PHILIPPINE BANK OF COMMUNICATIONS v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC O:F THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL THIRD DIVISION PHILIPPINE BANK 0~' CTA CASE NO. 8084 COMMUNICATIONS, Members: Petitioner, BAUTISTA, Chairperson -versus- COTANGCO-MANALASTAS~ COMMISSIONER 0~' Promulgated: INTERNAI .J REVENUE, AUG 1 2 2-013 Respondent. X-- -- - ---- -- - -------------- - ------- - - ----- ----------X DECISION COTANGCO-MANALASTAS, J.: STATEMENT OF TilE CASE Philippine Bank of Communications filed this Petition for Review on April 15, 2010 to appeal the inaction of the Commissioner of Internal Revenue over its administrative claim for issuance of tax credit certificate in the amount of P29,076, 156.00, representing its alleged unutilized creditable withholding taxes (CWT) for calendar year 2007. STATEMENT OF FACTS Petitioner Philippine Bank of Communications is a domestic corporation organized and existing under the laws of the Republic of the Philippines, with principal office address at PBCOM Tower, 6795 Ayala Avenue comer V.A. Rufino Street, Makati City. It is engaged in the/,

DECISION CIA CASE NO. 8084 commercial banking business and is registered with the Bureau of Internal Revenue (BIR) with Tax Identification Number (TIN) 000-263-340-000. 1 Respondent is the Commissioner of the Bureau of Internal Revenue duly authorized under the law to perform the duties of said office, including, among others, the power to refund overpaid and erroneously or illegally collected internal revenue taxes. She holds office at the BIR National Office Building, Diliman, Quezon City. On April 15, 2008, petitioner filed its Tentative Annual Income Tax Return (BIR Form No. 1702) for calendar year 2007, through the Electronic Filing and Payment System (EFPS), reporting a net loss of P822,409,440.00 and creditable taxes withheld at source in the amount of P29,007,058.38 for calendar year 2007 _2 On May 2, 2008, petitioner filed its Final Annual Income Tax Return for calendar year 2007, through the EFPS, reporting a net loss of P772,866,753.00 and unutilized creditable taxes withheld at source in the amount of P29,076, 156.00.3 On April 5, 2010, petitioner filed an administrative claim for the issuance of a tax credit certificate with the Bureau of Internal Revenue. 4 Respondent failed to render a decision on petitioner's application for a tax credit certificate, prompting petitioner to file a Petition for Review before this Court on April 15, 2010. Petitioner alleged that it was not able to utilize its creditable withholding tax for calendar year 2007 inasmuch as it incurred a net loss for that calendar year. Petitioner further argued that it indicated its intention to be issued a tax credit certificate for its unutilized creditable withholding tax for calendar year 2007 by marking the box corresponding to the choice "To be issued a Tax Credit Cetiificate" in Line 31 of its Pinal Annual Income Tax Return for calendar year 2007, pursuant to Section 76 of the NIRC of 1997, as amended. It asserted that it did not carry over the said unutilized creditable withholding taxes in its income tax return for calendar year 2008. On June 4, 2010, respondent filed her Answer5 and interposed the following contentions:~ 1 Pars. 1.1 and 1.3 , Stipulation of Facts, Joint Stipulation of Facts and Iss ues with Motion, rolla, pp. 68-69. 2 Exhibit "A". 3 Exhibit " 8 ". 4 Exhibit " E" . 5 Rollo, pp. -13 --15.

DECISION CTA CASE NO. 8084 "SPECIAL AND AFFIRMATIVE DEFENSES 3. He reiterates and repleads the preceding paragraphs of this answer as part of his Special and Affirmative Defenses; 4. Petitioner's claim for refund is still subject to the administrative routinary investigation/examination by the respondent's Bureau; 5. Taxes paid and collected are presumed to have been made in accordance with law and implementing regulations, hence not refundable. 6. Petitioner's claim for refund/issuance of tax credit in the amount of Php29,076,156.00 as alleged excess and unutilized creditable income taxes withheld for taxable year 2007 were not fully substantiated by proper documentary evidence, such as, but not limited to cetiificates of income taxes withheld at source. 7. Petitioner failed to prove that the amount of Php29,076, 156.00, as alleged excess and unutilized creditable income taxes withheld for taxable year 2007 was included as part of its gross income for taxable year 2007 and the same was not utilized in payment of its income tax liability for the succeeding taxable quarters/years ; 8. Petitioner has already exercised its option to carry-over to the succeeding taxable quarters/years the subject of its claim; 9. Petitioner failed to prove that the amount subject of its claim was remitted in full to the BIR. 10. Petitioner failed to comply with the requirements prescribed under Section 76 ofthe 1997 Tax Code. 11. Assuming but without admitting that petitioner is entitled to tax refund, it is incumbent upon the latter to show that it has complied with the provisions w1der Sections 204 in relation to Section 230 (now 229) of the Tax Code. Otherwise, its failure to prove the same is fatal to its claim for refund. 12. Claims for refunds are construed strictly against the claimant for the same partake the nature of exemption from taxation (Commissioner of Internal Revenue vs. Ledesma, 3I SCRA 95) and as such, they are looked upon with disfavor (Western Minolco Corp. vs. Commissioner of Internal Revenue, I24 SCRA I2II)." On June 21, 2010, the Court issued a Notice of Pre-Trial Conference which required both parties and their counsels to be present at the pre-trial and to file with this Court and serve on the adverse party at least three (3)/

