CTA Case No. 3159 (Decision)

REPU BL I C OF T HE P HILIP P I NES CO UH T OF TA X APPE AL S QU E ZON C I T Y BERLIMED PHILI PPINE CORPORATION, Pet i t i on e r� , - versus Cl'A CASE NO. 3 159 THE COMMISSIONER OF INTERNAL REVENUE, Respon d en t . X- - - - - - - - -}{ E c; I I Cl D:i.c:: putE�cl h '/ p c~ 1::..i. t :i.n r�,''�:�:� r- P f��, .i.J. :i. pp.inr::-:� Co r �por�� i::\ t ..ion .i s I " P~; pun cl f::? l'"l t . c:o mm .i ~;,. ~::; .i 0 1"1E?t"' C) �f J n t.e r� n i::\ 1 Rev?n ue ' s .income t .t~ }( i::\ f'l d :i.n t. e r.. e~:; t a ssessment for t he calend ar year 19 74 in t he total amount of P2 18, 533.7 4, computed as fo l l ows= ( piiH" . :'."�, pPtit.ion �f or� t� �<:�? V :iP \'J , ;;~ dmittF: cl :in thE:~ an~:; we r.. , p <':H " " .1._ " ) IN:::rJ -r:: rnx f\.let I nc::c:mE'� p<-=:�t'" n;~ tu. n �l F'l El6 ., 120 . OCi P.::ld: a] F >( C::E":;~:; ive f "DV��,,IJ 'l.iP<;'; .:c:1<::- d.i "-:;qu :i. s:c~ . l dividend ( a rncnnt p.:~id) F'.l / J.. , 4t.f.J .. O(t L.es~; : A l ll::x.--k,~:l t:.y 0;:-:�ntr.-:d. H.::1nk :'."�/. of qn:><:..:;s !:=d l Es t:rf p ::::.,.t7J,::=-.t:,7. 02 .J:':'f3_, ~-E'f.3.~ .::;:;;~, l 2 ,EIBl. 6 5 b] D :::n�-;iqn r:.>d ~:;.-,~mplE<:", �fn:::tfn motf�l('?r � cc)'np.::~T)i .JV -� D t:.::O?.ITll::x'?f " .1 f)(:-..,(:) f<.2l ~j, :')(:-; ';.. (l(i _;~::.tq , _::~;:!~1: ~ -(=~~~ '12~:., 9::'�7 .. 00 .Jv -- DecemtJf.">.r� l S7::. 120

DEC :i !3 I UN CTA CASE NO. 3 1 59 ,..) _,(. S.inc:P th::~::.f:) ,;,n� P cc~ �l~=:; j q11E:d r,;,,=~mp l !?'':; tYf t.h!? mntl"(�?r�� c:ump;"~rl ' r' , c~ �1ly l::.l lE? .impcw� t. ::,\ t..i.cn e :-q::x:ons;es <::I n�:�~ c:h,:;~ n:~Pi:lblP to t.h~:: t:.?.:-:���� p.::ry-E~r��. T l��lt:~ ~:;ub<::=. i.d i.P<:;; n:~e i vFd .::1n::~ cum�� po:�::::n�::.<:=' t :i.O::Tl -fo r�� ti �~:? pn:::m::yt.\ C:n c::\J. c:CC:t .i 'I :i. t ..i f.,~: ;. C: ii:\r�r.i.E:-t:l �few� tJ ~? illCJ lhPI'- CC:.-Tlp<.my . c] E:-:cPss Dcna tir:::n L.1:-:<.5S : A 11 C:)YlE:\ b 1p ����� F6::'.\f! � CjijC;t . ()~.i p 1u.s � - .:~) ' :;~:.:?~'~ (:.><:> Pl:A~5 ~l Et?. b~) Defic:.i.E?.ncy ta:-: p ;�\ /? .. O:S? . (:{l Rl?sponden t ' <:.s ' ... ...6..�..1.. 6'~..~..:..;.....7. .4 par� . .1.. ) a.) Alleq e d excessive roya l ties or di s guj s ej di vidend s pai d by petition~r to l t s p aren 1 compan y ~ S c: �-�t:�r- in O:J Ak t .i F.~n q f?.~::P ] l so:::: 1�-,;;~ f t , h E? ... .in ,:~ �ft. r~ t-� I"<~ �fEr- r �ed to ,,,, '5 fie:: h E' r- .i.I1CJ ; Fe~p o nd e ��1 t b E~ l.io:-::~\l.i.nq t... h c;"~t. thE' royalties were pa id i n vio lation o f Cent ra l Bank Ci r cu lar No . 393 ; 121

