PHILAM PROPERTIES CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

Republic of the Philippines COURT OF TAX APPEALS Quezon City SECOND DIVISION PHILAM PROPERTIES CTA CASE NO. 7912 CORPORATION, For: Refund of excess/unutilized Petitioner, creditable withholding taxes for CY 2006 -versus- Present: CASTANEDA, JR. , Chairperson CASANOVA, and COMMISSIONER OF INTERNAL MINDARO-GRULLA, JJ. REVENUE, Respondent. Promulgated : JAN 12 2012 / x----------------------------------------------------------------------------------\---7~--t-:--/{---r----A------x DECISION MINDARO-GRULLA, !: This is a Petition for Review filed on April 14, 2009 by Philam Properties Corporation as petitioner, against the Commissioner of Internal Revenue (CIR) as respondent, for the Court in Division, pursuant to Section 7 (a) (2) of Republic Act (RA) No. 1125, An Act Creating the Court of Tax Appeals, as amended 1, as well as Rule 4 ,(' Sec. 7. Jurisdiction. -The CTA shall exercise: (a) Exclusive appellate jurisdiction to review by appeal , as herein provided : XXX XXX (2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes , fees

Philam Properties Corporation v. CIR Page 2 of 27 CTA Case No. 7912 DECISION Section 3 (a) (2), in relation to Rule 8, Section 4(a), of the Revised Rules of the Court of Tax Appeals (RRCTA)2 . It involves a claim for the( or other charges, penalties in relation thereto , or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code provides a specific period for action, in which case the inaction shall be deemed a denial ; XXX XXX Rule 4 . Sec . 3. Cases within the jurisdiction of the Court in Division. -The Court in Division shall exercise : (a) Exclusive original over or appellate jurisdiction to review by appeal the following : XXX XXX (2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto , or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue , where the National Internal Revenue Code or other applicable law provides a specific period for action : Provtded, that in case of disputed assessments , the inaction of the Commissioner of Internal Revenue within the one hundred eighty day-period under Section 228 of the National Internal Revenue Code shall be deemed a denial for purposes of allowing the taxpayer to appeal his case to the Court and does not necessarily constitute a formal decision of the Commissioner of Internal Revenue on the tax case ; Provided, further, that should the taxpayer opt to await the final decision of the Commissioner of Internal Revenue on the disputed assessments beyond the one hundred eighty day-period abovementioned , the taxpayer may appeal such final decision to the Court under Section 3(a) , Rule 8 of these Rules ; and Provtded, sftl/ further, that in the case of claims for refund of taxes erroneously or illegally collected , the taxpayer must file a petition for review with the Court prior to the expiration of the two-year period under Section 229 of the National Internal Revenue Code ; XXX XXX Rule 8. Sec. 4. Where to appeal,� mode ofappeal. - (a) An Appeal from a decision or ruling or the inaction of the Commissioner of Internal Revenue on disputed assessments or claim for refund of internal revenue taxes erroneously or illegally collected ; the decision or ruling of the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade & Industry, the Secretary of Agriculture , and the Regional Trial Court in the exercise of their original jurisdiction , shall be taken to the Court by filing before it a petition for review as provided in Rule 42 of the Rules of Court. The Court in Division shall act on the appeal.

Philam Properties Corporation v. CIR Page 3 of 27 CTA Case No. 7912 DECISION refund of the amount of P9, 176,116.69, allegedly representing excess/unutilized creditable withholding taxes for the calendar year 2006. Petitioner Philam Properties Corporation is a corporation duly organized and existing under and by virtue of the laws of the Philippines, with principal office at 5th Floor Philamlife Bldg. , 126 L.P. Leviste St. , Salcedo Village , Makati City. Respondent is the Commissioner of the Bureau of Internal Revenue (BIR) who was duly appointed and empowered to perform the duties of her office, including the duty to act and approve claims for refund or tax credit as provided by law. She holds office at the BIR National Office Building , Diliman , Quezon City. On April 16, 2007 , petitioner filed with the Bureau of Internal Revenue its Annual Income Tax Return for the calendar year 2006. The said return indicated that petitioner declared a net loss in the amount of P3,300,336.00 and a Minimum Corporate Income Tax (MCIT) due in the amount of P981 ,659.12 . Petitioner also had total tax credits in the amount of P34 ,739,282.96 , consisting of prior years excess credits in the amount of P25 ,550 ,663 .00 and creditable tax withheld for the year in the amounts of P7 ,087 ,172.37 and P2 ,101,447.59, respectively.(

Philam Properties Corporation v. CIR Page 4 of 27 CTA Case No. 7912 DECISION After deducting the MCIT liability in the amount of P981 ,659.12, petitioner indicated an overpayment in the amount of P33,757,623.84. Petitioner opted to be issued a tax credit certificate. On April 8, 2009 , petitioner filed an administrative claim with the BIR Revenue District Office No. 50 for the issuance of a tax credit certificate for excess/unutilized creditable taxes withheld for the taxable year 2006 amounting to P9, 176,116.69. On April 14, 2009, petitioner filed the instant Petition for Review before this Court in order to preserve its right to claim for refund of its excess or unutilized creditable withholding tax for the calendar year 2006 in the amount of P9, 176,116.69. Respondent, in her Answer filed on May 8, 2009, interposed the following Special and Affirmative Defenses: "4 . Granting arguendo that Petitioner filed a claim for refund, the same is subject to investigation by the Bureau of Internal Revenue . 5. Petitioner failed to demonstrate that the alleged tax sought for refund or tax credit has been [or, sic] erroneously or illegally collected in violation of the tax laws relied upon by the petitioner. 6. It is incumbent upon the petitioner to prove by substantial and credible evidence that it is entitled for a refund or for issuance of Tax Credit Certificate. 7. Well-settled is the rule that the interpretation placed upon a statute by executive officers , whose duty is to enforce it, is entitled to great respect by the courts. Nevertheless, such interpretation is not conclusive and will be ignored if judicially found to be erroneous . Thus, the courts will not countenance(

