with the operation of casino(s) authorized under PD No. 1869; and (2) to those receiving compensation or other remuneration from PAGCOR or operator as a result of essential facilities furnished and/or technical services rendered to PAGCOR or operator. In other words, PD No. 1869 lays down the imposition of a five percent (5%) franchise tax of the gross revenues or earnings derived from its operations conducted under the Franchise, which shall be due and payable 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.40 Since the payment of the said five percent (5%) franchise tax shall be ((in lieu of all kinds of taxes", the tax exemptiOn privilege being enjoyed by PAGCOR is dependent on such payment. As a corollary, in case of non-payment of the same five percent (5%) franchise tax by PAGCOR, and thus, no tax exemption privilege is bestowed on the latter, it follows that PAGCOR's contractees and licensees shall not also be entitled to any tax exemption. As the old adage goes, the spring cannot rise higher than its source.41 In Bloomberry Resorts and Hotels, Inc. vs. Bureau ofInternal Revenue,42 the Supreme Court is clear on the significance of the payment of the said five percent (5%) franchise tax to entitle PAGCOR and all its contractees and licensees for the tax exemption to be enjoyed by them, to wit: "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. XXX XXX xxy -1o Refer to Philippim Amusement and Gaming Corporation (PAGCOR) vs. The Bureau of Internal Revenue, eta!., G.R. No. 215427, December 10, 2014. -II Heirs ofMaximo Labanon, eta!. vs. Heirs ofConstancio Labanon, G.R. No. 160711, August 14, 2004. -1z G.R. No. 212530, August 10, 2016.

DECISION CTA Case No. 10514 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, deflned within the purview of the aforesaid section, is not subject to corporate income tax." (EmphaJes and underscoring added) Simply put, the tax exemption of PAGCOR, and its contractees and licensees, is dependent on PAGCOR's payment of the 5% franchise tax. To be sure, under Section 13(2)(a) of PD No. 1869, no 5% franchise tax is imposed on the contractees and licensees, and thus, the latter are not required to pay the same to the government, in order to be exempt, inter alia, from all taxes. What is crucial is PAGCOR's payment of the said franchise tax, so that PAGCOR itself and the same contractees and licensees may enjoy tax exemption. In this case, for purposes of establishing payment of the 5% franchise tax by PAGCOR, petitioner presented the following documents, to prove petitioner's remittance of license fees, inclusive of 5% franchise tax to PAGCOR related to its gaming operations and to prove that PAGCOR remitted the said 5% franchise tax on behalf of its licensees, including petitioner to the BIR for taxable year 2018, to wit: 1) Statement of Franchise Tax Remittances for Calendar Year 2018 issued by PAGCOR;43 and, 2) Return of Percentage Tax Pqyable Under Special Laws (BIR Form No. 2553) flied by PAGCOR for the tst to 4th quarter of 2018;44 and To repeat, PD No. 1869 lays down the imposition of a five percent (5%) franchise tax of the gross revenues or earnings derived from its operations conducted under the Franchise, which shall be due and payable 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.45 Thus, by virtue of the above-quoted Section 13(2), upon payment of the said franchise tax, PAGCOR and its contractees and licensees shall be exempt from taxes. Petitioner complied with Section 76 of the NIRC of 1997. Notably, petitioner has not carried over the excess CWTs being claimed for refiind~ 43 Exhibit "P-14", Docket- Vol. 2, p. 801. 44 Exhibits "P-16 and series", "P-17 and series," "P-18 and series", and "P-19 and series", Docket- Vol. 2, pp. 804 to 823. 45 Refer to Phi!tppine Amusement and Gaming Corporation (PAGCOR) vs. The Bureau riflnterna! Revenue, eta/., supra.

DECISION CTA Case No. 10514 To recall, petitioner seeks the refund or issuance of tax credit certificate for the total amount of P24,798,420.00 on the basis that the same remained unutilized as of December 31, 2018, and was not carried forward to the succeeding taxable period/s pursuant to Section 76 of the NIRC of 1997, quoted hereunder for ready reference: "SEC. 76. Final Aqjttstment Return. - Every corporation liable to tax under Section 27 shall file a final adjustment return covering the total taxable income for the preceding calendar or fiscal year. If the sum of the quarterly tax payments made during the said taxable year is not equal to the total tax due on the entire taxable income of that year, the corporation shall either: (A) Pay the balance of tax still due; or (B) Carry-over the excess credit; or (C) Be credited or refunded with the excess amount paid, as the case may be. In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income taxes paid, the excess amount shown on its flnal adjustment return may be carried over and credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable years. Once the option to carry-over and apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years has been made, such option shall be considered irrevocable for that taxable period and no application for cash refund or issuance of a tax credit certificate shall be allowed therefor." The above provision discusses the two options of a taxable corporation whose total quarterly income tax payments in a given taxable year exceed its total income tax due. The taxpayer may either: (1) carry-over the excess amount to the succeeding taxable quarters/years until it is fully utilized, or (2) file a claim for refund in the form of cash or tax credit certificate. However, once the carry-over option is taken actually or constructively it becomes irrevocable for that taxable period.46 The phrase ]or that taxable pen.od" refers to the taxable year when the excess income tax, subject of the option, was acquired by the taxpayer. 47 In exere1smg its option, the corporation must signify in its annual corporate adjustment return (l:ry marking the option box provided in the BIRform) its intention, either to carry over the excess credit or to claim a refund. To facilitate tax collection, these remedies are in the alternative and the choice of one precludes the othe~ 46 Rhombus Energy, Inc. vs. Commtssioner of Internal Revenue, G.R. No. 206362, August 1, 2018, citing the case of Republic of the Philippines, represented by the Commzssioner of Internal Revenue vs. Team (Phils.) Emr;gy Corporation (former!J Mirant (Phils.) Energy Corporation, G.R. No. 188016, Januaty 14, 2015; Phi/am Asset Management, Inc. vs. Commissiomr of Intemal Revenue, G.R. Nos. 156637 & 162004, December 14, 2005; Systra Phi!tppines, Inc vs. Commissioner ofintemal Revenue, G.R. No. 176290, September 21, 2007. 47 Republic of the Philippines, represented by the Commissioner of Intemal Revenue vJ�. Team (Phils.) Energy Corporation (former!J Mirant (Phils.) Energy Corporation), G.R. No. 188016, January 14, 2015; Commissioner of Internal Revenue vs. Bank ofthe Phi!zppine Islands, G.R. No. 178490, July 7, 2009. 48 Phi!tppine Bank ofCommunications vs. Commissioner ofInternal Revenue, eta!., G.R. No. 112024, January 28, 1999.