DEC I f3 I CHI CTA CASE NO . 3159 b. ) ot h er�� th a i\ .i mpn r� ~.�3t. :i.. .-)n e ~:pen ~3''"' s on <:.\ l l f.�? q e el c: em s :i. grlf.?d ~5a mp l E~S r� f.?.C E' i VF~C:I I:Jy pt::~ t: .it..i. o n f�:! l"' �f' t��o rn Sc: h er ing, t'" E!~5 PC'fl( :l f:�� n t . bE� 1 :i E~ \1 inq thic\ t t h e s~,:�, j . c:l ~:; ,;~ mp J E��<::. \.".If:'!,... ~,~ dE'~'" :i.t.J n e el +: c� pr- omot e~ Lh r:-:�� bu~; in ~:�:�ss of Hch r.::� r �inq ,�:~rlcl no � of p E'!t..itiDI "it' l' ' i:~ fl d f::hP I"' P fDI'" P ttlE' c:o �" ~ uf sttc h ~::;,;:, mple �:; mr.:��y' l'l Ot. hP cl te du c t t-:-> cl ; c-~ n c.l c . ) A l l r::!qE'd P>:c:.:?"':.~::..i ve:� dun ~:\t.i.on. thE~ is erroneous the followin g re6snns ~ (p. 9, petition fo r review . a.) The r � oy ;:~ l t.i.f.-~<:; p<3. i d t.o f3c: h f:;:> t� :.i. nc.t pt.l t- s u ,,,, r�J L t o t h F~ L.. icc~ n ~'=� E~ (.)q r. E~ r? me n t bF:> tV>JP E' I"I :3c: l lE~ I" :i.. n CJ �'�lfl d pE~ t .i 'f:� io n f? l'" i:\ I'" f.? c 1 e ,,. t' � l \ ' n o t f? ~ ~ c: E! "'' ~:; i v f.? � 1��1o ,,.. eo v E~ 'r' ~ CE� n t .r � ':'! J p ,, ,. ., k C i ,.. c u. l 2 t .. l'�l o � :.'~: ':r ~~ d or:.:!<::: not qo vc>r� rJ t. t1~;;� vt � l .i.c:li. ty ell r-�n y <:l.l l: y <H.;t r �r;:p mt? n �': r:s � Hc� nc E'. t l�,n Pn t :.i..l�-e C:i.fn(JU.fi t c:d' r� <:J y ;::\) t :.i P<::; i ~;; <:1F d U.C:: t i I::Jl F: P ;.: p 0'?n s <:.> un thE~ p ,:,\ ,... t Cl f PE~ +:it io n ~2 r- � b�) (~ J J. pq f'�cf C <::ll 'l ~;; .i q n Pci !:0 ":'< tn p ] <'�:.�S'i V.IE: I"'E! f I() t:. r-p;:~ ll / �::: on!'> .i.(1 1'lt=' cl b y Hc � I�,F'Ir- .J..nq Lc� p t? t .i. t J n n P ,,.. ;). ''' f' E~ '1: .i '~':..; u n '~ ,,.. w ,:;l �;:; c hc:\n:.H:~ d 1) �/ fk hc�l'" irH] �f ur� !. It �:' ��; ;::~ l uE~ of the s:3 m p ] p::; . f'he ~:" i)<rq � l. '"::�::; vJ P I' �c� des .i.qnod to promote the guo dwi ll and bu s i n e~:::. s o'f p~~ t �..i t .i C:HW?I'" . H e nc:: P, th (:.! cos t of ~uc h sa mpl es may c l ea rl y b e d e du c:: tr~ d ,. c:: � ) The .:i tern ~> li s;tE~d '"'s d o n .:~ t. .i..o n ~::; '" ''' F.> not. r-�r:;:.::'\ ll �'l don a tions b u t constitut P c:l!:?d u c: t: i b l E' busin ess expens p. Aft e ,~ of p et.i.t. ionE:~r � , r�r.?.!::; pn ntlt�::.>nt .in ;:.:1 l.:~ t:. 'I':.E'r � d ::~. tE'd Clc:tobe l'.. 7, 122

DEC I f.3 I C:H�I ..... CTA cr.;E;E I\ID. :::q ~' :,(? �-� <1 .... the p ay me n t of P 2 18,533 . 74 as d efic i e n cy i. n c om e t ax , inc lus i v e o f in teres t . th ;:~t I"Jf.? t:. :.i. t i r.J n f:> r�� c:o t~p or�� ,;,,t:. :i.o n en(J i"lCJP r.1 i.n t h e:� h '.l' ', i l"l E""'i .. o�f .i mp o t' L.i.nq ~ manuf c"'l.c: tur�� j n o m ar� l (e t .i n c;~ r��h iol l'"� m ;::~ c e1...1 1:..i C: d J. pr-odu c:: t!;:, . In .l9 f:.8 , i t e nt e re d i nto a l i c e n se agr-eeme n t lt-li t.h He: h F� t'"�:i.nq Ak ti e n g ese ll sc:: h aft ( Sc:: h er- .i. nq �f CJ I'". <;;; I l L',. 1.�.. L<:J l:' ' ''''hlf:" .i. t -1-�. o rn ,:.�,nu"f ;:;;. ,:: t ur�''? Sc h e r-�i n g ' s pr- o du ct!::. u ~:::. in q Sc: hpr-�.i. n q' s �f o r�� rnt .l 1 a e, pr-� oc�? S ~c. e s and C:J nd t o Sc: h er- :i.n g ' s t r- a d emark s in t h e Phil i ppi ne s , fro m Ja nu a r y 1, 1 9 6 9 t.c1 D ec: embe r�� ~) .1. ~ .1. 97 9. (:, �;;:. c u n <:;i d C'r-<:I t. .ion f n 1-� t h f~ pct.:i. t . .iun ~~ r � ha d to P '"Y r� o y a l t i c:;~�s amn un t .in q t a gr-�e ement. p r- od uc t �:;; ~; o ld by p r~ ti. t .io n f.�~ r. (pp. 1..19 �- 1 20, CTA r- e c:or-d s . i F' u r� ~s u ;~ n t to CJ �f agr-eement , p et:..i t:. .i .on e� r-� p c:d .d to Sc hr.~r- .:i. nq i:'IS r-o y a 1 tie~s in 197 4 t h e a mou r�l t . F' .l 7 .1,460.00 0 1'"" 7 % u f th e y e ar-. 123