Philam Properties Corporation v. CIR Page 5 of 27 CTA Case No. 7912 DECISION administrative issuances and rulings that override , instead of remaining consistent and in harmony with the law which they seek to apply and implement (Philippine Bank of Communications v. Commissioner of Internal Revenue , G .R. No. 112024, 302 SCRA 241 , January 28, 1999). 8. Taxes paid and collected are presumed to be made in accordance with the laws and regulations, hence, not creditable or refundable . 9. It is incumbent upon the Petitioner to show that it has complied with the provision of Sections 108 and 112 in relation to Section 229 of the 1997 Tax Code , as amended. 10. In an action for tax credit or refund, the burden is upon the taxpayer to prove that he is entitled thereto, and failure to discharge the said burden is fatal to the claim (Emmanuel & Zenaida Aguilar v. Commissioner, CA-GR No. Sp . 16432, March 30 , 1990 cited in Aban , Law of Basic Taxation in the Philippines , 1st Edition, p. 206). 11 . Claims for refund are construed strictly against the claimant, the same partake the nature of exemption from taxation (Commissioner of Internal Revenue vs . Ledesma , 31 SCRA 95) and , as such, they are looked upon with disfavor (Western Minolco Corp . vs. Commissioner of Internal Revenue , 124 SCRA 121)." During trial , petitioner presented as witnesses , namely: Mary Jane C . Baysic and Atty . Fredieric B. Landicho. On August 20 , 2010 , petitioner filed its Formal Offer of Evidence without respondent's comment. This Court in its Resolution dated October 26 , 2010 admitted Exhibits "A" to "HH-14", and thereafter, petitioner was deemed to have formally rested its case . The documentary evidence formally offered and admitted are as follows : Description Exhibits Certificate of Filing of Amended Articles of A Incorporation issued by the Securities and(

Philam Properties Corporation v. CIR Page 6 of 27 CTA Case No. 7912 DECISION Exchange Comm ission under COMPANY REG NO. AS095-12730 to PHILAM PROPERTIES CORPORATION together with the Amended Articles of Incorporation consisting of 10 pages inclusive of the SEC Certificate A-1 Primary Purpose of Petitioner B Corporate annual income tax return of PPC for CY 2006 consisting of the return which was e-filed as indicated in the upper right portion where the reference no. and the date and time of filing are indicated as well as the copy of the duly signed corporate annual income tax return which was manually filed with the BIR, inclusive of all attachments B-1 Stamped Received by the Bl R dated April 16, 2007 B-2 No. 7 of the Notes to Financial Statements, p. 16, captioned as "Other Current Assets" B-3 Signature of Mr. Luis Enrique Mangosing c Tentative Corporate Annual Income Tax return of PPC for CY 2007 inclusive of all attachments duly filed with the BIR C-1 Signature of Mr[s, sic] . Luis Enrique Mangosing D Amended Corporate Annual Income Tax Return of Petitioner for CY 2007 consisting of the copy which was filed through e-filing as indicated in the upper right portion where the Reference No. and date and time file are indicated as well as the copy of the corporate annual income tax return which was duly signed and physically transmitted to the BIR Office, inclusive of all attachments D- 1 Stamped Received dated April 29, 2008 D-2 Signature of Mr. Luis Enrique Mangosing D-3 Item 28A of Petitioner's Amended Corporate Annual Income Tax Return labelled as "Prior years' excess tax credits other than MCIT" in the amount of P24 ,569 ,004 E Summary of Petitioner's Creditable Withholding Taxes for CY 2006(

Philam Properties Corporation v. CIR Page 7 of 27 CTA Case No. 7912 DECISION E-1 Signature of Ms. Mary Jane Baysic and Ms. J. Martinez, Finance Mgr and VP for Finance and Controller, respectively of Petitioner F Application for Tax CrediURefund together with the letter claim for refund and the summary of creditable taxes withheld for CY 2006 filed by Petitioner with the BIR F-1 Stamp Received by the BIR dated April 8, 2009 F-2 Signature of Mr. Luis Enrique Mangosing G Letter of Authority dated July 28, 2009 issued by the BIR to Petitioner First Quarterly Income Tax Return of Petitioner for CY 2006 J Second Quarterly Income Tax Return of Petitioner for CY 2006 K Third Quarterly Income Tax Return of Petitioner for CY 2006 L Schedule of Reconciliation Income per ITR and per CWT for the year 2006 of Petitioner N Report on the results of audit procedures performed by the audit firm of Manabat Delgado Am per & Co. dated March 5, 2010 with respect to Petitioner's judicial claim for refund of its excess/unutilized tax credits for CY 2006 N-1 Signature of Fredieric Landicho 0 to 0-505 Summary of creditable withholding taxes from tenants/clients with valid support and recorded in the books for the year 2006 P to P-12 Summary of creditable withholdings taxes with photocopies of original CWTs, official receipts with related income not recorded in 2006 books Q to Q- 10 Summary of creditable withholding taxes w/photocopies of original CWTs official receipts not provided with related income not recorded in CY2006 books R to R-36 Summary of creditable withholdings taxes with photocopies of original CWT, official receipts not(

