ZMG WARD HOWELL, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SECOND DIVISION ZMG WARD HOWELL, CTA Case No. 9004 INC., Members: Petitioner, CASTANEDA, JR., Chairperson CASANOVA, and MANAHAN, 11. -versus- COMMISSIONER OF Promulgated: INTERNAL REVENUE, JUN 0 4 1018 Respondent. x----------------------------------------------------------------------------------x RESOLUTION CASTANEDA, JR., J.: For resolution of this Court is petitioner's Motion for Reconsideration (Re: Decision dated September 1~ 2017) With Motion for Leave to Admit attached Supplemental Evidence! filed on October 4, 2017 with respondent's Comment/Opposition (To Petitioner's Motion for Reconsideration with Motion for Leave to Re- Open the Case for Presentation of Supplemental Evidence} filed via /V registered mail on November 7, 2017. 1 Division Docket Vol. III, pp. 1171-1188. 2 !d., pp. 1196-1198.

RESOLUTION CTA case No. 9004 Petitioner moves for reconsideration of the Decision dated September 18, 2017,3 (the "Assailed Decision'') of this Court denying its Petition for Review. The dispositive portion of the Assailed Decision reads: "WHEREFORE, the present Petition for Review is DENIED. SO ORDERED." In its Motion, petitioner moves for reconsideration of the Assailed Decision on the basis of the following grounds: 4 1. Petitioner presented sufficient and uncontroverted evidence to prove that it is a VAT-registered entity; and 2. Petitioner's sales of services to enterprises registered with the Philippine Economic Zone Authority (PEZA) are effectively zero- rated sales pursuant to Section 108(8)(3), Tax Code. Petitioner likewise moves for leave to submit supplemental evidence, particularly its Bureau of Internal Revenue (BIR) Certificate of Registration, to prove that it is a VAT-registered entity.5 Petitioner submits that it did not offer in evidence its BIR Certificate of Registration because of its honest belief, on the basis of law and past decisions of this Court, that it is only required to submit its Amended Articles of Incorporation, Quarterly VAT Returns, PEZA Certifications on VAT zero-rating, and supporting ORs evidencing its sales in order to prove that its sales are VAT zero-rated.6 It added that its failure to submit the said document could only have resulted from its good faith that the evidence submitted has already satisfied the quantum of evidence necessary to prove its case. 7 Otherwise, it would have readily submitted in evidence the BIR Certificate of Registration which was duly issued by and forms part of the public records of theJ!--- BIR.8~ 3 lei, pp. 1144-1169. 4 Id., p. 1171. s Id., pp. 1176-1184. 6 Id. 7 Id. s Id.

RESOLUTION CfA Case No. 9004 Respondent, on the other hand, in his Comment/Opposition, disagrees with petitioner's arguments for being erroneous, misplaced, misleading and bereft of factual and legal bases.9 Respondent points out that petitioner is well-aware that the subject BIR Certificate of Registration allegedly showing that it is a VAT-registered entity which the latter intends to present is crucial in proving its case but it merely submitted as evidence its Amended Articles of Incorporation, Quarterly VAT Returns, PEZA Certifications on VAT zero-rating and Official Receipts. 10 Respondent posits that petitioner's intention to present the alleged BIR Certificate of Registration was a mere afterthought, intended to remedy the deficiency that became apparent only after this Court had promulgated the Assailed Decision. 11 Thus, the grant of a new trial is not proper as the alleged BIR Certificate of Registration which the petitioner seeks to present is not a newly discovered evidence but a mere forgotten evidence. 12 Respondent also contends that to allow petitioner to re-open the case for trial and to present additional evidence would violate the Pre-Trial Order dated August 20, 2015, as duly approved by this Court on the present case. 13 In a Resolution dated January 30, 2018,14 this Court set the present case for hearing for the presentation of the document mentioned and attached to petitioner's Motion for Reconsideration. During the hearing dated February 12, 2018, petitioner recalled its witness, Mr. Hernan C. Saringan.15 Upon motion, petitioner made an oral Formal Offer of Evidence of Exhibits "P-19", "P-20" and "P-20- 1". Considering that respondent did not interpose any objection to the admission of the foregoing exhibits as to its existence as these are found in the BIR Records, this Court admitted Exhibits "P-19", "P- 20" and "P-20-1" subject to this Court's final evaluation and/or appreciation as to its purposes, materiality, relevance, and probative value. 16 During the same hearing, respondent had manifested that he will no longer present any evidence. 17 Thus, this Court granted the parties a period of thirty (30) days from date of the said hearing within which to file their respective Memoranda.18 ~ 9 Id, p. 1196. 10 Id, p. 1198. 11 Id 12 Id 13 Id, p. 1199. 14 Id, pp. 1204-1208. 15 Minutes of the Hearing dated February 12, 2018, Docket, Vol. III, pp. 1217-1218; Order dated February 12, 2018, Docket, Vol. III, pp. 1219-1220. 16 Id 17 Id 18 Id.