DECISION ... CTA CASE NU. 3 1 59 r� emitt ,3 nc e of r.:: .1 7 .1.~460.00 tn f:3chE:?t" :in! :t \11,3~: ii.lppr-�u�.te d by the Centr-al Br.-m L. Petition er- cl a imed the s aid amount i'.\S cl e cluct.ible bu"".inrc�~''"'i e>:p r-,> n s=.(�'� for.. thr:! YE' <~r- .1974 und e t�- Elec:t..iun ::::;r)( ,'? )i .\. ) (()) of �t: I\F.? clpp l.i ci~~ hlE::� Ta>: Code. Un the theory h owever- tha t the royalty expen se claimed by ~etit ion er w as excessive because Centr-al Bank C:i.r-c::tll ar� No. 393 al l ows only the r-emitt a nce of royalties n o t in exces s of 5% of the r�es poncl c n t . total royalty p ay men t of P .1 71~ 4 60. 00. I ~::; Hf::~c: t inn :::;.o ( ;,:~) ( l ) (A) of l..� h F� �r r::i >: Cocl E> l.:. l1 e proper� b,:~~:; i~~ �f n r�� clf:? I::E'?r- rnininq the dr? cl ,_. c tih:i l .i�t-.y o �f Co ur-t .i. n Philippiner::, Inc ., Comm .i r,;~; .i. onE~ r- of J n t�. F � r.. n ,;,,]. H evF: n u E? , U � F � No � H>:u::;::=:., Septf?mbE'?r- 26 , .1.9HE-3, v1her-e thf? f,'i.Clt1 ;::1 l t::.FC? tl:.i. r� q .i.!::. 39 :3 that: d E!f i n F:r::; t--11 �\,::o t r �o ya l t y p;:~ymPn t .t:; '"' ''" �~ pr oper.. ~ hence~ .i mp r.. D p E'' ,... p.::\ y men t�:::. r �oy ,,,, 1. t .y nCJt. quote the pertin en t 124