Philam Properties Corporation v. CIR Page 8 of 27 CTA Case No. 7912 DECISION provided with related income recorded in 2006 books S TO S-1 Summary of creditable withholding taxes with photocopies of original CWTs with related income recorded in 2006 books w/ official receipt dated 2005 T to T-85 Summary of creditable withholding taxes w/ photocopies of original CWTs with related income recorded in 2006 books partly valid and partly with exceptions U Supplemental Report on the results of audit procedures performed by the audit firm of Manabat Delgado Am per & Co. dated April 22, 2010 with respect to Petitioner's judicial claim for refund of its excess/unutilized creditable taxes for CY 2006 U-1 Signature of Fredieric Landicho V to V-624 Summary of creditable withholding taxes with original CWTs, official receipts and with related income recorded in CY 2006 books W to W-6 Summary of creditable withholding tax (BIR Form 2307) from tenants/clients related income not traced in the 2006 books and official receipt not provided X to X-49 Summary of creditable withholding tax (BIR Form 2307) from tenants/clients corresponding income partly not traced in the 2008 books and OR dated 2007 Y to Y-2 Summary of creditable withholding tax (BIR Form 2307) from tenants/clients for the year 2006 Z to Z-8 Summary of creditable withholding tax (BIR Form 2307) from tenants/clients w/ valid support and recorded in the books for year 2006 AA to AA-7 Summary of creditable withholding tax (BIR Form 2307) from tenants/clients with official receipt not dated in 2006 BB to BB-70 Summary of creditable withholding tax (BIR Form 2307) from tenants/clients with valid support and recorded in the books for the year 2006(

Philam Properties Corporation v. CIR Page 9 of 27 CTA Case No. 7912 DECISION CC to CC-2 Summary of creditable withholding tax (BIR Form 2307) from tenants/clients revenue reported in 2005 and supported by OR for the year 2006 DD to DD-8 Summary of creditable withholding tax (BIR Form 2307) from tenants/clients with official receipt not dated in 2006 for the year 2006 EE to EE-5 Summary of creditable withholding tax (BIR Form 2307) from tenants/clients corresponding to income partly not traced in the 2006 books and one official receipt dated 2005 FF to FF-55 Summary of creditable withholding tax (BIR Form 2307) from tenants/clients with valid support and recorded in the books for the year 2006 GG to GG-14 Summary of creditable withholding tax (BIR Form 2307) from tenants/clients revenues reported in 2005 and supported by official receipt HH to HH-14 Summary of creditable withholding tax (BIR Form 2307) from tenants/clients OR not dated 2006 Initial presentation of respondent's evidence was set on November 17, 2010 , January 17, 2011 , February 16 , 2011 and March 16, 2011. On the last date, March 16, 2011, respondent's counsel manifested that upon verification with the Revenue District Office No. 50 where petitioner's administrative claim for refund is filed, there is still no final report on the said claim, hence, he is submitting the case for decision. On June 1, 2011, the case was deemed submitted for decision, considering petitioner's Memorandum and the report of this Court's Records Division that respondent did not file her Memorandum.(

Philam Properties Corporation v. CIR Page 10 of 27 CTA Case No. 7912 DECISION The parties stipulated on the following issues for this Court's resolution: Whether or not petitioner is entitled to the tax credit/refund of its purported excess/unutilized creditable withholding taxes amounting to P9, 188,619.96 under Section 229 and 76 of the National Internal Revenue Code, as amended; and Whether or not petitioner's claim for refund/issuance of tax credit certificate for its alleged excess/unutilized creditable withholding taxes for taxable year 2006 is fully substantiated by documentary evidence . The principal issue is whether petitioner is entitled to a refund or an issuance of a tax credit certificate for its alleged unutilized creditable withholding taxes for the calendar year 2006 upon substantiated documentary evidence. Petitioner anchors its claim on Section 76 , in relation to Sections 204(C) and 229 of the National Internal Revenue Code (NIRC) of 1997, which are quoted hereunder for easy reference: "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 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 final adjustment return may be carried over and credited against the estimated quarterly income tax liabilities(

Philam Properties Corporation v. CIR Page 11 of 27 CTA Case No. 7912 DECISION 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." (Emphasis supplied) "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: 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 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: 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 which payment was made , such payment appears clearly to have been erroneously paid ." (Emphasis supplied)(

Philam Properties Corporation v. CIR Page 12 of 27 CTA Case No. 7912 DECISION Based on the above-quoted provisions , if a corporate taxpayer has excess tax credits or overpaid income tax in a given taxable year, the same may either be refunded in the form of cash or a tax credit certificate , or carried over/applied to the succeeding taxable years until fully utilized. However, once the carry-over option is taken actually or constructively, it becomes irrevocable for that taxable period. In exercising its option , the corporation must signify in its Annual Income Tax Return (by marking the option box provided in the BIR Form) 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 other. Should the taxpayer choose to be refunded of the excess tax credits, it must satisfy the following requirements: 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 were included in the return of the recipient.(

Philam Properties Corporation v. CIR Page 13 of 27 CTA Case No. 7912 DECISION In the instant case , petitioner chose "To be issued a Tax Credit Certificate" by marking the box corresponding to the said choice in its 2006 Annual Income Tax Return . Records disclose that petitioner filed its Annual Income Tax Return for 2006 on April 16, 2007. Thus, petitioner had until April 16, 2009 within which to file a claim for refund for the taxable year 2006 , both in the administrative and judicial levels. Clearly, petitioner's application for refund filed with the BIR on April 8, 2009 and the subsequent appeal via a Petition for Review filed before this Court on April 14, 2009 are well within the two-year prescriptive period . Nevertheless, petitioner's claim must be denied. The pieces of evidence show that petitioner failed to prove that the income, related to the excess creditable withholding taxes , was reported in petitioner's return. Petitioner's Annual Income Tax Return for the taxable year 2006 shows that the excess credits as of December 31 , 2006 in the amount of P33 ,757 ,623.84 consisted of the balance of the prior year's (2005) excess credits in the amount of P24 ,569 ,003.88 and creditable taxes withheld during the year (2006) in the amount of P9 ,188,619.96 , as shown below:(