DECISION CIA Case No. 10514 A perusal of petitioner's Annual ITR for taxable year 201849 shows that petitioner declared a total income tax overpayment of P108,502,885.00, computed as follows: Income Tax Due p - Less: Tax Credits/Payments PriorYear's Excess Credits Other than MCIT 83,704,465.00 Creditable Tax Withheld from Previous P15,656,999.00 24,798,420.00 Quarters P108,502,885.00 Creditable Tax Withheld per BIR Form 9,141,421.00 No. 2307 for the Fourth Quarter Overpayment Petitioner claims that the enure amount of P1 08,502,885.00 was unutilized since petitioner incurred a net loss at that time. Hence, petitioner did not have income tax due from its activities subject to regular corporate income tax. :Nloreover, petitioner incurred a gross loss in taxable year 2018. Hence, petitioner is not subject to minimum corporate income tax (MCIT). Accordingly, it was not able to utilize the CWTs arising from taxable year 2018 in the aggregate amount of P24,798,420.00, as well as the CWTs from prior years in the amount ofP83,704,465.00. Verily, in line with Section 2.58.3(C) of Revenue Regulations (RR) No. 2-98, as quoted below, the submission of petitioner's Annual ITR for CY 2017 is sufficient to prove its "Prior Year's Excess Credits other than MCIT" in the amount of P83,704,465.00: "SEC. 2.58.3. Claim for tax credit or refund. - XXX XXX XXX (C) Excess Credits.-An individual or corporate taxpayer's excess expanded withholding tax credits for the taxable quarter/year shall automatically be allowed as a credit against his income tax due for the taxable quarters/years immediately succeeding the taxable quarters/years in which the excess credit arose, provided he submits with his income tax return, a copy of the first page of his income tax return for the previous taxable period showing the amount of his excess withholding tax credits, and on which return he has not opted for a cash refund or tax credit certificate." (EmphaJis added) 20r Here, petitioner presented its Annual ITR for 2017 showing that it had excess tax credits amounting to P83,704,465.00 50 as of December 31, 49 Exhibits "P-7", "P-7-1", and "P-7-2", Docket- Vol. 2, pp. 744 to 756. 50 Line 20, Part II- Total Tax Payable, Exhibits "P-23-5" and "P-23-15", USB marked as Exhibit "P-21-2".

DECISION CTA Case No. 10514 which was then carried over in petitioner's Annual ITR for 2018.51 Accordingly, the Court finds the submission of petitioner's Annual ITR for 201752 sufficient to prove petitioner's "Prior Year's Excess Credits Other Than MCIT" of P83,704,465.00 for taxable year 2018. Moreover, considering that petitioner had no income tax liability for taxable year 2018, the CWTs for same year in the amount of P24,798,420.00 remained unutilized as of the end of the period. Since petitioner marked the box corresponding to the option "To be Refunded" in its Annual ITR for calendar year (CY) 201853 and carried over only the amount of P83,704,465.00 as prior year's excess tax credits in its Annual ITR for CY 2019,54 the CWTs for taxable year 2018 in the amount of P24,798,420.00 may be a proper subject of a claim for refund or issuance of tax credit certificate pursuant to Section 76 of the NIRC of 1997. Petitioner has erroneously withheld taxes related to its gaming revenues for taxable year 2018. As ascertained by the ICPA, Ms. Ma. Niilagros F. Padernal, the total CWTs ofP24,798,420.00 arose from the following: 55 Exhibit Particulars Income Payments Taxes Withheld No. IPer Schedule oJCIVTs: p 12,627,189.40 "P-24"56 1,522,692.29 Gaming Activities - Credit Card p 2,525,441,480.00 2,817,785.20 Transactions 304,538,457.00 7,830,433.65 Non-gaming Activities- Credit Card Transactions (Hotel 563,557,034.00 P24, 798,100.54 Ogerations} 392,354,528.96 Non-gaming Activities- Credit p 24,798,420.00 Card Transactions (Food and P3,785,891,499.96 (P319.46) Beverage) Non-gaming Activities- Other Transactions "P-23-6" and Per 2018 Annual Income Tax Return "P-23-16"57 Difference- Not Supported by BIR Form No. 2307 Petitioner claims that in addition to Section 76 as basis, petitioner is likewise entitled to a refund or issuance of tax credit certificate for the porti/ 51 Line 1, Schedule 8- Tax Credits/Payments, Exhibit "P-7", Docket- Vol. 2, p. 749. 52 Exhibits "P-23-5" and "P-23-15", USB marked as Exhibit "P-21-2". 53 Line 21, Exhibit "P-7", Docket, p. 744. 54 Line 1, Schedule 8- Tax Credits/Payments, Exhibit "P-8", Docket- Vol. 2, p. 762. 55 Page 9, ICPA Report (Exhibit "P-21"), Docket- Vol. 2, p. 586. 56 USB marked as "P-21-2". 57 USB marked as "P-21-2".