DEC I S I ON ��� CTA CASE NO. 3 1 59 Ho we v e r, p et it io n e r ar qu e s t hat 1 <:1l.'J a p p 1 .i. c .:~ b 1 E~ to .i t s c: c'l c,_~, c;� i.s D l l:f �-.,� S E~c tion 29 ( i:'l ) ( .l) [ s i c 1 of th e� r '"' >: Cnr:lr.'� w h i c h p r� o v o.iclr�?~; : II (a) ( .! ) B. u......s. .:.i n..~...�!'.' :,.,_ f? };_f.~~E~~ t} . ~i~5~ ~i~ ..... () 1 1 . q r. cl .irl _~r...y_ � - '~' r:l _<t ( () ) I r�, � :Jf:~ n E' ,..�:?~ 1 � p�c:;,t;! !?,~�~r:y_ .. ..... EU:_ pE~fl-~~J2. f:L.... ___ p c?, j,,c;l __ _____q,r: ����- .... ti:)J:J.I.l'::X".E~.P. c;l I,.IX:..i.,_l)<;:J ..JJ:l.f~ ...J �\?.; 9 gJ �~ . y 1:~ <~r::. ..... :i,,r:), . . _<::. �:J ._I_~-_ 1" YA U g .. qn_ i:~,IJ':t. ..... .t, c.~ t::l ? .. __ q r :... -�-� JJLI !:!:j_._ r:!�:? l'-~-~�:.., .in c: 1 u d .i.n q "'' r ea s on a b l e a l lo ~a n c:e for sa l ? r i e s o r c,,.. o t h e !"' c nrn p c 1�1l"; ,;�,_t: .:i. on �f p�::' t��~:=. nn ,:;, I <;;. e r.. '/ i c: p~:: a c tu ;::~ J. 1 y ,..f ' rH I r' r-- <-:-' d ; l:. r ~~ v r: :1 1 :\ 111�1 <�? :-: p P. n :'~cs-. 1--'.� h i.l t=:~ c:lltJ i:'l 'y' fl'"l .) m l 1 o m F~ .i1 1 t ill'~ p i .I I' "' U .i. t : of� '"' t. r ad!?~ p ro f E.-~ ~:;!:; .i 0 11 c:J I'" b1 _, �:; i. n e~; ~: , I " F-~ n t: a 1 !:'- o 1��� pJJJ.!:'U': .....PS'Y!J.l f:?:.rtL!"~ . ~~~ q_<H 1tr g~ d_.....t o 1;1_f~ �--�� rJ.l_ a <J q ....~~ ~ ; c;~, <;:;Qr.l<;,:lj ,_ Ltgn.._______t_p ... .. . ..tht~ ..........r~ .nrJ J tn!. l~~-~t . q_� <?____ . .<:-,'r. pq g; ~?. ?.~~J':i\J,. p r1 _ L ... �fqr:_ j : 1� 1_ro;~ - p_l,_l .t.J:.'PJ:? ~L. q:f . _ t. ll c~.._:t:.r ."i' <:l .~?. s.. pr-- n �f~::� s !;; .i. on I:J I"' bu !::; .i n t~ !c; s ~ �f u r � pr � u pe t�� t y t .o wh i c h th e t..:.~ >= p .:1: yp r� h .:~!,;. l' l D l. l:. i:"l 1::E' n or� i s n ot t a ki n g t ..i t l e ur-- .in \'i h i c l�1 hr> h a �:: n o �= q u.i.ty . '' f='p 'f: j_t:. iCJ I"' E' I"' p o.i n t .�::; 0 1..11:: t t. l"'l iO:\ t. l l f'< C e n tr"E<. l Fl i�\nk 11 h i:\!" fl O i.n the a ~;s; E)~;. <:;; mp r , -1:.: i::l. r � cl c: o l 1 E~ c t . .i. o n o �f i n t e l"' f'l c;, 1 r eve nu e t ~ xes a s ~ u c: h p o we ~ i s lodg e d i n n tl"'i!:? Bt.H ' E. u C� f J r d :. <::n�-- I"J<':d e v f..'' r li.H ::� ~ " t h c:d :. L t l ( 2 T c:\ _>: Codr~~ ' 'n<:> v r: �r.. m r~ nt:i.nn 3 C .i. r �c uJ. ,;:, r� ::::.(7' :3 <::\nd t h e r-- r.-~ i s no 1 <.~1�1 o F� r.. e q uJ. ,::~ ti. o n qove r-- n .i. n q c:l �'~ d ue: t .i o n r::< 'f l::lu s i r�1E~ s; s r;:~ :<p E�n c:; F.? !:::, t. h t~ t r-�("' �f e I"' s t. o !'~ ;:~ .i d c: :i. r. c:: u ],,:;~ ,.- � II (p� 9, F' e t i t ..io n . ) 'l' he c3 r-- qt l mE�n �l:. .i s s p e c i ou s ~ 'fO I'" ~ a lthoug h the T a x Cod e a ll ows p a y ment s of r oyalty t o b e d educted 'f r om g r o s s i n co me <~ s b u ~:>i n e !s!:; f.'~ ~:p t:-~ n s t?!::; , i t .1. ~:;; CB C :i. t--� c u l ,:.l l'" No. :39 :3 t. h ,:\ t . d E~ 'fi n E�s ~~ h ,:-~ t r� o y alt.v p ,:;~ ym e n t. s i:':\ r� p pr-- o p e l"' . H P n c: E� ~ .i. mprop t? r� p a.yrn<:?. n t .~; o �f r.. cy �.':1 1 t y i:'l I'"P not d eel ti c: t .i b l e "'' s l e git i ma t e bu si n e ss exp<e> n ses. 125

DEC I !31 ON CTA CA SE NO . 3159 ... 7 .... CB 1.. . n :: t.t. l <'� r� l\ lc�, :::;.'F:~: d ,3 t .e d Uc� cemb E� r� 7 , l ~r7:3 1-'J C:I!:; r�ubl.i. �s h e d in t.he Uff .i.c:.i.::.J Ga z ette .i.s !SUE~ of DE:�~cembe r� .1.7 , 1. 97:.') ( 69 CJ .G. No . ~:ll, p. 1.1 7:::::7 ) . Ci.r-c�..t l<'�t �� !:; i~JC::UF� d b y l. h~? CPn t t�- ,,,, 1 JJ,;,,n k :.i. n t i���,c, r:;! ~: F r �c i ~;F:� u f ,,,! ' :i. t t:; E1l..t t .hot~ .i t y un cl1:;~ r-� t ,... Cr:::� r�,tr� ,C>. l Hi'' n k (-k: l , i:":\nd 1--Jh .i.c:: h h;,:, v r-~ bf.?. E'!rl du l '�( pt.thl.i.!:'., l lt :��d .i. n ti1P (]�ff .i.c:.i.,-::~1 GiJ:-:e l: t.e, h .::<.\/f'> t. I JE:' fnr��c e ."':'ln cl e ff ect of l aw (Peo p l e vs. Que Po Lay , 9 4 Ph :i.l � 6 40; l ...i. �n H o~ �r i.nq v5=, . C:e n t. t~�,1 1 B a nk ~ 1.04 F' l �,j J . ~-'�7::~: ) � ThP y f.l.t'" !'' bind i nq on f? V f.~ r-�y b od y . L i�Jp pE~t..i. l.�: .i.o n E>.r- !� ;,;,!:. muc:l �1 ..;:, !,; th e p ubli c n-::'~", pon clr>. n t.: . Th H d.i.s<:<. .ll ut~-.J :J n :::: F~ h -y r �f.�.�~�::. pur�,d pnt of thf? arnnu n t P .i 7 1 , lJ. 60. 00 \�!i::~:::�, 1: 1�1et �r�.! f t:<r f.;~ p r <.:' pC" ,.... s.::~mple con~:;i gnm c~ nl. s (F :o : h.ib �i l s f\ ., [) ... ,..,,, D -..�J., D �-<1. ..-.::~ , pp. f.JC'f ....�]() !' [: T{'j, l'' l'i�C: D I �d !:-,) , !'" '" ' !'=j'lt:JI'll .I ~? I'\ t ;;I .i. ''"�i'ol l J 01-'Jeci 1:: hE' fn as c:omp e n �si::~ tion t h f::? p tr� omo t. i. on,,., 1 C:lct i. vi t.i.e~; th e: p t. tl'.. p o::::.E'� n �f .\.r � l.r n du :::: �inn pr.. odu c:ts to th P P i� l.i.l.ippin e~;. by marked: desi qr;pcl to Bel i.r.~v ing l:h ii'l t. ~:;ample~:; 126