DECISION CTA CASE NO. 8084 days before the date of the pre-trial their Pre-trial Briefs.6 On July 27, 2010, both petitioner7 and respondent8 filed their respective Pre-trial Briefs. On September 2, 2010, the parties submitted their Joint Stipulation of Facts and Issues with Motion.9 In the same Joint Stipulation, respondent proposed to add two more issues, to wit: "3.1. Whether or not the amount of P29 ,076, 156 being claimed by petitioner as unutilized creditable withholding tax for the calendar year 2007 was remitted in full to the BIR; and 3.2. Whether or not petitioner's claim for the issuance of a tax credit certificate for the calendar year 2007 in the amount of P29,076, 156 is duly substantiated by proper documentary evidence, such as invoices, official receipts, certificates of withholding tax at source, certificate of remittances and other required tax returns." Petitioner objected to the inclusion of the two issues for the reason that the first proposed addition to the stipulation of issues is not a valid issue in the case at bar; whereas the second proposed addition is necessarily subsumed in the issue stated in paragraph 2.2 of the Joint Stipulation and therefore, redundant. On September 13, 2010, this Court approved in its Pre-Trial Order10 the Joint Stipulation of Facts and Issues and agreed with petitioner as regards respondent' s proposed two additional issues, in this wise: "(T)he additional issue of proof of remittance to the BIR of the subject amount in Item C.l is not one of the requisites in a claim for the issuance of a tax credit certificate of unutilized creditable withholding taxes withheld at source. The requisites are as stated as issues in items B.l to B.4. On the other hand, the second proposed additional issue of substantiation is necessarily subsumed in the issue stated in item B.2." 11 In the same Pre-Trial Order, this Court terminated the pre-trial and scheduled the initial presentation of evidence for the petitioner. 1 ~ 6 Rollo, p. 47. ., Rollo, pp. 50-60. 8 Rollo, pp. 61-63. 9 Rollo, pp. 68-72. 10 Rollo, pp. 75 -80. 11 Rollo, p. 77. 12 Rollo, p. 80.

DECISION CTA CASE NO. 8084 On January 14, 2011, petitioner moved to commission Mr. Edwin F. Ramos of Constantino Guadalquiver & Co., as the Independent Certified Public Accountant (ICPA) to conduct the actual examination, evaluation and audit of the voluminous documents pertinent to the present case, pursuant to Section 5 of Rule 12 and Rule 13 of the Revised Rules of the Court of Tax Appeals. 13 On January 19,2011, the Comi appointed Mr. Edwin F. Ramos as ICPA in this case. On February 18, 2011 , Mr. Ramos, as the Court- commissioned ICPA, submitted his Report. 14 On September 16, 2011, petitioner moved 15, with leave of court, to recall witness Mr. Edwin F. Ramos, to allow the ICPA to submit a second supplemental report and to set a hearing for the presentation of the ICPA's second supplemental report. On October 27, 2011, the Court granted petitioner's motion. 16 On February 29, 2012, petitioner formally offered Exhibits "A" to "S" inclusive of their sub-markings and the testimonies of Percival J. Ordejon, as the head of the financial accounting and tax management unit of petitioner, and of Edwin F. Ramos, as the Court-commissioned ICPA. The Court in a Resolution 17 dated April 10,2012, admitted Exhibits "A" to "S" except Exhibits "G" inclusive of its sub-markings, "P-1" to "P-18.3", and "R-1.1" to "R-6". On May 3, 2012, petitioner filed a Motion for Reconsideration 18, praying that the denied evidence be admitted. In the Resolution 19 dated June 21, 201 2, this Court partially granted petitioner's Motion for Reconsideration. On April 2, 2012, petitioner filed an Omnibus Motion with Leave of Court to reopen proceedings for the introduction of new evidence and to recall witness Percival Ordejon? 0 The Court, in a Resolution21 dated May 18,2012, granted petitioner's motion. On June 22, 2012, petitioner filed a Supplemental Formal Offer of Documentary Exhibits, praying for the Court to admit Exhibits "T", "T-1", and "U"22. In a Resolution23 dated July 17, 2012, this Court admitted the above-mentioned exhibits and petitioner was deemed to have finally rested its case.~ 13 Minutes of the January 19, 20 II Hearing, Rollo, p. 98 ; Tran script of Stenographic Notes (TSN), January 19, 2011 , pp. 13-23. 14 Rollo, p. I 05. 1 Rollo, pp. 226-232. ' 16 Resolution dated October 27, 2011 , rolla, p. 23 8. rt Rollo, pp. 465-466 . 18 Rollo, pp. 474-478. 19 Rollo, pp. 501-503. 20 Rollo, pp. 459-462. 21 Rollo, p. 1186. 22 Rollo, pp . 5011 -507. 23 Rollo, p. 52 1.