Philam Pro perties Corporation v. CIR Page 14 of 27 CTA Case No. 7912 DECISION Gross Income p 49 ,082 ,956 .00 52 ,383 ,292 .00 Less: I Deductions p (3 ,300 ,336.00) Taxable Income p 981 ,659 .12 I 25 ,550 ,663 .00 Minimum Corporate Income Tax (MCIT) Due p 24 ,569 ,003 .88 9,188,619 .96 Less: I Prior Year's Excess Credits p 33,757,623 .84 Balance of Prior Year's Excess Credits Add: I Creditable Taxes Withheld for the year 2006 Total Excess Tax Credits as of December 31 , 2006 Petitioner presented its tentative and amended Annual Income Tax Returns for the taxable year 2007 , which showed that the amount of P24 ,569 ,004.00 , reflected as "Prior Year's Excess Credits", pertains to its excess tax credits as of December 31 , 2005 . But petitioner failed to establish the existence of its prior year's excess credits in the amount of P25 ,550 ,663.00 , from which the amount of MCIT due for 2006 was applied or credited . Petitioner should prove that indeed it had enough prior year's excess credits to cover its MCIT liability; otherwise , the said MCIT liability shall be deducted from petitioner's 2006 creditable withholding taxes. Petitioner should have submitted the Certificates of Creditable Taxes Withheld at Source and the Annual Income Tax Returns for prior years. Anent the requisite that the income related to the claimed creditable withholding taxes must be reported in petitioner's income tax return , an examination of the Summary of Creditable Withholding Taxes for 2006, the Certificates of Creditable Tax Withheld at Source (BIR C

Philam Properties Corporation v. CIR Page 15 of 27 CTA Case No. 7912 DECISION Forms No. 2307) , and the report of the Court-commissioned Independent Certified Public Accountant (CPA) shows that petitioner failed to satisfy said requirement. Petitioner was able to substantiate with Certificates of Creditable Tax Withheld at Source its claimed creditable withholding taxes for the year 2006 in the amount of P9 ,176,116.69 , detailed as follows : Exh ibit Payor/Withholding Ag ent Income Income Tax Payments Made by Top 10,000 Corporations Paym ent W ithh e ld V1 on their local supplier ofservices V3 Ban k of China Mani la Branch 6,077.53 303 .88 V108 Ban k of China Mani la Branch 6,077 .53 303 .88 V110 Ban k of China Manila Branch 5,788 . 13 289.41 V112 Bank of China Manila Branch 6,077 .53 303 .88 V114 Bank of China Manila Branch 6,077 .53 303.88 V156 Bank of China Manila Branch 6,077 .53 303 .88 V158 Merck Sharp and Dohme Philippines 10,500 .00 525 .33 V258 Merck Sharp and Dohme Philippines 10 ,500.00 525.67 V260 Bank of China Manila Branch 6,077 .53 303 .88 V262 Bank of Ch ina Manila Branch 6,077 .53 303 .88 V299 Bank of China Manila Branch 6,077 .53 303 .88 V404 Merck Sharp and Dohme Philippines 10,500 .00 525 .67 V406 Ban k of China Manila Branch 6,077 .53 303 .88 V464 Bank of China Mani la Branch 6,077 .53 303 .88 V466 Merck Sharp and Dohme Ph il ippines 10 ,500 .00 525 .67 V468 Merck Sharp and Dohme Philippines 10,500 .00 525 .67 V510 Merck Sharp and Dohme Phi lippines 10 ,500 .00 525.67 Phi lam Care Hea lth System Inc. 46 ,363.64 4 ,636.36 V5 Subtotal 175, 927.07 11 ' 118.25 Rental Payments BMW Philippines Corp. 8 ,500 .00 425 .00

Philam Properties Corporation v. CIR Page 16 of 27 CTA Case No. 7912 DECISION V7 BMW Philippines Corp. 8 ,500 .00 425 .00 V9 BNP Paribas Perewine Securities Inc. 9,750 .00 487 .50 V13 Isla Lipana & Co. 119,850 .00 5,992 .50 V17 JP Morqan Chase Bank 24 ,000.00 1,200 .00 V22 JP Morqan Chase Bank 4,000 .00 200 .00 V24 KBC Bank NV 26 ,700 .00 1,335 .00 V28 MD International Limited 205 ,615.00 10,280 .75 V30 MD International Limited 205 ,945.75 10,297.29 V32 MD International Limited 205 ,945.75 10,297 .29 V34 Merck Sharp and Dohme Philippines 10 ,500 .00 525 .67 V36 Merck Sharp and Dohme Philippines 10 ,500.00 525 .67 V38 Misys lnt'l Bankinq Systems Inc. 7,293 .04 364 .65 V40 Misys lnt'l Bankinq Systems Inc. 7,293 .04 364.65 V42 Misys lnt'l Bankinq Systems Inc. 4 ,750.00 237 .50 V44 Misys lnt'l Bankinq Systems Inc. 4,750 .00 237 .50 V46 Misys lnt'l Banking Systems Inc. 4 ,750.00 237 .50 V48 Misys lnt'l Bankinq Systems Inc. 6 ,000 .00 300 .00 V51 Navitaire International Inc. 10,422 .74 521.14 V53 Navitaire International Inc. 10,422 .73 521 .14 V55 Navitaire International Inc. 10,422 .73 521.14 V57 Ogilvy and Mather (Phils .) Inc. 1,350 .00 V59 Ogilvy and Mather (Phils.) Inc. 1,350 .00 67 .50 V62 Ogilvy and Mather (Phils.) Inc. 1,350 .00 67.50 V83 Regus Centers Inc. 465 ,353 .00 67.50 V86 Regus Centers Inc. 465 ,353 .00 23 ,267.65 V89 Requs Centers Inc. 465 ,353.00 23 ,267.65 V97 Sun Microsystem Phils . Inc. 7,293 .04 23 ,267.65 V101 Tower Club Inc. 1,439,432 .52 364 .55 V103 Union Bank of California N.A. 1,800 .00 71 ,971 .62 V116 BMW Philippines Corp. 8,500 .00 90 .00 V118 BMW Philippines Corp. 8,500 .00 425 .00 V120 BMW Philippines Corp. 8,500 .00 425 .00 V122 BNP Paribas Peregrine Securities Inc. 9 ,750 .00 425 .00 487 .50 (