DEC I~::; I Cll�l CTA CASE NO . 3159 .... Fl as pa y me nt s for Lhe co n s i gne d sa mpl Ps and ther e�for e F' P t: .i. t :i. on C:' ,,.. ,.., ov1 c: �1 <':"1.i m!"' I:.h.:, t:. d i SC:\ J. J. D I~J<-:? cl dpd '�' c.: -1".: .i. or�,!5 nf P 2 10~ 39 4 . 00 r e present th e compen s2t i ng taxes and Cour +. !. !).;") 1: ir l r:: Oill f-? t h e but�- dpn of c .1. E'� ,:;,r�� l y "''�hov-1 :i r..,q 1": h e-:� r .i q 1�1t to t:. t1 e c l airnE'~ d d e:,~cl u ct.:i.o n .i s> nn t. h e F'''~''�t of thF~ t E":-: p E!Y !? r�. (Interstate T ran si t ::~: .J. q ns a flli:itt er o f f ac t that df.::oduct:..:i.un .\. <::, E,,uth o r�� .i zE' cl~ r.:1ncl rnt.t !:=. t:. be:~ .::1 ble t o pro ve th E1t h e J s; E� nt:..i.t.J,:.~d t o +:.l���,c:;� clr:~ d,..tc t i o n li<l h .ic:h thf? l c-:I W a ll ot-J !::; . ( J.9 ~-�:, ~.'i r �l� l F~ Pel " ""! ",,, ;: C o t.l r �!=. C�~ � F' a I'" � 1801~ c i t e d .i.n t..IHt r.~ li., PE;�v:i.. E~\I~ Pr.. :i.n T .:~ >:at:.i.o n~ .198 ~5 ed. ~ p . .106. ) H as pet.i t..ione 1~ s u stai n ed th E' I::H...tl'"" ci E'� n \l�lh :i.c::h i<:s pl i:iC:F�c:l up i t to b r:~ F.?n t .it 1 ed t .CJ t :hf0 C J E:\ .i. fllp(j cl P cfUC t:. .i. O n s; o�f' p :;~ .1. ~.i, ::)6 ::::,. 00 127

DEC I :3 I Di'J CTA CASE NO . 3 L59 C) .... t �� \~~-:; pr;.�c. t. i �; r::� l y , r:IF�~ L �.i. t . j un E~ l'" ' ""� j C� ll t "l ., i:") 1 �s '/ ( )\I( : ilf:-:�1'" ( F : � 1., :i.. b i l: ~:;;. I) ,,,, ,..., d D�-� .t ) , th e ~. mc:ou n t.s:. o f P :-;:~ 1 ~:3 , 56 ::'~. 00 �'~nd F' :.? J.o, ::'!:9 4 .0 0, 1-'Jhich P 1::'1.i.d r�. u s;. h .i. p pE-~d b y f l' " f")lll �f c� r / r::�1 .., c un ~:; .i. CJ n rTH?n t �:::. . ... ( {:: ~c�r:.:� r� h j t: �.i. ... ~:::. r I r:, ..,, l'ld )J .... l .. t':':t. r (.) d r:.:?c.i.s; :i..o n.) i:l I'"C! f'\1''1I') I'� r:� :::� r'' <':l n d B C' f i: h j !5 r : L� I "F��1:;;. pnr �l d .i. 1' '1(] I''.� I l t: I i �-" :�;; e >: p l i ci. 'l::. ly i:�> nd c: 1\�:;;>i:'l t-� l �r ":. t.::.~�- ~?. 11 S:- \Ih ~; .i.d.i . ec:; nn '5.:::\mp } p c: on �:-; i qnmE'n t. II .::lrtd lew c on::: .i.qrlfll( "�n t <:; II s;F.:.� r-v .inc]. 128