DECISION CTA CASE NO. 8084 During the hearing held on September 13, 2012, respondent, through counsel, manifested that there is no investigation report regarding petitioner's claim for refund since it is still pending investigation; thus, she is constrained to submit the case for decision without presenting evidence.24 The case was submitted for decision on November 26, 2012, considering petitioner's Memorandum25 filed on October 12, 2012 and respondent's Memorandum26 submitted on October 29, 2012. STATEMENT O:F ISSUES The parties submitted the following jointly stipulated issues27 for this Court's consideration: 1. Whether or not the claim for issuance of tax credit certificate for calendar year 2007 was filed within the two-year period prescribed under Section 204(C), in relation to Section 229 of the NIRC of 1997 as amended; 2. Whether or not petitioner has an unutilized creditable withholding tax in the amount of P29,076, 156.00 for calendar year 2007, which is a proper subject of a claim for refund/issuance of tax credit certificate pursuant to Section 76 of the NIRC, as amended; 3. Whether or not the income from which the subject creditable taxes were withheld was included as part of the gross income in petitioner's annual income tax return for calendar year 2007; and 4. Whether or not the unutilized creditable withholding tax for calendar year 2007 in the amount of P29,076,156.00 was carried over and applied by petitioner against its tax liabilities in the succeeding taxable year. Basically, the issue is whether or not petitioner is entitled to issuance of tax credit certificate for its alleged unutilized creditable withholding tax for calendar year 2007 in the aggregate amount ofP29,076, 156.00. J_ 24 Minutes of the September 13, 201 2 Hearing, rolla, p. 525 ; TSN dated September 13,201 2, pp. 3-4. 25 Rollo, pp. 528-5113 . 26 Rollo, pp. 5t1 7-553. 27 Pars. 2. 1 to 2.tl, Stipulation of Issues, Joint Stipulation of Facts and Issues with Motion , rolla, pp. 69-70.

DECISION CTA CASE NO. 8084 RULING 0}"' THE COURT In order to be entitled to the issuance of tax credit certificate for excess/unutilized creditable withholding tax, petitioner must satisfy the following requisites: 1. That the claim for refund was filed within the two-year prescriptive period as provided under Section 204(C) in relation to Section 229 of the NIRC of 1997, as amended; 2. That the fact of withholding is 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. That the income upon which the taxes were withheld was included in the return of the recipient. 28 Anent the first reqms1te, the provisions of the National Internal Revenue Code (NIRC) of 1997, as amended, pertinent to claiming a tax refund/tax credit are Sections 204(C) and 229, which provide: "SEC. 204. Authority c~f 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 r efund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for cr edit or r efund within two (2) years after the payment of the tax or penalty: Provided, however, That a return filed showing an overpayment shall be considered as a written claim for credit or refund. " (Emphasis supplied) "SEC. 229. Recovery of Tax Erroneously or Illegally Collected. - No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been ? excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit 28 Section 2.58, Revenue Regulations No. 2-98, as amended ; Citibank N.A. vs. Court of Appeals, et at. , G.R. No. I0743tl , October I0, 1997; ACCRA Investments Corporation vs. The Honorable Court of Appeals, eta/., G.R. No. 96322, December 20, 1991.

DECISION CTA CASE NO. 8084 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 r egardless of any supervening cause that may a rise after paym ent: Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon wh ich payment was made, such payment appears clearly to have been erroneously paid." (Emphasis supplied) In ACCRA Investments Corporation vs. The Honorable Court of Appeals, et al. 29 the Supreme Court held that the two-year prescriptive , period for claiming a refund commences to run on the date of filing of the Final Adjustment Return. The pertinent portions of the Supreme Court decision are as follows: "The term 'return ' in the case of domestic corporations like ACCRAIN refers to the final adjustment return as mentioned in Section 69 ofthe Tax Code of 1986, as amended, which partly reads : Sec. 69. Final Adjustment Return. - Every corporation liable to tax under Section 24 shall file a final adjustment return covering the total taxable income for the preceding calendar or fiscal year. Ifthe 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 excess tax still due; or (b) Be refunded the excess amount paid, as the case may be . Clearly, there is the need to fi le a return first before a claim for refund can prosper inasmuch as the respondent Commissioner by his own rules and regulations mandates that the corporate taxpayer opting to ask for a refund must show in its final adjustment return the income it received from all sources and the amount of withholding taxes remitted by its withholding agents to the Bureau of Internal Revenue. The petitioner corporation filed its final adjustment return for its 1981 taxable year on April 15, 1982. In our Resolution dated April 10, 1989 in the case of Commissioner oflnternal Revenue v. Asia Australia Express, Ltd. (G. R. No. 85956), we ruled that the tw o-year prescriptive period within which to claim a refund commences to run, at the earliest, on the date of the filin g of the adjusted final tax return. xxx. It bears emphasis at this point that the rationale in computing the t tw o-year prescriptive period with r esp ect to the petitioner corporation 's claim for r efund fro m the time it fil ed its fin al 29 G.R. No. 96322, December 20, 1991 .