RESOLUTION CfA Case No. 9004 On March 14, 2018, petitioner filed a Motion for Extension of Time to File Memorandurrr9 which this Court granted in an Order dated March 16, 2018.20 Petitioner was granted an additional period of fifteen (15) days from March 14, 2018 or until March 29, 2018 within which to file its Memorandum. On March 28, 2018, petitioner filed its Memorandum. 21 Respondent, on the other hand, failed to file his Memorandum as per the Records Verification dated April 4, 2018 issued by this Court's Judicial Records Division.22 On April 13, 2018, petitioner's Motion for Reconsideration was submitted for resolution.23 The Court shall now resolve the present Motion for Reconsideration. As stated in the Final Decision on Disputed Assessment (FDDA)/4 the deficiency VAT in the total amount of P3,981,331.99, inclusive of interests and surcharge, was computed as follows: VATable receipts per VAT returns p 2 252.29 p 38 001 329.54 Add: Gross Receipts not subjected to VAT 21 764 368.89 21 766 621.18 Unqualified Zero-Rated Sale of Services p 59 767 950.72 Gross Receipts subject to VAT Output Tax Due p 7 172,154.09 Less: Creditable input tax p 2,754 636.46 Input tax on current purchases Input tax carried over from previous 112 206.47 quarter p 2,866 842.93 Total Input tax claimed per VAT Returns Less: Overclaimed Input Tax p 24,924.87 Input Tax carried over to succeeding quarter 26,339.21 51 264.08 2 815,578.85 VAT Payable p 4 356,575.24 Less: Tax payments Basic tax due 1,719,656.00 p 2,636 919.24 J1L- 19 Docket, Vol. III, pp. 1221-1223. 20 Id., p. 1224. 21 ld., pp. 1225-1239. 22 Id., p. 1240. 23 Id., p. 1241. 24 BIR Records, pp. 665-669; Exhibit "P-9", Docket, Vol. II, p. 981.