DE:C ISIDN CTA CA S E NO. 3 15 9 .lO �� � t .i::lk.ir�,q ttp nr r �ecor�dinq thPir�� I'""('?S p c-:>cti�; E! <::; c?r �ial r�,u mh E' r� s i�~rld �"muun 1.:.<::', L��Jh y these i n v oic es? e <:::. t .�='!bl i s; h F~ d l : l�l.::t �l�. F'c?. t ..it i or�, E~ r� p ,,.. r;� !':' E' tl Lc~ 1 :l tll ,::�.L l��. ht:? <'\ mounts and I:Jr��o k e ,... c~ q!':> �f t-::: E'''"� L.o ,~e l e>i:?<.Si l�:? t hi?:! !::�.;.,l m p 1 er:;, t h r�:: bf.�?!::; t . ~? V.i dPn Cf:-? 1-'JCJUJcl I'""F?C:f?. .i. pt ~; Wh y i s l t th~t p~tit i o n er di d n ot Cll'�� iqinal, clu p l i c:: .:~ t.~?. ~ d u J :: 1:. E�' ,.. t: i �f i r-c>r.l u ,... '"''.1 t h t :� r�, t .i c "'' t c:!c:l c: opi er::; 2, r�E:? qui.r�es th d t a ny c:: l .:3..i m �for- d P c.lu c t..i.on rnt.1s t b e substv.nt iEtted ,...f�?.c::o rd .i n c:IE~t. ai l a moun t a nd n ature of the ex pen s es inc urr e d . fJu.t o n 129

DE C I H IU N ��� en~ cAnr:. hiD � :�!; l 1Yi' :L l 1 onq e 1��� t:h c> E? v.iclcnc:~-? p E~ t. .i t. .i 0 1"1 E~ I'" do l'l_qt pt�� ov E~ t . f�H::! C'l fi\OU!l [�. :::. o f r:� :. F�:z.l ~:i ~ 1'.:\ (, :~:;. 00 ,., n<J u , ~J : ~; c;: Ji... i.l ( l \ ,,,:=�1� <' l U t" ( C\ili{ ' Cil'o'c':l t..i . rl r..l Sc h e l'" .i. n q �for� ~:;i3 rnp l P c:o r�~ :;;o.i . qn m Pn t.~::; .. s ub ::~.i. d if." ''; I'" C~ C::( �' i.'..' {'' iJ c r. �r ��r ~:-� r, , . ,,, l::. :i.nP t. h r:~ p r-�o rno t i. on c.~ 1 ;:,, c L.i 'i i l . i. f.;~ c::; <: ,,, ,.- t � .i. t:~ d b \' p<�:.~ t i t. i f''l"l 1-:-: 1��� f u r � the mother compan y. Corning t o t i..�,E~ .:~m <lt� l � lt �J f F' l: ll:� l .~'.:? ~�lll .ic:l �l 1-'Ji:.��.s d .i. !5i:~. J. 1 0\.',IE~ d h �/ I'' (�:> !'" p () q cl (�?.�: I" I '!". cl C::�I i i"t t:. j_ C) 1"1 , I'"P ~~- po 1�1c:l F�n t . r� on ' f .'' i' t t:.f'�:� d l:.l 'lf�" ~::=. t l. l'! l () f ~.? r) . :, ' �,::-:.-!; " c :1 i':\ c;~:;:. :i 'f :i c~ d 1: I i f: �~� "I l .i. fll:i. L.:'It..i. D I "I D ll ' '� d I? d u c t .i 1:::�.i l .:i.. t 'I c 1 f c:: I1D t � .i. �t ,;,1h :1 t':j t : on t .1�� i b 1 '� :i. o 1"1�-::. p u 1�� ::; t 1i':l r �1'1". t.1j f>E'C:: t .i o r.., : :;. o ( 11) o f t .h f.:�~ 1��1,;.�1t: :i.on a J J n t .��?r.. n .:'11 F;~r.-~vE~ n u t.:-" Cod��? of .1.974. {;,l c> <'tl' E' i r �1C: J .i. 1"'1F�:� d t .o c.::~qr. c?e trli. t .h pet .:i. t .i or�,r:::: r.. t I��l i:'� !. 'l..I "1P s:; o ..--c: <'<l l E�:d 11 q i f t !:: .:~n cl cl on ,;,1 t .i un !3 11 <H .. �~ no+:. ;:,\c: t .u ,;:; :1 l y d n n i':l t:. :.i. LHF:; � An Pxarn.:i.nat.:i.o n uf 130