DECISION CTA CASE NO. 8084 adjustment return is the fact that it was only then that ACCRAIN could ascertain whether it made profits or incurred losses in its business operations. The ' date of payment' , therefore, in ACCRAIN's case was when its tax liability, if any, fell due upon its filing of its final adjustment return on April15 , 1982." (Emphasis supplied) Also, the Highest Tribunal opined in the case of Commissioner of Internal Revenue vs. TMX Sales, Inc. and the Court of Tax Appeals30 that "it is only when the Adjustment Return covering the whole year is file d that the taxpayer would know whether a tax is still due or a refund can be claimed based on the adjusted and audited figures." Based on the afore-cited cases, petitioner has two years from the date of filing of the Pinal Adjustment Return within which to file a claim for refund or issuance of tax credit certificate for its excess creditable withholding taxes both in the administrative and judicial levels. The present claim covers taxable year 2007 for which petitioner filed its original Annual Income Tax Return on April 15, 2008.31 Counting from this date, the administrative claim which was filed on April 5, 201032 and the Petition for Review which was fi led on April 15, 2010 both fell within the two-year prescriptive period provided by Section 204(C) in relation to Section 229 of the NIRC of 1997, as amended. Thus, petitioner complied with the first requisite. As regards petitioner's compliance with the second requisite, the Court of Tax Appeals En Bane ruled in the case of Mermac, Inc. vs. Commissioner ofInternal Revenue33 that claims for refund of creditable tax withheld shall only be given due course upon submission of BIR Form No. 2307 issued by the income-payor to the recipient-payee, to wit: "On the outset, the third condition is imposed by Section 2. 58 .3 (B) of Revenue Regulations (RR) No. 2-98 , which states: Sec. 2.58.3 . Claim for Tax Credit or Refund.- XXX XXX XXX (B) Claims for tax credit or refund of any creditable income tax which was deducted and withheld on income payments shall be given due course only when it is shown that the income payment has been declared as part of the gross income and the fact of withholding is established by a copy of the withholding tax statement duly issued by the payor to the t- ~ay~e ~ovying _th~amou!}t paid al}d 1he amount of_tax ':Yit.hh~ld th~refrom . (Emphasis provided) 30 G.R. No. 83736, January 15 , 1992. 31 Exhibit " A". 32 Exhibit " E" . 33 CTA EB Case No . 699, July 27, 2011 (CTA Case No. 775 8).

DECISION CIA CASE NO. 8084 Corollary to the condition set forth, the same RR No. 2-98 establi shes the requirement on the part of the payor to furnish the payee the withholding tax statement using the prescribed form (BIR Form No. 2307), which shows the income payments made and the amount of taxes withheld. Otherwise, the fai lure of the payor to furnish the same shall be a ground for mandatory audit, viz. : Sec. 2.58. RETURNS AND PAYMENT OF TAXES WITHHELD AT SOURCE. - XXX XXX XXX (B) Withholding tax statement for taxes withheld. - Every payor required to deduct and withhold taxes under these regulations shall furnish, in triplicate, each payee, whether individual or corporate, with a withholding tax statement, using the prescribed form (BIR Form No. 2307) showing the income payments made and the amount of taxes withheld therefrom , for every month of the quarter, within twenty (20) days following the close of the taxable quarter employed by the payee in fi ling his/its quarterly income tax return. The payor, nonetheless, should always retain a copy of duly issued BIR Form 2307. Failure to furnish the same shall be a ground for mandatory audit of payor's income tax liabi lities (including withho lding tax) upon verified complaint of the payee. XXX XXX XXX The rules are clear. The income-payor, as the withho lding agent, is required to furnish the recipient-payee of the statement of withholding or BIR Form No. 2307. And for purposes of claims for refund or tax credit of creditable income tax, the claim shall only be given due course when the income and withholding are established by a copy of the withholding tax statement or BIR Form No. 2307 issued by the income-payor to the recipient-payee." (Emphasis supplied) The breakdown of petitioner's total claim amounting to P29,076,156.00 is summarized as follows: 34 Fi ndings Annex Supporting Amount of l{ e f e r e n c e BIR Creditable A. Cred itabl e Withholding tax payments properly sup ported by Withholding Tax origi na l BIR Form 1606, BIR Form 1706, a nd 811{ Form 2307 Retur ns Sale of Property I . Creditable withholding tax payments supported by ori r,inal BIR Retums stamped "received" by the BIR 34 1CPA Repott, dated March 5, 20 11 , Exhibit "G-36", pp. 3-6