RESOLUTION CTA Case No. 9004 Less: Basic tax paid per reinvestigation 25,154.01 Remaining Basic VAT deficiency p 2A>11,765.23 Add: Interest (07.26.12 to 03.09.15) 1 369,566.76 Total Amount Due p 3,981L331.99 Based on the foregoing, respondent's assessment hinges on the following items: Respondent's Finding Amount A Gross Receipts not subjected to VAT 8 Unqualified Zero-Rated Sale of Services p 21252.29 c Overclaimed Input Tax 21 764,368.89 D Input Tax carried over to succeeding 24J924.87 quarter 26,339.21 A. Gross Receipts not subjected to VAT - P2,252.29 Initially, respondent's verification disclosed that there was an understatement of petitioner's receipts not subjected to VAT in the amount of P9,029,961.23 for the period January 1, 2012 to June 30, 2012 as reflected in the computerized matching conducted by respondent on information/data provided by petitioner's customers against the total receipts declared in its VAT Returns. Further reinvestigation revealed that there were discrepancies in the data extraction due to frequent updating/uploading of SLSP in the Data Warehouse Facilities as mentioned in the memorandum of ACIR-ISDS dated November 15, 2012. To further verify the correct amount of petitioner's collections from the listed customers, the BIR sent letters25 to these customers to confirm the amounts of payments they made to petitioner during the period under audit. Some clients also reported purchases based on the date the billings were received and not on the date of payment.26 Hence, the remaining discrepancy amounting to P2,252.29, as computed below, was assessed in accordance with the provision of Title IV, Sections 105 and 108 of the NIRC of 1997, as amended: Per PAN Justified per Per FDDA P-9 Name of Customers P-3 Reinvestigation ABS CBN Publishing Inc. r Avon Cosmetics Inc. p 164,268.00 p 164,268.00 2,515,048.00 2,5151048.00 25 BIR Records, pp.505-510, 512, 542, 545, and 548-549. 26 Details of Discrepancies, Exhibit "P-9", Docket, Vol. II, p. 983.

RESOLUTION CTA Case No. 9004 Per PAN Justified per Per FDDA Name of Customers P-3 Reinvestigation P-9 Davies Energy Systems Inc. 30,000.00 30,000.00 Fresh N Famous Foods Inc. 4,001,729.50 4,001,729.50 GE Money Servicing Philippines Inc. 498,461.00 498,461.00 GeiserMaclang Marketing 262,721.42 262 378.58 p 342.84 Communications Inc. INSTL Shareholder SVCS Inc. Fr the Proxy Monitor 101,375.86 101,375.86 Kraft Foods Philippines Inc. 1,404,000.00 1,404 000.00 Kraft Foods Philippines Inc. (1,235 520.00) (1,235,520.00) Loreal Philippines 23-t_OOO.OO 234,000.00 Merck Sharp Dohme LA 1,909.45 1,909.45 Pueblo de Oro Development Corp. 58,968.00 58 968.00 Therma Luzon Inc. 525,000.00 525,000.00 Trans-Asia Oil and Energy Development Corp. 468,000.00 468,000.00 Total -- -- -- p .. 9,029,961.23 _P !J,027,Z08.94_ ~ 2,252.29 The output VAT related to the gross receipts of P1,909.45 made to Merck Sharp Dohme LA had already been settled by petitioner on October 4, 2013, as evidenced by BIR Form 60527 with total amount of P31,936.21, broken down as follows: Sale to Merck Sharp Doh me LA p 1,909.45 x VAT Rate 12% Output VAT Overclaimed Input VAT p 229.13 Assessment Analytics Inc. p 72.00 Brother's Venture Trading Corp. Saringan Hernan dela Cruz 852.87 Basic Tax Interest 24 000.00 24,924.87 Total p 25,154.00 6,782.20 p 31,936.2028 Petitioner was not able to reconcile the discrepancy of P342.84 pertaining to sale of services rendered to GeiserMaclang Marketing Communications, Inc., thus, the assessment thereon shall be sustained. p 27 BIR Records, pp. 550-552. 2s With discrepancy of PO.Ol.