Philam Properties Corporation v. CIR Page 17 of 27 CTA Case No . 7912 DECISION V126 General Mills Foods Inc. 24 ,521 .22 1,226 .06 V133 General Mills Foods Inc. 27 ,750.00 1,387 .50 V140 Isla Lipana & Co. 119 ,850 .00 5,992 .50 V144 JP Morgan Chase Bank V146 KBC Bank NV 8,000.00 400 .00 V150 MD International Limited 10,700 .00 535 .00 V152 MD International Limited 205 ,945.75 10,297 .29 V154 MD International Limited 205 ,945 .75 10,297 .29 V160 Misys lnt'l Banking Systems Inc. 205 ,945.75 10,297 .29 V162 Misys lnt'l Bankinq Systems Inc. 300.00 V164 Misys lnt'l Bankinq Systems Inc. 6,000.00 237.50 V166 Navitaire International Inc. 4,750 .00 300 .00 V168 Navitaire International Inc. 6,000 .00 521 .14 V170 Navitaire International Inc. 10,422.80 521 .14 V172 Ogilvy and Mather (Phils.) Inc. 10,422.73 521 .14 V201 Philamlife Tower Condo Corporation 10,422 .73 V206 Philamlife Tower Condo Corporation 1,350 .00 67 .50 V210 Philamlife Tower Condo Corporation 255,424 .80 12,771.24 V214 Philamlife Tower Condo Corporation 304 ,805.20 15,240.26 V240 Requs Centers Inc. 233 ,381 .00 11,669.05 V243 Regus Centers Inc. 228 ,885.00 11,444.25 V246 Regus Centers Inc. 465 ,353 .00 23 ,267 .65 V249 Sun Microsystem Phils. Inc. 465 ,353 .00 23 ,267 .65 V252 Sun Microsystem Phils. Inc. 465 ,353 .00 23 ,267 .65 V254 Sun Microsystem Phils. Inc. 7,657 .69 V256 Tower Club Inc. 7 ,657.69 382 .88 V264 BMW Philippines Corp. 7 ,657 .60 382 .88 V266 BMW Philippines Corp. 719,716 .25 382 .88 V268 BMW PhiliQpines Corp . 8 ,500 .00 35 ,985 .81 V270 BNP Paribas Peregrine Securities Inc. 8,500 .00 425 .00 V276 General Mills Foods Inc. 8,500.00 425.00 V283 General Motors Automobiles Philippines 9,750 .00 425.00 V285 JP Morgan Chase Bank 27 ,750 .00 487 .50 4 ,000 .00 1,387 .50 8,000 .00 200.00 400 .00

Philam Properties Corporation v. CIR Page 18 of 27 CTA Case No. 7912 DECISIO N V287 JP Morgan Chase Bank 8,000 .00 400 .00 V289 JP Morgan Chase Bank 8,000 .00 400 .00 V293 MD International Limited 205 ,945.80 10,297 .29 V295 MD International Limited 205 ,945.80 10,297.29 V297 MD International Limited 205 ,945 .75 10,297 .29 V301 Merck Sharp and Dohme Philippines 10 ,500.00 525.67 V303 Merck Sharp and Dohme Philippines 10,500 .00 525 .67 V306 Misys lnt'l BankinQ Systems Inc. 6,000 .00 300 .00 V308 Misys lnt'l BankinQ Systems Inc. 4 ,750.00 237 .50 V310 Misys lnt'l BankinQ Systems Inc. 6,000.00 300 .00 V312 Misys lnt'l Banking Systems Inc. 6,000.00 300 .00 V314 Misys lnt'l Banking Systems Inc. 4,750 .00 237.50 V316 Misys lnt'l Banking S1'stems Inc. 4,750 .00 237 .50 V318 Multimedia Telephony Inc. 30 ,000 .00 1,500 .00 V322 Navitaire International Inc. 10,422 .73 521 .14 V324 Navitaire International Inc. 10,422.73 521 .14 V326 Navitaire International Inc. 10,422.73 521.14 V328 Ogilvy and Mather (Phils.) Inc. V330 0Qilvy and Mather (Phils.) Inc. 900 .00 45 .00 V332 0Qilvy and Mather (Phils .) Inc. 900 .00 45 .00 V342 Philamlife Tower Condo Corporation 900 .00 45 .00 V345 Philamlife Tower Condo Corporation 180,465.00 9,023 .25 V362 Philamlife Tower Condo Corporation 180,465.00 9 ,023 .25 V380 Regus Centers Inc. 347,551 .00 17,377 .55 V382 Regus Centers Inc. 9,894 ,960.00 494 ,748 .00 V385 Sun Microsystem Phils. Inc. 465 ,353 .00 23,267 .65 V387 Sun Microsystem Phils . Inc. 7,657 .69 382 .88 V397 Tower Club Inc. 7,657 .60 382 .88 V399 Tower Club Inc. 719 ,716.27 35 ,985 .81 V402 Tower Club Inc. 2,878,864.80 143,943 .24 V408 BMW Philippines Corp. 720 ,127.97 36 ,006.40 V410 BMW Philippines Corp. 8,500 .00 425 .00 V412 BMW Philippines Corp. 8,500.00 425 .00 8,500 .00 425 .00