DECISION Ann ex A 1- 1 1606 & 1706 J} 6,7.90,4 74.40 CTA CASE NO. 8084 Page 11 of 19 Annex A l -7. 1606 180 ,000 .00 agent and photocopi es o f bank validated depos it slips Annex A l -3 1606 42 0,000. 00 as eviden ce o f tax remittan ce. 6,890,474.40 Ann ex A2- l 2307 2. Credi table with holdin g tax payment supported by 7,005,347.85 ori ginal BIR Return stamped "rece ived" by the niR Annex A2-2 2307 agent without the Company's T IN indi cated therein and 1,076.5 1 ori ginal copy of bank validated deposit slip as evidence Annex A3- l 2307 7,00 6,424 .36 o r tax remittance. Annex A3-2 2307 2,82 1,4 72.4 4 3. Creditable withholding tax payment supported by ori ginal BIR Return stamped "received" by the BIR Annex A5 -l 2307 477,00 1.86 agent. 3,298,474.30 S ub -Tota l Annex A5-7. 7.307 125583.02 Lease Income I. Creditable withholding tax payments supported by 79,225.95 ori ginal BIR Form 2307 204,808 .9 7 p 17,400,182.03 2. Creditable withholding tax payments supported by ori ginal BIR Fom1 2307 without Compan y's TI N Annex A l -4 1606 3.590,6 14.80 indicated therein I, 140,000.00 S ub-Tot a l Ann ex A l -5 1606/1706 Inter est Inco me on Commerci a l Loans Ann ex A l -6 1606 160 ,992 .00 I . Creditab le withholding tax payments supported by Annex A I-7 1606 (89 , 502. 0 0) original niR f orm 2307 2. Creditable withholding tax payments supported by ori ginal BIR Fom1 7.307 wit hout the Company's TI N indicated therein S ub -To ta l Reimburse me nt I . Creditable withholdin g tax payments supported by origin al niR f orm 2307 2. Creditable withholding tax payments supported by ori ginal BIR Fom1 2307 without the company's T IN indicated there in Sub-Total TOTAl . B. Oth er Findin gs Sale of Pro perty I . Creditable withholding tax payments s upported by photocopies of niR Returns stamped "rece ived" by the BIR agent and ph otocopi es o f" bank valid ated depos it slips as evidence of tax remittance. 2. Creditab le withholding tax payments supported by photocop ies ofl3IR returns stamped "received" by the BIR agent 3 . Creditab le withholding tax payment s upported by photocopy ofniR return stamped :received" by the niR agent but wi th different company name indi cated there in, and photocopy of bank validated depos it slip as ev idence o f tax remittance 4. Under-cla imed creditab le withholding tax payments

DECISION Ann ex A7.-3 7.307 4,802, I04.80 CIA CASE NO. 8084 Page 12 of 19 Annex A2-4 2307 562, 189.63 Annex A2-5 160 1-E S ub -To ta l 37 1,794 .93 Ann ex A7.-6 160 1-E 15, 175.00 Lease Income Annex A2-7 2307 l. Creditable withholding ta;~: payments supported by Annex A2 -8 5,200.00 ori ginal BIR Fom1 7.307 but with difTerent company T IN 4,770,064.05 indi cted therein Ann ex A3-3 7.3 07 (5 1,786 68) 2. Creditable withholding tax payments supported by Annex A3-4 2307 5,672,636.93 ori ginal 13IR f orm 2307 but not dated within the peri od 7.307 of claim/without date indi cated therein/with eras ure Ann ex A3-5 2307 295 ,739.47. on the date (year) 2307 Annex A3-6 5,337.08 3. Creditable withholding tax payments supported by Annex A3-7 19,539.0 1 origin al 13IR f orm 160 1-E Annex A3-8 553,26 l.ll 22 1, 198.06 4. Creditable withholding tax payments supported by Annex A4 (1 ,535.83) ori gin al BI R Fon11 160 1-E but are not dated within th e I ,093,538.85 period of cl airn/without date indicated there in/ with Annex A5-3 2307 4 ,11 0 .3 7 eras ure on the date (year) Annex A5-4 23 07 tl4.25 5. Supporting documents not available for verifi cati on Annex A5 -5 2307 995.74 6. Under-claimed creditable withholding tax payments S ub -To ta l 85,3 12.50 Inter est In come on Comm ercia l Loa ns I. Creditable withholding tax payments supported by original 13IR f orm 2307 but with different company TIN indi cated therein 7.. Creditable withholding tax payments s upported by original 13IR f orm 23 07 but not dated within the peri od o f claim/with out date indi cated th ere in/with eras ure on the date (year) 3 . Credi tab le withholding tax payments supported by ori gin al BIR Form 2307 but with erasure in the amount 4. Creditable withholding tax payments supported by photocopies ofBIR f orm 2307 5. Supportino documents not availab le for verification 6. Under claimed creditable w ithholding tax payments Sub-Total Commission Income I. Supporting documents not avail abl e for verifi cati on Reimburse ment I. Creditable withh oldin g tax payments supported by origin al BlR Form 2307 but with di fTerent company TI N indicated therein 2. Creditable withholding tax payments supported by ori gin al BIR Form 23 07 but with difTerent company name indicated therein 3. Creditable withholding tax payments supported by ori ginal 13IR f orm 23 07 but arc not dated within the peri od o f claim/with out date indi cate therein/ with erasure on the date (year)