DECISION CTA Case No. 10514 of the 2018 CWTs of P24,798,420.00, equivalent to P12,627,189.40, representing 2018 CWTs related to gaming activities,58 under PD No. 1869. As discussed above, by virtue of Section 13(2) of PD No. 1869, petitioner is a licensee of PAGCOR, hence, tax exemption granted to PAGCOR inured to the benefit of, and extended, to petitioner. Consequently, petitioner's revenue from gaming operation is exempt from corporate income tax and, likewise, from withholding tax. Accordingly, the related CWTs erroneously withheld may be subject of refund or issuance of tax credit certificate. In its Annual ITR for taxable year 2018,59 petitioner allegedly reported its revenues from gaming as exempt from income tax. As earlier mentioned, of the CWTs of P24,798,420.00, P12,627,189.40 represents 2018 CWTs related to gaming activities. Petitioner, through its Director of Finance-Operational Accounting, Mr. Rafael B. Taladtad, Jr., explained how to determine whether the revenues were derived from gaming or non-gaming activities. He avers that pursuant to the Merchant Agreemenf0 with Banco De Oro (BDO), BDO has deployed credit card terminals for use by the petitioner in settlement transactions within the gaming and non-gaming areas in its premises, to wit: 61 "3. As the Director, Finance-Operational Accounting of the Corporation, I have access to, and accountable for, various credit card terminals deployed by Banco De Oro ("BDO"), for use in settlement transactions within the gaming and non-gaming area within the premises of the City of Dreams Manila. 4. For taxable year 2018, the following credit card terminals with the corresponding Merchant Identification Numbers ("MID") were deployed and used solely at the corresponding location or address within the premises of the Corporation: XXX XXX 58 Par. 56, Memorandum.for Petitioner, Docket- Vol. 2, p. 982. 59 Exhibit "P-7", Docket- Vol. 2, p. 749. 60 Exhibit No. "P-22-9", USB marked as "P-21-2". 61 Exhibit "P-22-10", USB marked as "P-21-2".

DECISION CTA Case No. 10514 5. The credit card terminals assigned to GAMING AREAS were used solely and exclusively for transactions involving the buy-in of table game chips and slot machine tickets for gaming use within the premises of the Corporation." Further, according to Ms. Eunice Rekha P. Pobre, petitioner's Tax Manager, the C\X'Ts related to the gaming operations pertain to credit card charges made by petitioner' patrons. When these charges are paid by the credit card companies, such BDO, to petitioner, the same are subjected to withholding tax by said credit card companies. Upon withholding, BDO issues BIR Form No. 2307 or Certificate ofCreditable Tax Withheld at Source to petitioner. It indicated in the space for "registered address" of petitioner the "CAGE", "COD MRLOIALYINLINICNGAGGCCEAA"GG' E"EC",'"OCtDoOiSdDAenTStiEIfGyLNLthIAaTtTEtUhCeRAEcrGeCEdiA"t'Gc"aCErd"O'cDh"aCMrAgAeGsSESweCAreAXmG"'aEdo"er' "COD "COD in the cage of the casino premises and were used solely to purchase table game chips or slot machine tickets for gaming purposes. If the term "CAGE" is not indicated anywhere in BIR Form No. 2307, it means that the credit card charges were made in non-gaming areas for non-gaming purchases.62 To prove that pettttoner has P12,627,189.40 CWTs for taxable year 2018, petitioner duly submitted the BIR Forms No. 230763 issued by BDO in its favor. It is to be noted that for credit card transactions, the basis of the withholding tax is the gross amount paid by any credit card company in the Philippines to any business entity pursuant to Section 2.57.2(H) of RR No. 2- 98, as amended. To ascertain that the income payments related to the CWTs of P12,627,189.40 were withheld from income exempt from tax, the same were then traced through its Merchant Identification Number (2\1JD)/Terminal Address indicated in the BIR Form No. 2307 against the Credit Card Reconciliation, Credit Card 5ummary and Bank 5tatements. The MID, represents the POS equipment unique serial number/ code, and the Terminal Address represents the location/department which were indicated beside the period and registered address boxes in the BIR Form No. 2307 issued by BDO for the credit card transactions. The Credit Card Reconciliation64 shows the amount of credit card transactions swiped in each terminal for the day. The Credit Card Summaif5 contains the daily comparison of credit card transactions per terminal against the actual net amount received from BDO per bank statemen( 62 Q&A33, Judicia! Affidavit, Docket- Vol. I, p. 301. 63 Exhibits "P-25-1" to "P-25-79", USB marked as "P-21-2". 6-l Exhibits ''P-27-1" to "P-27-12", USB marked as "P-21-2". 65 Exhibits "P-27-13" to "P-27-24", USB marked as "P-21-2". 66 Exhibit "P-28-1", USB marked as "P-21-2".