RESOLUTION CTA Case No. 9004 B. Unqualified zero-rated sale of services - P21,764,368.89 In its Quarterly VAT Returns for the pt and 2nd quarters of CY 2012, petitioner declared zero-rated receipts of P21,764,368.89, which respondent subjected to VAT at 12�/o, to wit: Zero-rated Sale ofServices per VAT Returns p 12,992,697.05 First Quarter 8,771,671.84 Second Quarter Total Zero-rated Sale of Services P 21lZ64,368.89 Based on the review conducted by respondent of the sample contract provided by petitioner, the former finds that petitioner, as an executive search firm engaged to search for senior and mid-level executives in various industries, conducts its applicant's testing and interviews within petitioner's premises and/or some private hotels and restaurants within Metro Manila and not within any ECOZONE. Accordingly, such services of petitioner are unqualified as zero-rated VAT, and thus, assessed and subjected to 12�/o VAT under Section 108{A) of the NIRC of 1997, as amended, following the BIR Ruling No. DA-202-08 dated March 28, 2008.29 In the assailed Decision, this Court ruled that the sale of services by VAT-registered person performed within the Philippines to PEZA-registered entities located and operating within an ECOZONE is subject to VAT at zero percent {0�/o).30 The Court further held that there is no need to prove that the sale of services to PEZA-registered enterprises are directly connected to their registered activities. What is important is that the PEZA-registered enterprise availing the services is located and operating within the ECOZONE.31 Thus, to support its zero-rated sales of services for the period covered January 1, 2012 to June 30, 2012, petitioner presented the PEZA Certifications of its clients, Stellar Philippines, Inc. (SPI)32 and �Jz-- JP Morgan Chase & Co. - Philippine Global Service Center33 29 Par. 5(b), Special and Affirmative Defenses, Answer, Docket, Vol. I, pp. 85-86. 30 Docket, Vol. II, p. 1165. 31 Docket, Vol. III, pp. 1166-1167. 32 Exhibit "P-12-2", Docket, Vol. II, p.994. 33 Exhibit "P-12-3", Docket, Vol. II, p. 996.

RESOLUTION CTA case No. 9004 Petitioner presented also the letter dated July 8, 201534 issued by PEZA confirming that it issued VAT zero-rating certifications to the following clients of petitioner: 1. Accenture, Inc.; 2. ADP (Philippines), Inc.; 3. ANZ Global Services and Operations (Manila), Inc.; 4. BA Continuum Philippines, Inc.; 5. Champ Cargo Systems Philippines, Inc.; 6. DPCData (Philippines), Inc.; 7. EXL Service Philippines, Inc.; 8. FIS Global Solutions Philippines, Inc.; 9. Fluor Daniel, Inc. - Philippines; 10. Ford Motor Company Philippines, Inc.; 11. Friendster Philippines, Inc.; 12. GE Money Servicing Philippines, Inc.; 13. Genpact Services LLC; 14. Hitachi Global Storage Technologies Philippines Corp. (Formerly Hitachi Computer Products (Asia) Corp.); 15. Infosys BPO Limited - Philippine Branch; 16. Maxim Philippines Operating Corporation; 17. PriceWaterhouseCoopers Service Delivery Centre (Manila) Limited; 18. Rapu-Rapu Processing, Inc.; 19. Shell Shared Services (Asia) B.V.; 20. Sitel Philippines Corporation (Formerly: Clientlogic Philippines, Inc.); 21. Telus International Philippines, Inc.; 22. Teletech Customer Care Management Philippines, Inc.; 23. Teletech Customer Care Management- Philippines Branch; 24. Transitions Optical Philippines, Inc.; 25. Veyance Technologies Global Business Services, Inc.; and 26. Wells Fargo Philippines Solutions, Inc. In the same document, PEZA states that based on their records, Millennium Distributions Systems Inc., is not a PEZA- ;;v registered enterprise.35 34 Exhibit "P-12-1", Docket, Vol. II, pp. 990-993. 35 Exhibit "P-12-1", Docket, Vol. II, p. 993.

