SPECIAL STEEL PRODUCTS CO., INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS Quezon City Second Division SPECIAL STEEL PRODUCTS CTA CASE NO. 10333 CO., INC., Members: Petitioner, RINGPIS-LIBAN, Chairperson, MODESTO-SAN PEDRO, and -versus- FERRER-FLORES,]]. Promulgated: COMMISSIONER OF INTERNAL AUG ZZ2023 REVENUE, .,. Respondent. /: 2.o 1 X ------------------------------------------------------------------------------------ --------------- -------- X JUDGMENT ON COMPROMISE AGREEMENT RINGPIS-LIBAN,j.: On August 26, 2020, petitioner filed a "Petition for Review"1 praying that the assessments made by respondent against petitioner for taxable year 2014, as set forth in the (a) Final Decision on Disputed Assessment (FDDA) dated July 20, 2020, (2) the Final Assessment Notice (FAN) dated December 15, 2017, (3) and the Preliminary Assessment Notice (PAN) dated November 8, 2017 issued by respondent, be cancelled and declared void by the Court. On September 11, 2020, the Court issued Summons2 to respondent. On November 16, 2020, respondent ftled his Answe2 by registered mail. On December 7, 2020, the Court issued a Resolution4 referring the case to mediation in the Philippine Mediation Center-Court of Tax Appeals (PMC- CTA). t Docket, CTA Case No. 10333, pp. 7-46. 2 Ibid., p. 108. .1 Ibid., pp. 115-131. 'Ibid., pp. 140-141.

JUDGMENT DN COMPROMISE AGREEMENT CTA CASE NO. 10333 On March 10, 2021, the Court received a "Request for Extension"5 flied by the PMC-CTA, stating that the parties have signified their willingness to extend the mediation period, there being a good possibility that an amicable settlement will be reached. On March 22,2021, the Court issued a Resolution6 granting the "Request for Extension." On August 5, 2022, the Court issued a Resolution7 ordering the parties to inform the Court the status of the amicable settlement, within ten (1 0) days from notice. On September 8, 2022, the Court received the parties 'joint Compliance and Manifestation on the Compromise Agreement Between Parties Awaiting Approval of the National Executive Board."8 On September 19, 2022, the Court issued a Resolution noting the "Joint Compliance and Manifestation on the Compromise Agreement Between Parties Awaiting Approval of the National Executive Board."9 On February 27,2023, the Court received the parties "Joint Manifestation and Motion for Extension ofTime to Submit a Report on the National Executive Board's Action on the Compromise Agreement Between Parties."10 On March 21, 2023, the Court issued a Resolution noting the "Joint Manifestation and Motion for Extension of Time to Submit a Report on the National Executive Board's Action on the Compromise Agreement Between Parties"11 and ordering the parties to inform the Court the status of their amicable settlement within fifteen (1 5) days from notice. On April 13, 2023, the Court received the Mediator's Report12 signed by (Ret.) Judge Leticia E. Sablan, Appellate Mediator, with the following attachments: 1) PMC-CTA Form 2 (Agreement to Mediate), 2) PMC-CTA Form 2-A (Selection of Mediator), 3) Special Power of Attorney, 4) Secretary's Certificate, 5) Appearance of Parties, 6) original copy of the Compromise Agreement, 7) Payment Forms, 8) Certified True Copy of the Certificate of Availment (Compromise Settlement), 9) Certified True Copy of the Signature Page of the National Evaluation Board. ; Ibid., p. 147. 6 Ibid., pp. 149-150. 7 Ibid., pp. 153-164. 8 Ibid., p. 155. 9 Ibid., p. 179. 10 Ibid., pp. 180-182. n Ibid., pp. 184-185. 12 Ibid., p. 186.