DECISION CTA Case No. 10514 The reconciliation resulted to the following: Exhibit No. Particulars Income Payments Taxes Withheld Listings ofBIR Form No. 2307 vs MID/Terminal Addresi7 "P-25-1" to Per Listings ofBIR Form No. 2307 P2,525,441,480.00 P12,627,189.40 "P-25-79"68 2,525,441,480.00 12,627,189.40 "P-25"69 Per Terminal Address and MID p p Difference MID/Terminal Address vs Credit Card Reconciliation70 "P-25"71 Per Terminal Address and MID P2,525,441,480.00 P12,627,189.40 12,624,157.40 "P-27-1" to Per Credit Card Reconciliation 2,524,831,480.08 " P - 2 7 - 1 2 "72 p 3,032.00 Difference p 609,999.92 3,050.00 (P18.00) Accountedfor m'}ollows: 610,000.00 Not Within Period ofClaim (P0.08) Rounding-OffDifferences Credit Card Reconciliation vs Credit Card Summar;P "P-27-1" to Per Credit Card Reconciliation P2,524,831 ,480.08 P12,624,157.40 " P - 2 7 - 1 2 " 74 2,524,976,480.08 12,624,882.40 "P-27-13" to Per Credit Card Summary " P - 2 7 - 2 4 "75 " P - 2 7 - 1 2 "76 Gross amount paid by BDO in TY2018 (P145,000.00) (P725.00) but BIR Form No. 2307receivedin TY 2019- not subject ofclaim Exhibit No. Particulars Income Payments Taxes Withheld Net Amount Credit Card Summary vs Bank Statements77 "P-27-13" to Per Credit Card Summary P2,524,976,480.08 P12,624,882.40 P2,468,879 ,022.02 "P-27-24" 78 Per Bank Statements 2,517,424,830.40 12,587,124.15 2,461,848,579.52 "P-28" 79 7,551,649.68 37,758.25 7,030,442.50 Difference " P - 2 7 - 1 " 80 Aa�ounted for as follows: 20,500,000.00 102,500.00 20,397,500.00 Outstanding balance in December 2017 but only reflectedin theJanuary 2018 bank statement! 67 Table 9 of ICPA Report (Exhibit "P-21"), Docket- Vol. 2, p. 591. 68 USB marked as "P-21-2". 69 USB marked as "P-21-2". 70 Table 10 of ICPA Report (Exhibit "P-21"), Docket- Vol. 2, p. 592. 71 USB marked as "P-21-2". 72 USB marked as "P-21-2". 73 Table 10 of ICPA Report (Exhibit "P-21"), Docket- Vol. 2, p. 592; "Exhibit "P-27", USB marked as "P-21- 2". 74 USB marked as "P-21-2". 75 USB marked as "P-21-2"; Table 11 of ICPA Report (Exhibit "P-21 "),Docket- Vol. 2, p. 593. 76 USB marked as "P-21-2". 77 Table 11 of ICP1\ Report (Exhibit "P-21"), Docket- Vol. 2, p. 593. 78 USB marked as "P-21-2". 79 USB marked as "P-21-2". so USB marked as "P-21-2".