Philam Properties Corporation v. CIR Page 19 of 27 CTA Case No. 7912 DECISION V414 BNP Paribas Peregrine Securities Inc. 10,581 .00 529 .05 V418 Digital Telecommunications Phils. Inc. 66 ,550.00 3,327 .50 V421 Digital Telecommunications Phils. Inc. 99 ,825 .00 4,991 .25 V425 Digital Telecommunications Phils. Inc. 103 , 152 .50 5 ,157 .63 V429 Digital Telecommunications Phils. Inc. 146,410.00 7,320 .52 V434 General Mills Foods Inc. 27 ,750 .00 1,387 .50 V441 General Motors Automobiles Philippines V443 General Motors Automobiles Philippines 4,000 .00 200 .00 V445 General Motors Automobiles Philippines 4 ,000.00 200 .00 V447 General Motors Automobiles Philippines 4,000 .00 200.00 V449 JP Morgan Chase Bank 4,000 .00 200.00 V451 JP Morgan Chase Bank 6,000 .00 300 .00 V452 JP Morgan Chase Bank 6,000 .00 300 .00 V458 MD International Limited 6,000 .00 300 .00 V460 MD International Limited 205 ,945.80 10,297 .29 V462 MD International Limited 205 ,945.75 10,297 .29 V470 Misys lnt'l Banking__futstems Inc. 205 ,945.75 10,297 .29 V472 Misys lnt'l Banking Systems Inc. 6,000 .00 300 .00 V474 Misys lnt'l Banking Systems Inc. 4 ,750.00 237.50 V476 Misys lnt'l Banking Systems Inc. 6,300 .00 315 .00 V478 Misys lnt'l Banking_�ystems Inc. 4,750 .00 237.50 V480 Misys lnt'l Banking Systems Inc. 6,300 .00 315 .00 V482 Multimedia Telephony Inc. 4,750 .00 237 .50 V486 Multimedia Telephony Inc. 90 ,000 .00 4,500 .00 V488 Multimedia Telephony Inc. 30 ,000 .00 1,500.00 V491 Navitaire International Inc. 30 ,000 .00 1,500.00 V493 Navitaire International Inc. 10,787 .38 539 .37 V495 Nokia Philippines Inc. 10,422 .73 521.14 V500 Nokia Philippines Inc. 149,242 .66 7,462 .13 V504 0~ and Mather (Phils .) Inc. 91 ,200 .00 4,560 .00 V506 Ogilvy and Mather (Phils .) Inc. V536 Philamlife Tower Condo Corporation 900 .00 45 .00 V550 Regus Centers Inc. 900 .00 45.00 301 ,670 .20 15,083.51 465 ,353 .04 23 ,267 .65

Philam Properties Corporation v. CIR Page 20 of 27 CTA Case No. 7912 DECISION V553 Requs Centers Inc. 448,440 .00 22,422 .00 V556 Sun Microsystem Phils. Inc. V558 Sun Microsystem Phils. Inc. 7,657 .69 382 .88 V560 Sun Microsystem Phils. Inc. V619 Tower Club Inc. 7,657 .60 382 .88 V621 Tower Club Inc. GG9 Tower Club Inc. 15 ,315 .38 765 .77 W4 Tower Club Inc. W5 Tower Club Inc. 720 ,992 .54 36 ,049 .63 W6 Peoplesupport (Phils .) Inc. HH1 Merck Sharp and Dohme Philippines 719 ,792 .54 35,989 .63 HH12 Philamlife Tower Condo Corporation X14 Philamlife Tower Management Corporation 694 ,190.64 34 ,709 .53 X18 Philamlife Tower Management Corporation X35 Nokia Philippines Inc. 719,792 .54 35,989 .63 X39 Nokia Philippines Inc. X44 Philamlife Tower Condominium Corporation 719,792 .54 35 ,989 .63 Subtotal V65 Professional Fees 389 ,864 .00 19,493.18 V67 Perf Realty Corporation V76 Philam Asset Management, Inc. 10,500 .00 525 .53 V78 Philam Plans Inc. V80 Philam Plans Inc. 66 ,134.60 3,306 .73 V95 Philam Plans Inc. V176 Social Security System 302 ,655 .80 15 ,13 2.79 V178 Philam Plans Inc. V1 80 Philamlife Tower Condo Corporation 431 ,001 .20 21 ,550.06 V183 Philamlife Tower Condo Corporation V187 Philamlife Tower Condo Corporation 136,200 .00 6,810 .00 V190 Philamlife Tower Condo Corporation V196 Ph ilamlife Tower Condo Corporation 91 ,800 .00 4,590 .00 V228 Philamlife Tower Condo Corporation Philamlife Tower Condo Corporation 448 ,135.80 22,406 .79 32,312,794.85 1,615,642.88 18,409.09 2,761.36 30,000 .00 4,500 .00 260 ,000.00 39 ,000 .00 130,000 .00 19,500 .00 14,722 .07 2,208 .31 582 ,320 .00 87 ,348.00 59 ,874 .76 8,98 1.21 202 ,045.80 30 ,306 .67 335 ,545.80 50 ,331 .87 226 ,770.27 34 ,015.54 265 ,745 .80 39 ,861 .87 225 ,739.13 33,860 .87 3,500 .00 700.00 1,270 ,155.53 < 190 ,523 .33