RESOLUTION CTA Case No. 9004 Moreover, petitioner submitted the Amended Articles of Incorporation of another client, De La Salle University, Inc.,36 to prove that the latter is a private educational institution not subject to VAT. To substantiate its zero-rated receipts of P21,764,368.89, petitioner submitted the official receipts it issued to its clients for the period covered of the assessment. Upon verification, the undersigned finds that out of the claimed zero-rated receipts of P21,764,368.89, only the amount of P19,282,590.35 is duly supported by official receipts and issued to PEZA-registered entities, detailed as follows: Client Name Exhibit O.R. O.R. O.R. Amount Gross Amount No. Number Date Fluor Daniel 1/6/2012 p 172,009.60 p 175,520.00 Ford Motor P-15-1 569 1/5/2012 177,840.00 Wells Fargo P-15-2 575 1/10/2012 174,773.20 Genpact LLC P-15-4 577 1/13/2012 1,250,340.00 Genpact LLC P-15-5 578 2/3/2012 1,225,333.20 179,040.00 Friendster Philippines, Inc. P-15-6 579 1/13/2012 Rapu-Rapu Processing, Inc. P-15-7 580 1/17/2012 175,459.20 1,309,080.00 JP Morgan P-15-8 581 1/26/2012 124,800.00 Stellar P-15-9 583 1/26/2012 1,282,898.40 374,400.00 Hitachi Global Storage P-15-10 584 2/3/2012 627,264.00 Transitions Optical Philippines Inc P-15-11 585 2/2/2012 122,304.00 287,280.00 BA Continuum P-15-12 586 2/2/2012 178,284.60 Transitions Optical Philippines Inc P-15-13 587 2/2/2012 366,912.00 114,400.00 ANZ Global Services & Operations P-15-14 588 2/10/2012 375,000.60 JP Morgan Chase Bank NA Phil P-15-15 589 614,718.72 351,000.00 Global Service 153,280.00 FIS Global Solutions Phils Inc P-15-16 281,534.40 PWC 717,594.00 Genpact LLC P-15-18 174,718.91 Friendster Philippines, Inc. P-15-19 899,153.93 Infosys BPO Limited P-15-20 112,112.00 845,872.45 Accenture Inc. P-15-21 660,000.00 DPCDATA (Phils) Inc. P-15-22 367,500.00 208,000.00 Infosys BPO Limited P-15-23 451,014.48 Transitions Optical Philippines Inc P-15-24 343,980.00 504,000.00 DPCDATA (Phils) Inc. P-15-25 Wells Fargo P-15-26 150,214.40 35,100.00 GE Money Servicing Phils Inc. P-15-27 288,301.44 GE Money Servicing Phils Inc. P-15-28 590 2/14/2012 703,977.12 150,800.00 FIS Global P-15-29 Shell Shared Services - BV - P-15-30 593 2/24/2012 881,170.85 70,200.00 P-15-31 594 2/17/2012 828,955.00 205,660.00 P-15-32 596 2/24/2012 646,800.00 178,200.00 598 3/2/2012 203,840.00 216,000.00 599 2/22/2012 441,994.19 600 3/2/2012 493,920.00 92,979.25 601 2/28/2012 602 3/2/2012 34,398.00 ~ 245,850.00 603 3/23/2012 282,535.41 604 3/8/2012 147,784.00 605 3/30/2012 606 3/9/2012 68,796.00 607 3/13/2012 201,546.80 608 3/16/2012 174,636.00 609 3/16/2012 211,680.00 91,119.66 240,993.00 36 Exhibit "P-14", Docket, Vol. II, p.1001.