JUDGMENT ON COMPROMISE AGREEMENT CTA CASE NO. 10333 On April 25, 2023, the Court received the parties' 'joint Motion to Approve and Render Judgment Based on Compromise Agreement,"13 praying that the Court render judgment based on their Compromise Agreement, and enjoin the parties to faithfully comply with their respective obligations as stipulated therein. Attached to the said motion are the photocopy of the Compromise Agreement and the computer printouts of the payment forms. On May 26, 2023, a Minute Resolution14 was issued submitting for Resolution the parties' 'joint Motion to Approve and Render Judgment Based on Compromise Agreement." The "Compromise Agreement"15 states as follows: "Petitioner SPECIAL STEEL PRODUCTS CO., INC. ("Taxpayer" for brevity), a domestic corporation organized and existing under Philippine laws, with principal office at Unit 1907 Cityland Pasong Tamo Tower, 2210 Pasong Tamo, Makati City, represented herein by its President Jospeh Anthony B. Pardo and respondent COMMISSIONER OF INTERNAL REVENUE, in his capacity as the head of the Bureau oflnternal Revenue (BIR), with principal address at the BIR National Office Building, Agham Road, Diliman, Quezon City, assisted by their respective counsels, AGREE as follows: WHEREAS, a dispute arose between parties regarding the assessments made by respondent Commissioner of Internal Revenue against petitioner Special Steel Products Co., Inc. for the taxable year 2014, as set forth in: (1) the Final Decision on Disputed Assessment (FDDA) dated July 20, 2020; (2) the Final Assessment Notice (FAN) dated December 15, 2017; (3) and the Preliminary Assessment Notice (PAN) dated November 8, 2017 issued by respondent Commissioner oflnternal Revenue; WHEREAS, the BIR issued a Final Decision on Disputed Assessment (FDDA) dated July 20, 2020, denying the Letter of Protest dated January 17, 2018 flled by the Taxpayer. The assessment appearing in the FDDA are as follows: TAX TYPE Basic Tax Surcharge Interest Compromise Total Income Tax 1,100,977.47 862,563.06 1,963,540.53 Value-Added 257,585.55 213,097.34 470,682.89 Tax "Ibid., pp. 213-215. " Ibid., p. 233. IS Ibid., PP� 194-198.

JUDGMENT ON COMPROMISE AGREEMENT CTA CASE NO. 10333 Expanded 162,706,81 106,942.00 135,496.89 20,000.00 298,203.70 Withholding 427,768.00 106,942.00 465,517.06 20,000.00 Tax 1,949,037.83 1,676,672.35 1,000227.06 D o cum en tary 20,000.00 Stamp Tax Compromise 3,645,712.18 Total WHEREAS, the parties have agreed to accept mediation to avoid prolonged litigation, as authorized by A.M. No. 11-1-05-SC- PHILJA; WHEREAS, the Taxpayer offers for amicable setdement of the case the amount of Php877,239.23, which is broken down as follows� BASIC PROPOSED RATE OF TAX TYPE DEFICIENCY SETTLEMENT PROPOSED TAX AMOUNT SETTLEMENT AMOUNT Income Tax 1,100,977.47 440,390.99 40% Value-Added Tax 257,585.55 103,034.22 40% Expanded 162,706.81 162,706.81 100% Withholding Tax Documentary 427,768.00 171,107.20 40% Stamp Tax TOTAL 1, 949,037.8 877,239.23 WHEREAS, the BIR, through the Commissioner of Internal Revenue, has evaluated the Taxpayer's proposal for amicable setdement, and believes that a compromise between parties would serve the interest of the Government as it would result in immediate tax collection and putting an end to litigation as provided in the Civil Code of the Philippines; WHEREAS, on June 14, 2021, the Taxpayer, through e- Filing and Payment Scheme (eFPS) already paid the abovementioned compromise amount ofPhp877,239.23; WHEREAS, the assistance of the assigned mediator resulted in making the parties realize the advantage of ending their dispute by agreeing upon a compromise; WHEREAS, the PARTIES ensure that the terms of the amicable setdement as contained in this Agreement do not circumvent the limitations provided in Section 204 of the National Internal Revenue Code on administrative comprormse proceedings;

Pages of 10 JUDGMENT ON COMPROMISE AGREEMENT CTA CASE NO. 10333 pamnreedjnutdpioiuWcntiteaHidlnEgcliaRtisageEna,AtuieoSpnn,od,nthhtteaeovrPmeaAsaRpagnrrToedIetErdcaoSctn,toedfdiota,irmoentihxcsaephbepelnyruseirivspneeoattsflteaeenrodtshfeeamtvfuaoobtirudotahivln;elgy- foregoiNngOpWre,mTisHesE, RthEe PFAORRTEI,EfSorhearnedtoihnavceonasgirdeeerdataisonfololofwths:e 1. eCtITTHSPhnnaeoaeeutcxvxismnotoealdmianepsmnsrdtreesyomoaecd-TusanmSeassnPdexeeitvtesd,,oereT,VemtcnaqwaeaAeTlusnleuTmichtnvweoaota(o-mexyu1lAulep-0slpTnnda0arattdy%hnos.eerdtm)erodOtaheoioTsnneFfefadfCoexaotaTrrhe,mrtmewendyadotneoo,aeuPdruvaxnHenntDoptortdusacoeonnestcqhddenf(uuPetertmEtiehdlvBei(dPeag4WIn8lT0htReht7%thinai7atsirtHh)cry,2httcauyoo3Soebn-9pfltoNddaOt.v2temirihnne3ednpe-)ged,e. This compromise amount is broken down into: BASIC PROPOSED RATE OF SETTLEMENT PROPOSED TAX TYPE DEFICIENCY SETTLEMENT AMOUNT TAX 40% 440,390.99 40% AMOUNT 103,034.22 100% 162,706.81 Income Tax 1,100,977.47 40% Value-Added Tax 257,585.55 171,107.20 Expanded 162,706.81 877,239.23 Wimholding Tax 427,768.00 Documentary Stamp Tax 1,949,037.8 TOTAL 2. JSPaPaubtaahntoyPtaeivmc8seh7fem1ae7n4dc,et2,tnt3ioot92in.0oaS2/2nn3cP1deh.a,demyCmtmahoedepeeineiTctsnoa(toeexomFgfpfpPraCarSmyloo)epm,emra,irppsttersrhaoolorormoeffuastidghseyoihasfmAAepom-gauFpryoanielmuiteidnnmegtne.tnaOttanhorandeesf Annexes "A" to "A-1 ". 3. SHAsuugobbrnmemoeirmtitaseesbdinlotefnofrouCtlflhoyuethraistspigpoCnroefodvmaTlbpaoyrxfomtthAheiepseHpPeoAAanglRosrrTeaeIb(EmCleSTeCnAsTt)h.Atao.llTTthhhbiesee