Philam Properties Corporation v. CIR Page 21 of 27 CTA Case No. 7912 DECISION V230 Philamlife Tower Condo Corporation 1,065,679 .73 159 ,851.96 V232 562 ,364.93 84 ,354 .74 V237 Philamlife Tower Condo Corporation 624,468 .73 93 ,670.31 V274 12,547 .00 1,882 .05 V291 Philamlife Tower Condo Corporation 125,250 .00 18,787 .50 V334 167,500.00 25 , 125 .00 V336 Citibank Savings Inc. 139 ,750.00 20 ,962 .50 V338 279 ,500.00 41 ,925.00 V340 Kapatiran Realty Corporation 16,945.19 2,541 .78 V348 211 ,045.80 31 ,656.87 V351 Perf Realty Corporation 220,458.00 33 ,006 .87 V354 202 ,045.80 30 ,306 .87 V356 Philam Plans Inc. 3,500 .00 700 .00 V367 707,148 .87 V369 Philam Plans Inc. 106,072 .33 V389 2 ,656 ,345.27 398,451 .79 V456 Philam Plans Inc. 2,543 ,623 .88 381 ,543 .58 V508 V515 Philamlife Tower Condo Corporation 146,750 .00 22,012 .50 V517 85 ,200 .00 12,780.00 V519 Philamlife Tower Condo Corporation 11 ,096 .87 V521 1,664 .53 V523 Philamlife Tower Condo Corporation 390 ,000 .00 58,500 .00 V526 58 ,500.00 V530 Philamlife Tower Condo Corporation 8,775 .00 V533 139,750 .00 20,962.50 V540 Philamlife Tower Condo Corporation 59 ,848.05 V542 8 ,977 .21 V544 Philamlife Tower Condo Corporation 488,268 .60 73 ,240.29 V562 The Philippine American Life & General 192,843 .80 28 ,926 .57 V564 Insurance 218 ,045.80 32 ,706 .87 V566 471 ,505.80 70 ,725.87 V568 Kapatiran Realty Corporation 543,461 .80 81 ,519 .27 2,047 ,189.20 307 ,078.38 Perf Realty Corporation 9 ,965.48 1,494.82 Philam Plans Inc. 53 ,297 .94 7,994 .69 1,047,475 .00 157,121 .25 Philam Plans Inc. 1,047 ,475 .00 < 157,121 .25 Philam Plans Inc. Philam Plans Inc. Philam Plans Inc. Philamlife Tower Condo Corporation Philamlife Tower Condo Corporation Philamlife Tower Condo Corporation Philamlife Tower Condo Corporation Philamlife Tower Condo Corporation Philamlife Tower Condo Corporation The Philippine American Life & General Insurance The Philippine American Life & General Insurance The Philippine American Life & General Insurance The Philippine American Life & General Insurance

Philam Properties Corporation v. CIR Page 22 of 27 CTA Case No. 7912 DECISION V570 The Philippine American Life & General 12,075.80 1,811 .37 V572 Insurance V574 The Philippine American Life & General 9,880.20 1,482 .03 V576 Insurance V578 The Philippine American Life & General 261 ,684 .17 39 ,252.63 V580 Insurance V582 The Philippine American Life & General 261 ,774 .14 39 ,266 .13 V584 Insurance V586 The Philippine American Life & General 17 ,548.38 2 ,632 .26 V588 Insurance V590 The Philippine American Life & General 19,769.17 2,965.38 V592 Insurance V594 The Philippine American Life & General 16 ,174 .77 2,426 .22 V596 Insurance V598 The Philippine American Life & General 10,342 .38 1,551 .36 V600 Insurance V602 The Philippine American Life & General 15,513.57 2,327 .04 V604 Insurance V606 The Philippine American Life & General 11 ,954 .80 1,793.22 V608 Insurance V623 The Philippine American Life & General 9,781 .20 1,467.18 GG1 Insurance GG5 The Philippine American Life & General 90,407 .00 13,561 .05 GG13 Insurance The Philippine American Life & General 114 ,845 .00 17,226 .75 W1 Insurance W2 The Philippine American Life & General 21,448.02 3,217 .20 W3 Insurance HH3 The Philippine American Life & General 68 ,924 .56 10,338 .68 HH5 Insurance HH7 The Philippine American Life & General 13 ,001.49 1,950 .22 HH16 Insurance HH18 The Philippine American Life & General 12 ,180 .02 1,827 .00 X1 Insurance The Philippine American Life & General 444,844 .50 66 ,726 .68 Insurance The Philippine American Life & General 23 ,887.79 3,583 . 17 Insurance The Philippine American Life & General 8,940,444 .33 1,341,066.66 Insurance 187,000 .00 28 ,050.00 Tower Club Inc. 122 ,805 .00 18,420.75 Kapatiran Realty Corporation 130,000 .00 19,500 .00 Philam Plans Inc. 51 ,051 .25 2,552.56 Tower Club Inc. 279 ,500 .00 41 ,925.00 Philam Plans 506 ,750.00 76 ,012.50 Philam Plans Inc. 3,500.00 700.00 Philamlife Tower Condominium Corp. 139,750 .00 20 ,962 .50 Philam Plans Inc. 139,750 .00 20 ,962 .50 Philam Plans Inc. 40,418 .02 6,062 .70 Philam Plans Inc. The Philippine American Life and Gen 801 ,211 .11 120,181 .67 Insurance Co The Philippine American Life and Gen 929 ,825 .65 139,473 .85 Insurance Co 238 ,283 .84 35,742.58 AIG Business Processing Services , Inc.