RESOLUTION CTA case No. 9004 Client Name Exhibit O.R. O.R. O.R. Amount Gross Amount No. Number Date Philippines P-15-33 610 3/23/2012 406,425.60 414,720.00 EXL Services Phils Inc. P-15-34 611 3/30/2012 91,728.00 93,600.00 Friendster Philippines, Inc. P-15-35 612 3/30/2012 Telus International Philippines Inc P-15-36 613 3/30/2012 381,626.11 389,414.40 Sitel Phils Corp. P-15-37 614 5/3/2012 599,230.80 611,460.00 Genpact LLC P-15-38 615 4/12/2012 259,660.80 264,960.00 ADP P-15-39 616 4/11/2012 49,686.00 Champ cargo Systems Phils Inc P-15-41 618 4/27/2012 152,880.00 50,700.00 Price Waterhouse Coopers Service P-15-42 619 5/7/2012 88,200.00 156,000.00 Accenture Inc. 986,076.00 Maxim Philippine Operating P-15-43 620 4/11/2012 90,000.00 Gateway 1,006,200.00 BA Continuum Phils Inc. P-15-44 621 5/6/2012 ADP (Philippines) Inc. P-15-45 622 5/23/2012 199,801.99 201,921.20 Price Waterhouse Coopers Service P-15-46 624 5/30/2012 EXL Services P-15-47 625 6/1/2012 813,792.00 830,400.00 Accenture Inc. P-15-49 628 6/18/2012 179,379.20 183,040.00 Accenture Inc. P-15-50 629 6/18/2012 375,104.80 382,760.00 Teletech Customer care 848,836.80 866,160.00 Management P-15-51 630 6/6/2012 936,390.00 955,500.00 Veyance Technologies 180,006.40 183,680.00 TOTAL P-15-52 631 6/8/2012 49,703.60 50,820.00 1,105,000.00 1,105,000.00 p 19,282,590.35 The remaining P2,481,778.54, as determined below, shall not qualify for VAT zero-rating, and thus, be subjected to 12�/o VAT: Client Name Exhibit O.R. O.R. O.R. Amount Gross Amount No. Number Date 1 Sale to Non-PEZA-registered entity De La Salle University - Manila P-15-3 576 1/5/2012 p 68,796.00 p 70,200.00 . 592 2/14/2012 1,190,633.35 1,187,583.35 Ergo Asia Party Ltd. P-15-17 617 3/20/2012 64,404.00 64,101.00 627 6/6/2012 1,121,508.32 1,144,396.24 M + W High Tech Projects Taiwan P-15-40 ~ 2,466,280.59 Millennium Distribution P-15-48 Sub-total Over-claimed zero-rated sales PWC (P861,370.40 - P845,872.45) P-15-19 594 2/17/2012 p 15,497.95 p 2,481,778.54 TOTAL C. Overclaimed input tax - P24,924.87 Initially, respondent found that there was an overstatement of petitioner's purchases subject to VAT in the amount of P1,225,800.38 for the period January 1, 2012 to June 30, 2012 as reflected in the computerized matching conducted by the Bureau on information/data provided by petitioner's suppliers against the total purchases declared in petitioner's VAT returns. Hence, corresponding input tax from jh-

RESOLUTION CTA case No. 9004 these purchases amounting to P147,096.05 were disallowed pursuant to the provision imposed under Section 110(A)(1) of the NIRC of 1997, as amended. Then during reinvestigation, there were discrepancies in the data extraction due to frequent updating/ uploading of the SLSP in the Data Warehouse Facilities as mentioned in the memorandum of ACIR-ISDS dated November 15, 2012. Some of the sales made by the suppliers to the company were not included in the data extracted. To further verify the correct amount of petitioner's purchases from the listed suppliers, respondent sent letters to these suppliers to confirm the amounts of sales they made to petitioner during the period under audit. Some suppliers of services also reported their sales based on the date of billings and not on the date of payment. All overclaimed input VAT have been properly justified except for the following input VAT amounting to P24,924.87, which were disallowed pursuant to Section 110(A)(1) of the NIRC of 1997, as amended:37 Overclaimed Overclaimed Calendar Purchases per Input VAT Justified per Remaining Quarter 2012 Qtr 1 Name of Supplier PAN per PAN Reinvestigation Discrepancy Assessment Analytics Inc. 2012 Qtr 2 Brothers Venture Trading p 600.00 p 72.00 p 72.00 Corp. 2012 Qtr 1 Integrated Computer Systems 7 107.17 852.87 - 852.87 2012 Qtr 1 Inc. 2012 Qtr 1 64 968.21 7 796.18 p 7,796.18 - 2012 Qtr 2 Jobstreetcom Philippines Inc. 72 000.00 8 640.00 8,640.00 - 2012 Qtr 2 865 000.00 103 800.00 '� TOTAL Lopez Vito Jose Rafael T. 200 000.00 24 000.00 103,800.00 24 000.00 16 125.00 1935.00 Saringan Hernan dela Cruz - - .. 1,225,800.38 P147,096.05 Set Graphics and Printing Inc. 1,935.00 .. 24,~24.87 --- ----- ---�- .. 122,17~.18 As already mentioned, petitioner partially settled its VAT deficiency on October 4, 2013 amounting to P31,936.20, which includes settlement of the overclaimed input VAT of P24,924.87. As such, this item of assessment shall be disregarded in computing the basic deficiency VAT due from petitioner. D. Input tax carried over to succeeding quarter - P26,339.21 Respondent deducted from petitioner's input tax credits the amount of P26,339.21 representing excess input tax on purchases jc 37 Details of Discrepancies, Exhibit "P-9", Docket, Vol. II, pp. 984-985.