DECif.3IDN .. CTA CASE NO . 3159 t �;~ �- 1-'J i. 11 s hovJ t h i:\ t . mo ;::; t o f doctors a nd related pe r s ons. Accor-d inq t.o .i t.s 'f :i.n.::1nC:E' m c::\n i::lqf.~~r-, the se cc:mpany g i v e-aways we r e given to pr ac: t .1. C: E' j n t l"'lf'' [ )l l :,~ l'"fllE:IC E'''.J l:. .i .C ,;~ J .i nd tJ .;:; t Y"Y. ( l~. . :-; , n. ~� n c)'i::. May l 9D6, p " :,?/I " ) contradic t e d b y respondent . con~:; t i.. Ltl l :f:~ <:J n F~ r�.l e el 1...\( ~ 't ..i. C) I") ~:: .l.n c onduc: t ..inq '"' ( C o J 1 r;-~ c:: t u r � n 'f I r�, I.e I'" n a J d r�.' duct .i. hl e j f (~pri l B C ~: f.'l ? !35" ) An e}:,~min ,::\ t :i.o n o f t t heR t.h py c:l Y" f:~ r �t-'.� C:~. "- UI b] I ,-::c_ I? ~ Cl t .1:1 j fl (;\ I " y iO:\ f'l d n f-} C: P'"'�'5c':\ l~ y , Accor dingl y, r espo nd ent erre d in a ll owi ng o nl y 131

DEC I F> l CH,f ���� CTA CASE NO. 3199 i n 1' ull. nf ,. llf? In as foll o\1-ls : PlEl6 ~ 1 '2(l . ((l ?'K:_id : Con s.i.qrw:1J ~;.;:._mp l e 'fr-cxn m:) th~.?l'" ccJPlp.J.ny ,J � ~.~. ,., P6.1. 2 ."" ""'' 0....7....7........0. 0 ". Int:.E~n�:~:::, t. �~t <1�.?% F" :~:�.::?;.,:1:.:::.:1:: ~�:7:::::0c:::0o::::.::::7::::0:::: Tot..=.>. l c\lllC~..tnt. c.h..IE' and col lf2(::: t .i.blf? F' h .i l ipp.i.nE~ p t-::d :. .i. t �.i. on r.:~ r.. Comm is s ioner of :( 1"1 t .(:�.! I'" I'\ i:��� l t. ht? C.:\lllOUI"' t 0 f F'21..1~ 700.70 "''~'' cf(:�?f :i.. ciE' Ii c: y ..inc: urnce t:~,~~ 1'or� tt�Jp ve .:~r�� 19'74~ .i. n t.c ,.... r-:-:�:�:. ,.._ in c j _c:l E': tl t. to 132

DECI HIU N ��- CTA CASE NO. 31 5q -- J. <l ..... df::> l.i.r..,qu enc y pur-.::; tta rl t l~o thE�' pr.. <:)V.i.. 5;; i u l�l'5 of SPr:tio n 51(a)(2)(3) of th~ app li c a ble. Nation a l In t. e n1a 1 Revenue Code~ as a me nd e d. nue~''(Jf"' Cit y , l"l(.?.� t i'" D 1�1.::�.1"1:i:l ;,;o, (~p i'" i..] :.? B, .1.7137 . A s soc ia te ..lu dge <.-:: E U . T .L l"' J: C A. -:11~ l <) .1 I h C f" f'~ by c E~ ,... L. j f '/ L. h :i."'; th e Court of Tax Ap p eals in acco rdance wit h Sec t ion 13 , Article VIII of the Constit ut ion. ~ / 41... at.4'CV--~-1-�4_,~ _-' / � y ) I I Ar1ANTE IL LER Presidir g Judge Court of Tax Appeals 133

';)<~ ; -� '�tj�RLIMED PHILIPPINE CORPORATION I Ccncorde Condominium Bldg.. Legaspi Villt~ge PAGE NO. 95 I- Mekat i. Riza!- TeL Nos. 87-37-71 to 73 \lJ' 134 ~ ~ .... ! Box 33! (Ccmmer=ial Cer.!er Pc.>t Office) MakaU,_ Ri:zal. 3117 A'i'f -l I JOURNAL VOUCHER ! ! I IJ l 1- I -I ACCT. NO. !g~ ~ ~e~r;r~ed C :h ~a-;rg~e; s~ :_ :~ - ---�_j ~'L1..(~l -DATE . l SUBS I 0 I A R y ((!'*j"!ij)i'~~------ ACCOUNT NAME 12 - 64 DEB r T ~ CREDIT ~ecemoer 31,1974 I j G E N E R A L------, I 0980 'To er Prepayments made fj , .1, 9, 2�-5s0�I. 0r 0 ' I' !I CRtDIT 1510 1 reclassify th f !' I I' .:.-.--' - - - 1,250.01) I I ! � cllowing' 1 InRec.f. erenc~I 1,050.00 ! r I 21 � Oo wn p a ym ent - Phil D~ug 200.00 � Deposit - Sa ulag T�-�a nslt i I-- ~j\ I 1,250.00 I ~ Ii: II \ . I l t ~: I' 12 - 65 I II ! ;- / i 143,599. 44 2060 :IExchanga Losses l 74 > "I' 3J'. � ~I 2 11,045.55 _- - """"- 1 1 '701 /scheri ng .q.G. Gocos Account - -~- - ...~ -...., --- ~ I 1703 ;scnering A.G. Currsnt Accoun t �-... ...~-.:\~ I 1715 iDuco A. G. Loan Account 20,086.33 i I I l ! ----~.,.j : I ~.. iTo t ake up exchange Adjustment II Semsst ar. Ir! - -- -,;. ' :)-.' i # .......... ~- I -~ .I 12 - 66 ;I.; ~ 0 -l ~-: __, , I A': ~1 5 ~ Ez .~~ - .�� c::, _ ,_,--I_ l~l ;Il II. 9600 ; I !i :-~ r::~ o 't i cil =:;; oense I / 488 0-Sam pl es ,I . '�~..'. L - ; 215,562.65 f :l,~ Ii l Subsidies - Information I -i :I i . Ii f To taka up subsidies on sample ccnsfgn~nt I -~ r--. -~ / ,-.III - ;-'\ .I I as follows: �~:-,#..,-.--.!,'. LI : P~so ! Amount I,.',_.; .,.;P ~ ~ f I !r.v. # OM Amount r ' ��. 11 -._,.- -, : 4a226 s, s4o.oo� :' i l4h 57 LeO ' I l1i '/ ~:' )i.:..7- i1 i 49saJ � 4,o4o.oo 10~988.80 t� l0~9aa.ao 11 I.. I' i 48226/ I 4,040.00 II 1._ .., /!. 49584 , 22,s2o.oo 64~ 341.05 1 ~� 74~~_~.,J:;;);��9. ~,., �~ I ~~ J !- I' ' ,.,- c~<;;0r~oh'"~6'J� ' aon: m 3<1!: ,0~c0t0..00 I 00 t, - - r -- -~- -~-- ---- --- -- .I 1 ~I y SH 1 4' ;/ f - �i::n�:,"!:-"�:..-...1_-,~.,::_�_:.."..', ~"..."~.;.: ' _./ I 215 ,..<.:;:o::.':~:.. w~"" ! -0 0 ' 2_',4 � 00 1I iitlV I \ ~i(1 ..l.PPROVED BY: r,I ;lJ/ '/j I II '. Ml~!\!U E!_ S . ~F'" ~J .: t ;:-~