Philam Properties Corporation v. CIR Page 23 of 27 CTA Case No. 7912 DECISION X8 Philamlife Tower Management Corporation 1,003,473.67 150,521 .05 X6 Philam Insurance Agency and Call Center X26 Serv, Inc. 120 , 162 .92 18 ,024.44 X10 The Philippine American Life and Gen X23 Insurance Co 10,405,973 .25 1,560,896.00 V71 Philamlife Tower Management Corporation 1,899,078.47 284,861 .77 V99 V174 Philamlife Tower Management Corporation 1,784 ,564 .67 267 ,684 .70 V193 Subtotal 49,332,841.73 7,395,345.98 V198 V218 Payments Made to Prime Contractors/Sub- 92 ,970 .77 13 ,945 .62 V222 contractors 7,293 .04 364 .65 V225 V234 Philam Care Health System Inc. 108 ,767.78 16 ,315 . 17 V358 391 ,451.50 7,829.03 V360 Sun Microsystem Phils. Inc. 804 .99 V374 Philam Equitable Life Assurance Company 40 ,249 .50 1,250.46 V376 Inc. 62 ,523.00 201 .62 V378 10 ,081.00 61 .38 V548 Philamlife Tower Condo Corporation 710 .78 GG3 3,069 .00 771 .10 GG11 Philamlife Tower Condo Corporation 35,539 .00 931 .57 38,555.00 141 .64 V92 Philamlife Tower Condo Corporation 46 ,578 .50 202 .69 HH14 36.48 Philamlife Tower Condo Corporation 7 ,082 .00 9.24 GG7 10 ,134 .50 3 ,615 .92 Philamlife Tower Condo Corporation 227.17 1,824 .00 Philamlife Tower Condo Corporation 462 .00 47,419 .51 Philamlife Tower Condo Corporation 24 ,106.16 11 ,358.50 Philamlife Tower Condo Corporation 892 ,045 .25 Philamlife Tower Condo Corporation 45 ,753 .70 915.07 542 ,500.00 81 ,375.00 Philamlife Tower Condo Corporation 588,253 .70 82,290.07 Philam Tower Realty Corporation 243 ,000 .00 24 ,300 .00 Philam Tower Realty Corporation 243 ,000 .00 24,300.00 Philam Equitable Life Assurance Company Inc. 83,544,862.60 9,176,116.69 Philam Tower Manaqement Corporation Subtotal Payment Made by the Government to its localsuppherofservices Social Security System Social Security System Subtotal Gross commission or service fees Social Security System Subtotal TOTAL

Philam Properties Corporation v. CIR Page 24 of 27 CTA Case No. 7912 DECISION The above summary indicates that the claimed creditable withholding taxes of P9, 176,116.69 were withheld from the following income payments totaling P83,544,862.60: Income Pavment Income Tax Withheld Sale of Services p 175,927 .07 p 11 ' 118.25 49 ,332 ,841 .73 7,395 ,345.98 Payments Made by Top 10,000 Corporations to their local supplier of services 892 ,045 .25 47,419 .51 Professional Fees 588 ,253 .70 82 ,290 .07 Payment Made to Prime Contractors/Sub- 243 ,000.00 24 ,300.00 Contractors p 51,232,067.75 p 7,560,473.81 Payment Made by the Government to its local 32,312,794.85 1,615,642.88 supplier of services p 83,544,862.60 p 9,176,116.69 Gross commission or service fees Subtotal Rental Income Total However, petitioner, in its 2006 Annual Income Tax Return , reflected the amount of P93,212,492 .00 as its revenues from sale of services and lease of properties: p 52 ,552 ,837.00 Sale of Services 40,659 ,655 .00 Lease of Properties Total p 93,212,492.00 Evidently, there are discrepancies between the income payments shown per certificates vis-a-vis the income amounts per petitioner's 2006 Annual Income Tax Return, as shown below: Per Certificates Per Income Tax Discrepancy p 51 ,232,067.75 Return Sale of Services 32 ,312 ,794 .85 p 52 ,552 ,837 .00 p 1,320 ,769.25 Lease of Properties p 83,544,862.60 Total 40 ,659,655.00 8,346 ,860 .15 p 93,212,492.00 p 9,667,629.40

Philam Properties Corporation v. CIR Page 25 of 27 CTA Case No. 7912 DECISION The Independent CPA explained that the discrepancies represent certain items such as recovery of condominium dues, payments where taxes were not withheld, accrual of income in the calendar year 2006 but billed in calendar year 2007, timing differences in recording income and certain non-income payments. Also, the Independent CPA reported that the income related to the claimed creditable withholding taxes of P8,851 ,978.35 was recorded in petitioner's books. Below is the breakdown of the amount of P8,851 ,978.35: p 6,081 ,610.16 a) Creditable Withholding taxes 392 ,850.48 Supported with Original CWTs, Official Receipts, and with related income recorded in 2006 books [Annex A, 796 ,327 .25 Exhibit "U"] 1,581 ' 190.46 P8,851 ,978.35 b) Creditable Withholding taxes Supported with Original CWTs, Official Receipts dated other than in 2006 with related income recorded in 2006 books [Annex M, Exhibit "U"] e) Creditable Withholding taxes Supported with Original CWTs with * Valid documentation (supported by Official Receipts and with related income recorded in 2006 books) [Annex C, Exhibit "U"] * CWT with exception (Official Receipts provided and with related income recorded in the Books other than in 2006) (Annex C, Exhibit "U"] Total However, the Court cannot verify the above report and the explanation of the Independent CPA because petitioner failed to present,

Philam Properties Corporation v. CIR Page 26 of 27 CTA Case No. 7912 DECISION supporting documents such as, but not limited to , detailed general ledger, sales journal and sales invoices/billing statements for 2006 and prior years, income tax returns and audited financial statements for prior years or any other document whereby the Court can determine if petitioner properly reported the income related to the claimed creditable withholding taxes either in the current or prior years. Petitioner's non- compliance with the third requisite is fatal to its claim. It bears stressing that a claimant has the burden of proof to establish the factual basis of his or her claim for tax credit or refund. 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. WHEREFORE , premises considered , petitioner's claim for refund or issuance of a tax credit certificate is hereby DENIED due to insufficient evidence. ~ N.M~~- G ~ SO ORDERED. CIELITO N. MINDARO-GRULLA WE CONCUR: Associate Justice ~~.4 c . GY-~~ Cl - CAESAR~ANOVA JlfANITO C. CASTANEDA, 5R. Associate Justice Associate Justice

Philam Properties Corporation v. CIR Page 27 of 27 CTA Case No. 7912 DECISION 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 . (L~c_.~~~. ~ fuANITO C. CASTANEDI( JR. Associate 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's Division . t__;:-<?� o~ ERNESTO D. ACOSTA Presiding Justice