DECISION CTA Case No. 10514 "P-27-12" 81 Outstanding balance in (27,419,000.00) (137 ,095.00) (26,809,291.00) December 2018 but only (P632,649.68) reflected in theJanuary 2019 (P3,163.25) (P618,651.50) bank statements Difference -not traced to bank statement Moreover, the income payments per bank statements were traced to the Journal Voucher/'2 and to the General Ledger- Cash Receipt/'3 for the taxable year 2018 which are generated from the petitioner's Workdcry Financial Management (Workday) computerized system with Permit to Use Computerized Accounting System (CAS Permit)84� As per re-examination of the Bank Statements from BDO for Gaming 85 and non-gaming 86 activities, the Court noted that the income payments amounting to P2,461,848,579.52 were swiped or entered to MID /Terminals assigned to gaming activities, summarized as follows: 87 Seq Terminal Address MID Income No. Payments COD Main Cage p 309,851,056.60 1 9181229907/918229907 COD Satellite Cage COD Signature Cage 304,621,120.62 2 9181229915/918229915 COD Mass Cage 1,290,103,957.00 COD Li Ying Cage 3 9181229923/918229923 COD Rolling Cage 154,040,597.30 Cage AX 130,455,420.00 4 9181229931/918229931 243,740,543.00 29,035,885.00 5 9181229956/918229956 P2,461,848,579.52 6 9181339318/918339318 7 9181693607 Total (Net of Taxes Withheld) As per verification, there was no difference m the mcome payments based on the documents presented, to wit: Exhibit No. Particulars Income Payments "P-28"88 Per Bank Statements ~2,461,848,579.52 "P-33-1-1" to "P-33-1-621"89 Per Journal Vouchers 2,461,848,579.52 "P-33-2"90 Per General Ledger-Cash Receipts for Gaming 2,461,848,579.52 Activities Difference From the foregoing reconciliations, the income payment difference of P610,000.00, with corresponding CWTs of P3,050.00, pertains to the gross amount paid by BDO to petitioner in December 2017 but the correspond/' 81 USB marked as "P-21-2". 82 Exhibits "P-33-1-1" to "P-33-1-621", USB marked as "P-21-2". 83 Exhibits "P-33-2", USB marked as "P-21-2". s-1 Exhibit "P-22-12", USB marked as "P-21-2". 85 Exhibits "P-28", and "P-28-1", USB marked as "P-21-2". 86 Exhibits "P-34", "P-34-1" and "P-41", USB marked as "P-21-2". 87 Exhibit "P-28-1 ",USB marked as "P-21-2". 88 USB marked as "P-21-2". 89 USB marked as "P-21-2". 90 USB marked as "P-21-2".

DECISION CTA Case No. 10514 BIR Form No. 2307 was only received in January 2018. On the other hand, the income payments of P632,649.68 with corresponding CWTs of P3,163.25 was not traced to the bank statement. Hence, the total amount of CWTs of P6,213.25 with related income payments of P1,242,649.68 shall be disallowed from the present claim, as determined below: Particulars Income Payments Taxes Withheld Not within the period of claim p 610,000.00 p 3,050.00 Not traced to bank statement 632,649.68 Total 3,163.25 p 1,242,649.68 p 6,213.25 Consequently, petitioner was able to prove that the CWTs in the amount ofP12,620,976.15 (P12,627,189.40 less P6,213.25) were duly supported by BIR Form 2307 and were erroneously withheld from income payments related to its gaming operations. Requisites to claim a tax credit or refund of excess and unutilized CWT. As earlier presented, the amount of P12,171,230.60 represents unutilized CWTs related to petitioner's non-gaming activities. To prove entitlement thereto, in addition to the requisites provided under Section 76 of the NIRC of 1997, the following requisites must be further complied with: 1. The claim for refund must be filed within the two-year prescriptive period as provided under Sections 204(C) and 229 of the NIRC of 1997; 2. The fact of withholding must be established by a copy of a statement duly issued by the payor (withholding agent) to the payee, showing the amount paid and the amount of tax withheld therefrom; and 3. The income upon which the taxes were withheld must be included in the return of the recipient.91 Thus, it behooves petitioner to establish the foregoing requisites. claimy Petitioner timely filed both its administrative and judicial 91 Repttblic of the Philippines, represented by the Commissioner of Internal Revenue vs. Team (Phils.) Energy Corporation (formerjy Mirant (Phils.) Energy Corporation), G.R. No. 188016, January 14, 2015; United International Pittures AB vs. Commissioner ofInternal Revenue, G.R. No. 168331, October 11, 2012; Citibank NA. vs. Court ofAppeals, et al., G.R. No. 107434, October 10, 1997; ACCRA Investments Corporation vs. The Honorable Court ofAppeals, et aL, G.R. No. 96322, December 20, 1991; Section 2.58, Revenue Regulations No. 2-98, as amended.

DECISION CTA Case No. 10514 for refund of/ issuance oftax credit certificate. As to the first requisite, that the claim for refund was flied within the two (2)-year prescriptive period, the pertinent legal bases therefor are Sections 204(C) and 229 of the NIRC of 1997, which read as follows: "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: Prm;ided, howet;er, That a return filed showing an overpayment shall be considered as a written claim for credit or refund." "SEC. 229. Recovery ofTax ErroneouslY or Illega!/y Co!leded. - 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 flied 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 of any supervening cause that may arise after payment: Prot;ided, however, 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." (Emphasis added) The above-stated provisions mandate that the administrative and judicial remedy of filing a claim for refund of erroneously or excessively paid tax must be done within two (2) years from the date of payment of the tax. It is well settled that the two (2)-year prescriptive period for claiming a refund of overpaid income tax/ CWTs commences to run on the date of filing of the Pinal Adjustment Return (FAR)92 (or 1\nnual ITR). This is so becaus~ 92 ACCRA Investments Corporation vs. The Honorable Court ofAppeals, et aL, G.R. No. 96322, December 20, 1991; Commissioner of Intemal Revenue vs. TMX Sales, Inc. and the Court of Tax Appeals, G.R. No. 83736, January 15, 1992; Commissioner ofIntema! Revenue vs. The Philippine American Life Insurance Co., et aL, G.R. No. 105208, May 29, 1995.