JUDGMENT ON COMPROMISE AGREEMENT CTA CASE NO.l0333 PsCuATbRAmTittIoEanSbyeuaannbddleearlttlaodkoerceuntomdeeprneatrsfJoruerdmqgumiarenedyntbaybnytdhCeaolHlmoapncrtoosrmaabinsldee Agreement. 4. EtbrfaeuyfkmlffeteihacleiletnmfifHveeincoitnttynoaoonrffadofbrttcblhheeieenCdcaATontAghvdre.eenTPeeahmAfniftseRescAnTtatgI.nErudeTSnehtmuiuilnspedonAcetnorgtsmahfrikeapneilalnlmelgttheaisonepnrtpoerfasohfavttanhealdelrl PARTIES. 5. DUCateidwD2DNhmlxeopro0iieeeeolsctpm,ocihacctuvlniidude2epAmsceytrmm0ierrevagoe2aopwebernn(0abmrenPetai,iiesnlfrotAndiemygtsndsNaih1t,eenshe5o)Dtngeh,sdAmtfdiee,FeCas2tgataliphnt0iotnyrtiveudeh1nmaeedpt7elbgerPeprc,meNodAoArBavoatnoerssARolnImefnvSisRdidqseTetlriesoussmmtI,eshentibuEhrsmibseneynAseaSeddmegnmrenTtPudetrhto8toarontph,eeafxutNaoclk2peniatn0(eHomfatnFf1sttytceaiaohihD7nececnpinertalsetDdiopliortviTyArnruiae(aosagiFnl)pAmsxAyvbyAoupadgmltsenNaaehlarsdenyeaete)osedenedsiCafdgimrsdgdaFTtnmfataJhehuiieAiuntnenalianlellsagnsylty.sydl,ltt the Taxpayer. 6. ApPCBAtehruoIgeteRtimrsthea,iimdooepwmrenpiinserateostryrnivJrotSoaa,ntnplsoaeeetonrcpfdEtihahottnhlaofAittsSednItrAenttehhlteigeeoCvlryrneeonPryemaretmolBhnpdee.tRerunPnroect,aevmtbrcseysdeiniossCgtuse,hnoaeea,r,.A,nyHadrIgdneonrodtpnchecr.oeeueermsmtrxaheeebeenrsclnontpeuiuttonts.CgenguhTdTptAethhiohnti.esens"t Section 204(A) of the NIRC of 1997, as amended, provides for the authority of the CIR to compromise the payment of any revenue tax, to wit: "SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes.- The Commissioner may- (A) Compromise the payment of any internal revenue tax, when:

JUDGMENT DN COMPROMISE AGREEMENT CTA CASE NO. 10333 (1) A reasonable doubt as to the validity of the claim against the taxpayer exists; or (2) The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax. The compromise settlement of any tax liability shall be subject to the following minimum amounts: For cases of financial incapacity, a nnrumum compromise rate equivalent to ten percent (10%) of the basic assessed tax; and For other cases, a mmtmum compromise rate equivalent to forty percent (40%) of the basic assessed tax. Where the basic tax involved exceeds One million pesos P1,000,000.00) or where the settlement offered is less than the prescribed minimum rates. the compromise shall be subject to the approval of the Evaluation Board which shall be composed of the Commissioner and the four (4) Deputy Commissioners. xxx" (Emphasis supplied) A compromise settlement is thus deemed valid when the following requirements are present: 1. The application for compromise should be based on either the doubtful validity of respondent's assessment or taxpayer's financial incapacity to pay such assessment; 2. In case the basis of the compromise offer is doubtful validity, the minimum payment of compromise settlement shall be at the rate equivalent to forty percent (40%) of the basic assessed tax, while if the ground is financial incapacity, the minimum payment should be at the rate equivalent to ten percent (10%) of the basic assessed tax; and 3. The compromise agreement should be approved by the NEB, which is composed of the respondent and his four (4) Deputy Commissioners if the subject assessment exceeds One Million pesos (P1,000,000.00) or where the settlement offered is less than the prescribed minimum rates. To prove that the offer of compromise was approved by the CIR, the parties presented the Certificate of Availment dated January 19, 2022, signed by OIC-Assistant Commissioner Clavelina S. Nacar, and the Signature Page of the National Evaluation Board.