DECISION CIA CASE NO. 8084 4. Creditabl e withholdin g tax payments supported by Annex A5-6 2307 2,77 1.62 ori ginall3IR f orm 2307 but with erasure in amount Annex A5-7 /.3 07 Ann ex A5-8 16,745 .23 5. Supporting documents not ava ilable fo r verifi cation (2,286.3 2) 6. Under claim ed creditabl e withholding tax payments 103 ,583 .0 2 S ub -To ta l 11 ,675,973.97 TOTAL - Other Findings P29,076,156.00 GRAND TOTAL Based on the above findings and the Court's ruling on strict compliance with the required Certificates of Creditable Tax Withheld at Source or BIR Form No. 2307 in claiming for CWT refund, petitioner was only able to comply with the second requisite in the amount of Pl 0,505,664.42, as presented below: Findings Annex Supporting Amount of Reference Creditable A. Creditable Withholding tax payments properly s upported by Bm Withholding Tax original BIR Form 2307 Lease Income Returns Creditable withholding ta,x payments supported by Annex A2- l 2307 7,005 ,347 .85 origi nal fl!R form 2307 Interest Income on Commercial Loans Annex A3 - l 7.307 7.,82 1,472.44 Creditabl e withh oldin g tax payments supported by ori gin al l:li R Form 2307 Reimbursement Ann ex 1\5- 1 2307 125,583.02 C reditabl e withholding tax payments supported by origin al l:li R Form 2307 Annex A3-6 2307 553 ,26 1.11 B. Other Findings Pl0,505,664.42 Interest Income on Commercial Loans Creditable withholding tax payments supported by photocopies of IJIR f orm 2307 GRAND TOTAL As regards the third requisite, records reveal that out of the amount of Pl 0,505,664.42, which was supported with BIR Form No. 2307, only the amount of P903, 106.89 CWT has been proven. The Court found out that this is the amount that corresponds to the income payments in the aggregate amount of Pl8,250,259.33; which the Court verified to have been included in petitioner's General Ledger and Annual Income Tax Return for taxable year 2007, in compliance with the requisite that the income upon which the taxes were withheld was included in the return of the recipient, to wit: Amount of Amount of Creditable I Exhibit Received From I I Income Payments Withholding Tax A. Creditable Withholding tax payments properly supported by original BIR Form Nos. 1606, 1706, and 2307 Lease Income (Annex A2-l, Exhibit G-36)

DECISION CTA CASE NO. 8084 G- 12.38 Caspo, Inc./via Web Inc. f> 3,274, 13 1.20 f> 163 ,706.56 G- 12.99 PBCom Fin ance Corp. 15,000.00 G- 12. 108 Phil am 750.00 G- 12. 11 3 Primary Breeders 1,802,655. 80 G- 12- 142 Alpha Securities (Daiichi Properti es) 222,062.20 90 , 132 .79 G- 12- 143 Alpha Securiti es (Dai ichi Proper1ies) 30,258.00 G- 12- 144 Alpha Securities (Daiichi Properti es) 30,25 8.00 11 ,103. 12 G- 12-146 Alpha Securities (Daiichi Properties) 30,258.00 G- 12-147 Alpha Securities (Daiiehi Properties) 30,258.00 1,5 12.90 G- 12- 148 Alpha Securities (Daiichi Properti es) 30 ,25 8.00 G- 12-1 49 Alpha Securities (Daiieh i Proper1ies) 27,94 8.00 1,5 12.90 G- 12- 150 Alpha Securities (Daiichi Properti es) 27,948.00 G- 12- 15 1 Banco De Oro 27,9 118 .00 1,5 12.90 G-1 2-1 52 Banco De Oro G- 12- 154 Bel l Communications 1,0 18,767.60 1,5 12.90 G- 12-1 55 Bell Communications 679, 178.40 G- 12-1 56 Blu Boz Water Treatment 80,850.48 1,5 12.90 G- 12- 158 Blu Boz Water Treatment 4, 119.5 1 G- 12-1 59 Blu Boz Water Treatment 472,3 35.00 I,397.40 G- 12- 160 Blu Boz Water Treatment 3 14,890.00 G- 12-54 Data Road Philippines 173, 189.5 0 1,397.40 G-12-62 ESS Manufacturing 173 , 189.50 G- 12- 168 First Philippine Ind ustrial Park 6 15,4 58.00 I,3 97.40 G-1 2-169 GKE Group lnt'l. Inc. 668 ,273. 35 G-1 2-1 70 GKE Group lnt'l. Inc. 18 3,894 .00 50,938.38 G- 12- 17 1 GKE Group Tn t'!. Inc. 75,496.00 G-1 2-1 72 GKE Group lnt'l. Inc. 75,496.00 33,958.92 G- 12- 173 GKE Group lnt'l. Inc. 75 ,496.00 G- 12- 176 lNG Bank N.Y. 75, 496 .00 4,042.52 G-12- 179 IPSOS Phils. inc. 75 ,1196.00 G- 12- 180 TPSOS Phil s. Inc. 140,325 .00 205.98 G-12- 182 lPSOS Phils. inc. 47,300.40 G-1 2-183 iPSOS Phils. inc. 47,300.40 23,616.75 G- 12- 184 IPSOS Phil s. Inc. 54,81 1.00 G-12- 185 IPSOS Phils. inc. 54,8 11.00 15,744.50 G- 12- 186 IPSOS Phil s. Inc. 54,8 11 .00 G- 12- 187 IPSOS Phils. Inc. 54,8 11.00 8,659.4 7 G-1 2-1 88 IPSOS Phils. Inc. 5t1 ,811.00 G- 12- 192 KSY Land Dev. Corp. 54 ,8 11.00 8,659.47 G-12-1 93 KSY Land Dev. Corp. 54,8 11 .00 G- 12-194 KSY Land Dev. Corp. 70 ,6 02.00 30,772.90 G- 12- 195 KSY Land Dev. Corp. 70,602. 00 G- 12-196 KSY Land Dev. Corp. 70,602 .00 33,4 13.67 G- 12- 199 KSY Land Dev. Corp. 70,602.00 G- 12-200 KSY Land Dev. Corp. 70,602. 00 9, 194.70 G-1 2-20 1 KSY Land Dev. Corp. 65,2 12.00 G- 12-202 Meche! Metal Supply 65 ,2 12.00 3,774.80 G-1 2-72 Mitsubishi Corporation 65 ,2 12.00 G-1 2-2 15 No rwegian Missionary 32,238 .03 3,774.80 G- 12-2 16 Norwegian Missionary G- 12-2 17 Norwegian Missionary 1,045,0 10.14 3,774.80 G- 12-2 18 No rweg ian Missionary 105,069.00 G- 12-2 19 Norwegian Missionary 122,5 16.00 3,774.80 122,5 16.00 122,5 16.00 3,774.80 122,5 16.00 7,0 16.25 2,365.02 2,3 65.02 2,7 40 .55 2,740.55 2,740.55 2,740.55 2,740.55 2,740.55 2,740.55 3,530.10 3,530.10 3,530. 10 3,530. 10 3,53 0.10 3,260 .60 3,260.60 3,260 .60 1,611.91 52 ,25 0.51 5,253.45 6, 125.80 6, 125.80 6, 125.80 6, 125.80