DECISION CTA Case No. 10514 is only when the FAR covering the whole year is ft.led that the taxpayer would know whether a tax is still due or a refund can be claimed based on the adjusted and audited ft.gures. 93 In other words, it is only logical to reckon the two-year prescriptive period from the time the FAR or the Annual ITR was flied, since it is only at that time that it would be possible to determine whether the corporate taxpayer paid an amount exceeding its annual income tax liability.94 In this case, pet:1t:1oner flied its Annual ITR via electronic filing and payment system or eFPS of the BIR on April 15, 2019. 95 Thus, counting therefrom, petitioner had until April 15, 2021, within which to flie both its administrative and judicial claims. Accordingly, petitioner flied its administrative claim for refund and its Application for Tax Credits/ Refunds (BIR Form No. 1914) on April 12, 2021, with the BIR.96 On the other hand, the judicial claim was electronically flied on April 14, 2021,97 or within the two (2)-year prescriptive period. However, the hard copy of the petition was only flied on May 18, 2021. 98 Nevertheless, this Court En Bane's Resolution No. 4-2021 dated February 24, 2021, allows the ft.ling of pleadings, motions, and other court submissions ry e-mail during the Period of State of Public Health Emergency due to the COVID-19 Pandemic. However, litigants shall submit, by personal ft.ling or licensed courier, the required number of hard copies of the pleadings, motions, and other court submissions within ft.ve (5) calendar days from date of filing by email.99 Moreover, in cases where there are filing fees or other legal fees that are required to be paid on the pleadings, motions, and other court submissions ft.led by e-mail, litigants are required to submit the proof of payment of the filing fees or other legal fees due thereon within ft.ve (5) � calendar days from the date of filing through email.10 Failure to do so shall be a ground for declaring the pleading, motion, and other court submission as deemed not ft.led which may result in the dismissal of the petition for review, complaint or information, and the imposition of other appropriate sanctions as may be determined by the Court. 101 Hence, pursuant to this Court's En Bane Resolution No. 4-2021, petitioner must submit, by personal filing or licensed courier, the requi/ 93 Commissioner ofInternal Revenue vs. TMX Safes Inc., eta!., G.R. No. 83736, Januaty 15, 1992. 9+ Metropolitan Bank & Trust Company vs. The Commissioner ofInternal Revenue, G.R. No. 182582, April17, 2017. 95 Exhibits "P-7", Docket- Vol. 2, p. 744. 96 Exhibits "P-11" and "P-11-1, Docket- Vol. 2, pp. 786 to 798. 97 Docket- Vol. I, p. 2. 98 Docket- Vol. I, pp. 8 to 38. 99 Paragraph 3, CTA En Bane Resolution No. 4-2021. 100 Paragraph 4, CTA En Bane Resolution No. 4-2021. 101 Paragraph 6, CTA En Bane Resolution No. 4-2021.

DECISION CfA Case No. 10514 number of hard copies of its Petition and proof of payment of the filing fees or other legal fees due within five (5) calendar days from the date of filing of email, or until April 17, 2021. However, due to the physical closure of the Courts brought about by the COVID-19 Pandemic, the Supreme Court issued the following Administrative Circulars (ACs) suspending the filing periods for pleadings/court submissions for Courts in the National Capital Region and nearby provinces until the physical reopening of the relevant court, to wit: ACNo. Date Issued Subject Content 15-2021 Apr. 3, 2021 "Likewise, the filing periods of 21-2021 RE: EXTENSION OF THE pleadings and other court Apr. 10, 2021 submissions that fell due or 22-2021 PHYSICAL CLOSURE OF would fall due during the period beginning from March 29 to COURTS AND THE April 11 2021 are hereby EXTENDED for seven (7) FILING PERIODS FOR calendar days, counted from April 12. 2021. xxx" PLEADINGS AND OTHER "Considering the unabated rise of COURT SUBMISSIONS IN COVID-19 cases, the requests of the judges and court personnel, LIGHT OF THE FURTHER and upon the concurrence of the members of the Court en bam~ EXTENSION OF THE ALL the courts and judicial offices in the National Capital ENHANCED Judicial Region and the provinces of Bulacan, Cavite, Laguna, and COMMUNITY Rizal (NCJR+) shall remam physically closed until 18 April QUARANTINE FROM 2021. They may be reached through their hotlines and email APRIL 5 TO APRIL 11, addresses as posted 1n the Supreme Court website. 2021. RE: EXTENSION OF PHYSICAL CLOSURE OF COURT XXX XXX XXX The time for filing and service of pleadings and motions during this period is SUSPENDED and shall resume seven (7) calendar days counted from the first day of physical reopenmg of the relevant court." Apr. 14, 2021 RE: PHYSICAL CLOSURE "Considering that the National OF COURTS IN Capital Region, and the provinces ENHANCED of Abra, Bulacan, Cavite, Laguna, COMMUNITY Quirino and Rizal, and Santiago QUARATINE AND City are under Modified MODIFIED ENHANCED Enhanced Community COMMUNITY Quarantine (MECQ) until 30