JUDGMENT ON COMPROMISE AGREEMENT CTA CASE NO. 10333 Having found the documents in order, the Court finds the Certificate of the parties' compliance with the second and Availment sufficient evidence of the mandate of Section 6 of RR No. 30-2002, third requisites, respectively, and as amended, to wit: - "SEC. 6. APPROVAL OF OFFER OF COMPROMISE.- EpdjboCrueayxeforlrcqieamasegugdmpmtareihtatcsaieepttsdjfishooooi,nrrofCittntooohoeyaffmrelfosltet.mhtfhraesaeAixcslNpllsoolitRamafohdytEnipeeceoeBrcormnroim1soam6eilrpomiarOnsfponaesbufdmvferooisricrsufsseaeteabtohtn(hltwefNetleethOthmoNete)ofreoEteNnshuBhterttsEah,hlteBelagbx(wr14a7peas)ipcuantaphocytprimcieDonpnervpreeg,oaodpslvsihttunheehaitsgddeylel have the concurrence of the Commissioner. XXX XXX XXX Provided, however, that if the offer of compromise is less than the prescribed rates set forth in Sec. 4 hereof, the same shall always be subject to the approval of the NEB. Tfwadtbihphlieiiseptneahdlgapioeccmpdouaoruomttoficutovphttnnaerhetlodefpfmooufalafrriilospdtecsmphueoleotpimttcfolhaafepenpetmriprootfeloimnsilntichanitaaflsgtooleioloorfubnsftthceetsohtefttopamelornaeafpimdffdcrieooeonrrbnmmgeeytdspitaasstraihxehodmaemlalsoilapteiuabstpbnxteilelltpiie.ctsamipaeIeyrnttseetio.nlorccextnaemu.xssspexeNsho"neaonodtlf,l rpaggeihsenguaxoaocritenoiwnaepccdaeneruitndsdoivtAcoecuebeuonadrpanse,lulobtcddiatocyntonomobtb,mcaonyefdsenpccidcatdersohaoorsbmlnbeeusmaydegirwceottiatos.wsnsphruuedmsuOeeriibtetnion.da,lnngricagiTcettneotrhhhietgrpseehaeedeoyeamreppclnniraoooacetradsmyetnftosir,jtcleupieoobsardsrsi.elnnsotiesnaAtdmtorsgghaali.acamevcsioiIeentdcrutmboeisatdmnithnptgneieftrulrrdhrfioiemstiairamicentcgviumdgnntiaelistaotefuieiwftbnetopeiasetonhborgeeneieniasnrnrnneoectcgedhboffteirmheynsvakeeteepeecarlnenatamyonhprtrndtjyeaimiua,tnenrdntgsatonopihd.ycvieauHinlerrbaiasrtnlamwe,isttevhayea,eisieplnvxnmlaypidoegngmroichesdodbruaunavaethkvtoclaeelaseehylrdn,s, the force and effect of a judgment18 16 Regional Evaluation Board. 17 National Evaluation Board. No. 176973, February 25,2015. 18 David vs. Paragas,Jr., G.R.

JUDGMENT ON COMPROMISE AGREEMENT CTA CASE NO. 10333 Finding the subject compromise agreement to be in order and in compliance with established laws, rules and regulations, taking into consideration the documents submitted by the parties in support thereof, the same is approved. WHEREFORE, in view of the foregoing, the parties' 'joint Motion to Approve and Render Judgment Based on Compromise Agreement" is GRANTED. The "Compromise Agreement" is APPROVED and judgment is hereby rendered in accordance therewith. Accordingly, the proceedings in the instant case is considered CLOSED and TERMINATED. SO ORDERED. ~ . ~ _.-z/...._____ MA. BELEN M. RINGPIS-LIBAN Associate Justice WE CONCUR: Associate Justice ATTESTATION were I attest that the conclusions in the above Judgment on Compromise Agreement reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. ~ 44--. ---"--- MA. BELEN M. RINGPIS-LIBAN Associate Justice Chairperson

JUDGMENT ON COMPROMISE AGREEMENT CTA CASE NO. 10333 CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, is it hereby certified that the conclusions in the above Judgment were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. Presiding Justice