DECISION CTA CASE NO. 8084 G-12-220 Norwegian Missionary 122,5 16.00 6, 125 .80 G- 12-22 1 Norwegian Mi ssionary 122 ,516.00 6, 125 .80 G-12-222 Norwegian Missionary 122,5 16.00 6,125.80 G-12 -223 Norwegian Missionary 122,516.00 6,125.80 G- 12-79 NPC Alliance Corporation 37,894.80 1,894.74 G-12-80 NPC Alliance Corporation 573 ,102.60 28,655.13 G-12-225 Orakel Transcription 127,785.00 6,389.25 G-12-82 Primary Breeders 222 ,062.40 11 ,103 . 12 G-12 -230 Sodcxho Pass l 12,556.40 5,627.82 G-12-231 Sodexho Pass 112,556.40 5,627.82 G-1 2-232 Sodcxho Pass 112,556.40 5,627.82 G- 12-233 Sodcxho Pass 37,648.00 1,882.40 G- 12-234 Sodexho Pass 37 ,648 .00 1,882.40 G-12-235 Sodcxho Pass 112,556.40 5,627. 82 G-12-236 Sodexho Pass 37,648.00 I ,882.40 G-12-237 Sodexho Pass 112,556.40 5,627.82 G- 12-238 Sodcxho Pass 37,648.00 1,882.40 (1 - 12-239 Sodexho Pass 37,648.00 I ,882.40 G- 12-240 Sodcxho Pass 112,556.40 5,627.82 G- 12-241 Symbio Inc. 12 7,7 04. 25 6,385.21 G- 12-242 Symbio Inc. 127,704.25 6,385 .21 G-12-243 Symbio lnc. 127,704.25 6,385.21 G- 12-24 -1 Symbio Tnc. 127,704.25 6,385.21 G- 12-245 Symbio Tnc. 127,70-1.25 6,385.21 G-12-246 Symbio lnc. 12 7,7 04.25 6,385.21 G- 12-247 Symbio Tnc. 127,704.25 6,385.21 G-12-250 Talk pia Lanp,uagc Center 33,756.00 1,687.80 G-12-25 1 Talkpia Language Center 33,756.00 1,687.80 G- 12-252 Talkpia Language Center 33,756.00 1,687.80 G-12-253 Talkpia Language Center 33 ,7 56.00 1,687.80 G- 12-254 Talkpia Language Center 33 ,756.00 1,687.80 G- 12-255 Talkpia Language Center 33 , 756 .00 1,687.80 G-12-256 TalkQia I ,an guagc Center 33 ,756.00 1.687.80 G- 12-257 Talkpia Language Center 33 , 756.00 1,687.80 G-12-258 Talkpia Language Center 33 ,756.00 1,687.80 G-12-259 Tradition Homes 68,872.00 3,443.60 G- 12-260 Tradition Homes 68 ,872.00 3,443 .60 G-12 -261 Tradition llomcs 68 ,872.00 3,443.60 G- 12-262 Tradition Homes 68 ,872.00 3,443.60 G- 12-263 Tradition Homes 68 ,872.00 3,443.60 G-12-264 Tradition Homes 68,872.00 3,443.60 G-12-265 Tradition Homes 68,872.00 3,443.60 G-12-266 Tradition Homes 68,872.00 3,443.60 G-12-267 TUV Phils. 186.096.00 9,304 .80 G- 12-268 TUV Phi is. 186 ,096.00 9,304.80 G-12-269 TUY Phils. G- 12-270 TUV Phil s. 10,000 .00 500.00 G- 12-272 TUV Phi is. 5,000.00 250.00 G-12-311 Pepsi Cola 186,096.00 9,304.80 Total 150,000 .00 7,500.00 p 17,936,723.46 p 896,836. 17 Inter est Inco me on Co mm er cia l Loa ns (A nn ex A3-1, Ex hi bit G-36) 28 ,987.26 579.75 G- 12-937 Lepanto Consolidated Mining 48,951.39 979.03 G-12-943 Masagana TclcmaJ1, inc.