RESOLUTION erA case No. 9004 exceeding P1 Million carried over to succeeding period/years since the same shall be carried over and credited against the output tax due of the succeeding quarters/years pursuant to Section 110(8) of the NIRC of 1997, as amended. However, the undersigned finds it improper for respondent to disallow the said excess input tax because any tax benefit derived by petitioner from the carry-over of the said amount redounds to the succeeding quarter/s of CY 2012, which is beyond the scope of the present assessment. Since the tax benefit will be in the succeeding quarter/s, at most, petitioner may only be assessed in the said succeeding quarter/s. Thus, said amount should be removed from the computation of deficiency VAT. In sum, petitioner shall be held liable for basic deficiency VAT in the amount of P271,515.18, computed as follows: VATable receipts per VAT returns p 342.84 p 38,001,329.54 Add: Gross Receipts not subjected to VAT 2,481 778.54 2,482,121.38 Unqualified Zero-Rated Sale of Services p 40 483,450.92 Gross Receipts subject to VAT Output Tax Due p 2,754,636.46 p 4,858 014.11 Less: Creditable input tax 112 206.47 2,866,842.93 Input tax on current purchases p 1,991_L171.18 Input tax carried over from previous quarter VAT Payable 1,719 656.00 Less: Tax payments Basic deficiency VAT p 271,515.18 WHEREFORE, the deficiency VAT assessment issued by respondent against petitioner covering the 1st and 2nd quarters of CY 2012 is AFFIRMED WITH MODIFICATIONS. Petitioner is ORDERED TO PAY the aggregate amount of P992,239.37, inclusive of the 25�/o surcharge imposed under Section 248(A)(3) of the NIRC of 1997, as amended, and deficiency and delinquency interests imposed under Sections 249(8) and (C) of the NIRC of 1997, as amended, until December 31, 2017, computed as follows: Basic deficiency VAT p 271 515.18 Add: 25% Surcharge Sub-total 67_~878.80 Add: Deficiency Interest (7/25/2012 to 12/31/2017) p 339 393.98 (P271,515.18 x 20% x 1,985 days/365 days) 295,319.25 ~

RESOLUTION CTA case No. 9004 Sub-total p 634 713.23 Add: Delinquency Interest (3/9/2015 to 12/31/2017) 357 526.14 p 992,239.37 (P634,713.23 x 20�/o x 1 028 days/365 days) TOTAL -------- In addition, petitioner is ORDERED TO PAY delinquency interest at the rate of 12�/o on the total unpaid VAT of P634,713.23, representing basic deficiency tax, surcharge and deficiency interest, as determined above, computed from January 1, 2018 until full payment thereof pursuant to Section 249(C) of the NIRC of 1997, as amended by Republic Act No. 10963, also known as Tax Reform for Acceleration and Inclusion (TRAIN).38 SO ORDERED. ~c-u:lz> c_. ~a-U:~ Q fUANITO c. CASTANEDAfJR. Associate Justice WE CONCUR: ~�J-/~ CAESA~ANOVA CATHERINE T. MANAHAN Associate Justice Associate Justice 38 Alpha 245, Inc., (formerly ARC Worldwide Philippines Co., Inc.) vs. Commissioner of Internal Revenue, CfA Case No. 9225, April 6, 2018.