,~ ~ BERLirvn:D PHILIPPINE CORPORAT10N -� \ t ~'- 135 Ccr:ccrd-3 Condomid:.u"r. Bldg., Leg.!Is;::; Vi ll ~q~ P~GE NO. 97 ._l, j\ \ t"" � M.!bti, Riu. t - Te!. tb s. 87-37-7r '.Q 73 t~ ~~; Box 33! (Co!!!me:-c : ~! Cer:.!er Pos t O t:!c e j M~ ;;.:J.ti, Riz::l. 3i17 ~~ Jt\)- ( l~i:- " ~ ~~ - ~ JOURNAL VOUCHER .- lr. ' I SUBS IDIA RY GE .:! ~- l D� ~ REF. 1- - - - - - - - - - - :- - - - - - - : - - - - - - - J ;.,:=:.. I DEB IT CR EDIT CREDiT Ij ____ _ _ _ _ __ -- s. 22s .oo !:� !I _ _ _ _ DEBIT ;!;>;- -'-.err.o sr Jl,l'374 i - 217 4 : Inco me r :rc; ro Recluctl iJI, c;f Pr-ovisio n - ------ --r�I 5,225 . 00 t 0971 ' Provisio n for Co mpe nsatio n & Pe:1si.:J n ! ~>,- � 1703 To reverse e nt ry fro provsion written off 9600 for the 1st seme ster 197~. if I 40-l 12 - 72 ~ 1703 'I g i Sc her in g A. G. Cur!'2nt Account Subsidy 210,394.00 ~ ~ .t I 1~~ � / fl _.,...-'----....,_��..�. / 2l0, 394.DO --:_~-- ~ -::-..\ , To record s ubsidy from Sc hering for t h :: . r I ----- f~"I i following sample consign:nents; . \ -, �. \ I IJ -- \ -�.w. T~.~ 1\1- DM. Mir,ount Peso Amount ' -~ _ __, I I 'I~. . ~ ,�!' . 54043 11,320.00 33, 394. 00 51624 i 49583 /1 48,ooo . oc 141,EOO. CO ! 35!400. 00 . r J!r::..� .JI ! '""-- ~ ~ /~___,-�- -,- 12.000. CD l: 71' 320.00 210,394.00 iIj' ;'">. � ~� f ! . ' . I ~~ .it!' "--" --- ,IlZ ~ :::::-----""" -~ f - ,. rI, _I,.-;.., 12 - 73 .r-r . :' . ! I <if .,.... " . ,, Information Expe nses f. ' 210, 394.oo 1 / 4 8 8 0 - S a mp 1 e s ~.....-r S~hering A.G. Goods Account . - ,; ' \ '-- ... ! ',~ ! 210,39 4 . 00 ' ' To teke u~ s u~ sidi9s on sample cc n s ign~ents . l 12 - 74 i 2400 I Income Tax . j. : i 0 j 0974 Provisions for Taxation I// 1 55,142 .OC J 1 1 To {t~ke 11p c;;'FPorate 'ocoee-� ax fer ~hP-.2.~~ _.s...., � ; ' 1/1::---=-__..:..________-; PREPARED BY: /. \~' ,. '"'PROVED BY: lif#t/fo, ,.: ,;,! ) ii I ' .tiJc-1 - ~-~ Tn ;. - ).