DECISION 53 , 173.6 1 1,063 .47 CTA CASE NO . 8084 49 ,08 3 .33 9 81. 67 Page 16 of 19 5 1,666 .67 53 , 173.61 1,033.33 G-1 2-945 Masagana Tclcmart, inc. 2 8,500 .00 1,063.4 7 G- 12-947 Masagana Telemart, inc. 313,535.87 G-1 2-949 Masagana Tclcmart, inc. p 18,250,259.33 570 .00 G-1 2-951 Masagana Tclcmart, inc. 6,270.72 G- 12-981 Masagana Telemart, inc. p 903,106.89 Total GRAND TOTAL In sum, petitioner has sufficiently complied with the three requisites for the refund of unutilized creditable withholding taxes, but only to the extent ofP903,106.89 out of the total claimed CWT ofP29,076,156.00. The Court shall now determine whether petlttoner exercised the option to carry over its excess creditable withholding taxes to the succeeding quarters, as provided under Section 76 of the NIRC of 1997, as amended, which reads: "SEC. 76. Final Adjustment 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 fi scal 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) CatTy-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 final 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." Pursuant to the above-quoted provisiOn, the corporate taxpayer's excess tax credits or overpaid income tax in a given taxable year may either be refunded (either in the form of cash or tax credit certificate) or carried over/applied to the succeeding taxable years. Ilowever, once the carry-over option has been made, the same becomes irrevocable for that taxable period. J__

DECISION CIA CASE NO. 8084 Records reveal that in its Final Income Tax Return for calendar year 20 0 i 5 petitioner reflected a net loss of P772,866,753.0036 and income tax , overpayment ofP70,159,970.0037; which petitioner marked as "To be Issued a Tax Credit Certificate". A perusal of said Income Tax Return shows that the mcome tax overpayment ofP70,159,970.00 consists of the following: Prior Year's Excess Credits P41 ,083 ,814.00 Add: Creditable tax withheld during the year 29 ,076,156.00 Unutilized Creditable Withholding Taxes P70,159,970.00 Petitioner was unable to utilize the total tax credits of P70, 159,970.00 because it had no income tax liability due to losses incurred in its operations. In petitioner's 2008 Quarterly Income Tax Returns for the first38 and second39 quarters, only the amount ofP41,083,814.00 was reflected as "Prior Year's Excess Credits" ; while in the Quarterly Income Tax Returns for the third40 quarter as well as in its 2008 Annual Income Tax Return41 , only the amount ofP40,911,536.52 was reflected as "Prior Year's Excess Credits". This amount was arrived at by deducting the Minimum Corporate Income Tax (MCIT) for the second quarter of 2008 amounting to P172,277.48 from "Prior Year's Excess Credits" ofP41 ,083,814.00. Clearly, the claimed CWT amounting to P29,076, 156.00 for the year 2007 was not carried over to the succeeding quarters or taxable year. In recapitulation, petitioner is entitled to the issuance of tax credit certificate in the reduced amount of P903, 106.89, representing excess/unutilized creditable withholding taxes for calendar year 2007. /- 35 Exhibit "B" 36 Exhibit "B" Line 2 1B 37 Exhibit "B',' Line 29 38 Exhibit "G-4" 39 Exhibit "G-5" 40 Exhibit "G-6" 41 Exhibit " D"

DECISION CTA CASE NO. 8084 WHEREFORE, premises considered, the instant Petition for Review is hereby PARTIALLY GRANTED . Accordingly, respondent is hereby ORDERED TO ISSUE A TAX CREDIT CERTlFICATE in the reduced amount of NINE HUNDRED THREE THOUSAND ONE HUNDRED SIX PESOS AND 89/100 (P903,106.89) in favor of petitioner, representing its unutilized creditable withholding taxes for calendar year 2007. SO ORDERED. ~0=:�~/-- AMELIA R. COTANGCO- MANALASTAS Associate Justice 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. """"--"-"'""'""Ociate Justice Chairperson

DECISION CTA CASE NO. 8084 CERTIFICATION Pursuant to Section 13, Article VIII 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. Presiding Justice