DECISION CTA Case No. 10514 ACNo. Date Issued Subject Content April 2021, the physical closure QUARANTINE AREAS of courts m the said areas 1s likewise extended to 30 April 2021. XXX XXX XXX The time for filing and service of pleadings and motions during this period is SUSPENDED and shall resume seven (7) calendar days counted from the ftrst day of physical reopenmg of the relevant court." 29-2021 Apr. 30, 2021 RE: WORI<:. "Considering that the National Capital Region, the provinces of ARRANGEMENTS IN Abra, Bulacan, Cavite, Laguna, Quirino, and Rizal, and Santiago COURTS ON 3 - 14 :MAY City, Isabela, continue to be under Modifted Enhanced 2021 Community Quarantine (MECQ) until 14 May 2021, ALL ftrst and second level courts, and appellate collegiate courts, and their judicial offtces in the said areas shall continue to be physically closed until14 May 2021. XXX XXX XXX The time for filing and service of pleadings and motions during this period m these areas ts SUSPENDED and shall resume after seven (7) calendar days counted from the ftrst day of the physical reopening of the relevant court." 33-2021 May 14,2021 RE: COURT OPERATIONS "Considering that the National STi\RTING 17 MAY 2021 Capital Region and nearby provmces of Bulacan, Cavite, Laguna, and Rizal, together with some provinces and cities, have been placed under General Community Quarantine (GCQ) starting 15 May until 31 May 2021, all ftrst and second level courts, and appellate collegiate courts (except the Supreme Court), and the judicial offtces in these areas under GCQ shall be physically opened with a skeleton force of at least thirty percent (30%) to at most ftfty percent (50%), beginning 17 May 2021 until further notice." ~/ f

DECISION CTA Case No. 10514 Based on the foregoing circulars, the reopening of courts resumed on May 17, 2021, and petitioner had seven (7) days from this date, or until May 24, 2021, within which to file hard copies of its Petition for Review as well as to show proof of payment of its filing fees. In view of the foregoing, petitioner's filing of the hard copies of its Petition for Review as well as the proof of payment of its filing fees on May 18, 2021,102 is well within the extended period for filing judicial claim for refund as provided above, thus, fulfllling the first requisite. The fact of withholding Js established by certificates of tax withheld at source. In compliance with the second requisite, petitioner submitted various BIR Forms 2307,103 which were examined by the ICPA. Based on her examination and per the undersigned's further verification, the CWTs of P3,549,405.25 with related income payments of P426,842,131.63 should be disallowed for not being supported by BIR Forms No. 2307, summarized as follows: Exhibit No. Particulars Income Taxes Withheld Pa ments "P-26"104 Difference- Not supported~ BIR Form No. 2307: Non-gaming Activities- Credit 3,776,472.00 18,882.36 Card Transactions (Hotel 355,020,338.00 Operations) 1,775,101.69 Non-gaming Activities- Credit 68,045,321.63 1,755,101.74 Card Transactions (Food and Beverage) 1"426,842,131.63 319.46 Non-gaming Activities- Other 1"3,549,405.25 Transactions Difference per Schedule of CWfs vs per 2018 Annual ITR Total Consequently, only the CWTs of P8,621,825.35 with related income payments of P833,607,888.33 were duly supported by BIR Form No. 2307, as summarized below: Non-gaming Activities- Credit Card Transactions (Hotel p 300,761,985.00 p 1,503,809.93 Operations) 208,536,696.00 1,042,683.51 Non-gaming Activities- Credit Card Transactions (Food 324,309,207.33 6,075,331.91 and Beverage) p 833,607,888.33 1'8,621,8257 Non-gaming Activities- Other Transactions Total 102 Docket- Vol. I, p. 3. 103 Exhibits "P-25-80" to "P-1297", USB marked as "P-21-2". 10+ USB marked as "P-21-2".

DECISION erA Case No. 10514 Petitioner failed to prove that the income payments trom its non- gaming revenue upon which the claimed unutilized CWTs were withheld were declared as part ofits gross income in its Annual ITR. Regarding the third requisite, pet1tl.oner must prove that the income payments from which the substantiated CWT were withheld were declared as part of its gross income. Correspondingly, it becomes necessary to trace the revenues per BIR Form No. 2307 vis-a-vis recorded in the general ledger book and ultimately to Annual ITR to ascertain that the related income was duly reported as revenues for taxable year 2018. To reiterate, the CWTs claimed for refund pertains to income payments from credit card sales transactions from these regular tax revenue-generating activities, listed as follows: Exhibit Particulars Income Payments Taxes Withheld "P-24"105 Non-gaming Activities - Credit Card Transactions (Hotel Operations) 304,538,45 7.00 1,522,692.29 Non-gaming Activities- Credit Card Transactions (Food and Beverage) 563,55 7,034.00 2,817,785.20 Non-gaming Activities - Other Transactions 392,354,528.96 7,830,433.65 P1,260,450,019. 96 P12,170,911.14 Total Petitioner submitted General Ledgers for Non-gaming Revenue, AFS and Annual ITR which shows the following revenue amounts: Exhibit No. Particulars Amount General Ledger- Non-gaming Revenue vs Audited Financial Statements106 P6,181,048,219.39 "P-32-61" to "P-32-134"107 Per General Ledger- Non-gaming Revenue 2,815,424,000.00 " P - 2 3 - 2 2 " 108 Per Audited Financial Statements: 2,759,911,000.00 Rooms 605,714,000.00 6,181,049,000.00 Food and beverage (P780.61) Entertainment, retail and other Rounding-off difference 105 USB marked as "P-21-2". 106 Table 32 ofiCPA Report (Exhibit "P-21"), Docket- Vol. 2, p. 609. to7 USB marked as "P-21-2". tos USB marked as "P-21-2".

DECISION CTA Case No. 10514 Schedule ofReconciliation ofFinancial and Taxable Income vs Annual Income Tax Retum109 "P-35"110 Non-gaming Revenue in the taxable income column 2,306,857,299.02 per Schedule of Reconciliation of Financial and Taxable Income "P-23-6" and "P-23-16"111 Revenue under "Total Regular" column reflected in 2,306,85 7,299. 00 the Annual Income Tax Return for the taxable year 2018 Rounding-off difference P0.02 While the ICPA claims that the Non-gaming Revenues per GL agreed with the AFS for taxable year 2018, 112 as well as with the amount of "Net Sale/Revenue/Receipts/Fess" under the "Total Regular" column of Annual ITR for taxable year 2018, petitioner did not provide a reconciliation or detailed tracing of the income payments from credit card transactions subjected to withholding amounting to P1,260,450,019.96 to the general ledger - non- gaming revenue amounting P6,181,048,219.39 to ascertain whether these income payments were the same revenue reported in the AFS and Annual ITR for taxable year 2018. Further, while there was reference to Credit Card Transaction Process Narratives, it remains unclear on how the non-gaming revenue amounting to P1,260,450,019.96 from credit card sales transactions from BDO can be traced to the General Ledger non-Gaming Revenue amounting to P6,181,048,219.39, or any other documents that would somehow aid the Court in verifying whether the income payments related to the claimed CWTs were indeed declared in the Annual ITR for taxable year 2018. The Court emphasizes that the ICPA is commissioned to assist the Court in determining the merit of a taxpayer's case. However, it is not bound by the findings of the ICPA, as provided under Section 3, Rule 13 of the Revised Rules of Court of Tax Appeals, which states: "SEC. 3. Findinp of independent CPA. - The submission by the independent CPA of pre-marked documentary exhibits shall be subject to verification and comparison with the original documents, the availability of which shall be the primary responsibility of the party processing such documents and, secondarily, by the independent CPA. The findings and conclusions of the independent CPA may be challenged by the parties and shall not be conclusive upon the Court, which may, in whole or in part, adopt such findings and conclusions subject to verification." (Emphmis and underscoring added) Based on the foregoing prov1s1on, the ICPA's findings are not conclusive upon this Court as the same are subject to its verification, to determine its accuracy, veracity and merit. The Court may either wholl7 109 Table 33 ofiCP/\ Report (Exhibit "P-21"), Docket- Vol. 2, p. 610. 110 USB marked as "P-21-2". 111 USB marked as "P-21-2". 112 Par. 34, ICPA Report (Exhibit "P-21"), Docket- Vol. 2, p. 608.

DECISION CTA Case No. 10514 partially adopt or even disregard the findings of the ICPA, depending on the outcome of its own independent verification and evaluation. It is essential for the petitioner to present evidence to support its compliance with the requirements of the law in order to pursue its claim for credit or refund. Consequently, the Court cannot determine the veracity of petitioner's claim of having duly reported the sales related to the subject claimed withholding taxes, and thus, the Court cannot rule that petitioner complied with the third requisite for entitlement to a refund or issuance of tax credit certificate for unutilized excess CWTs. Petitioner's non-compliance with the third requisite is fatal to its claim. A claimant has the burden of proof to establish the factual basis of his or her claim for tax credit or refund. 113 Tax refunds are in the nature of tax exemptions. As such, they are regarded as in derogation of sovereign authority and to be construed strictissimijuris against the person or entity claiming the refund. 114 Considering petitioner's failure to discharge such burden of proof, the present claim for tax refund or issuance of tax credit certificate pertaining to unutilized CWTs of P12,171,230.60, though the amount of P8,621,825.35 was duly supported by BIR Forms No. 2307, must necessarily fail. Correspondingly, the Court finds petitioner entitled to a refund or for the issuance of a tax credit certificate pertaining only to erroneously paid CWT related to its gaming or exempt activities, amounting to P12,620,976.15. ACCORDINGLY, in light of the foregoing considerations, the present Petition for Review is PARTIALLY GRANTED. Accordingly, respondent is ORDERED to refund or issue a tax credit certificate in favor of petitioner the amount of P12,620,976.15, representing erroneous and unutilized withholding tax on its gaming revenues for taxable year 2018. SO ORDERED. L.~ , - MA. BELEN M. RINGPIS-LIBAN Presiding Justice 113 Citibank, N.A vs. Court ofAppeals, eta!., G.R. No. 107434, October 10, 1997. 114 Commissioner ofInternal Revenue vs. S.C. johnson and Son, Inc., e/ a/., G.R. No. 127105, June 25, 1999.

DECISION CTA Case No. 10514 WE CONCUR: MARl Associate Justice co~ t.-dallli~REs Associate Jus~~:-/J.' ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. ~-~'- MA. BELEN M. RINGPIS-LIBAN Presiding Justice Chairperson CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. ~. ~'t- MA. BELEN M. RINGPIS-LIBAN Presiding Justice