PET PLANS, INC., v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES Court of Tax Appeals QUEZON CITY Special Third Division PET PLANS, INC., Petitioner, CTA CASE NO. 10002 -versus- Members: UY, Chairperson, RINGPIS-LIBAN, and MODESTO-SAN PEDRO, JJ. COMMISSIONER OF Promulgated: INTERNAL REVENUE, Respondent. H~ 2 3 20~~ X ------------------------------------------------------------------------------------q_,__f'�_�:.:~--------------- X DECISION MODESTO-SAN PEDRO, J.: The Case This Petition for Review ("Petition") filed by petitioner, PET PLANS, INC., against respondent, COMMISSIONER OF INTERNAL REVENUE ("CIR"), pursuant to Section 7 (1) ofRepublic Act No. 1125, as amended by Section (7) (a) (1) ofRepublic Act No. 9282 t'RA 1125''}, seeks to reverse the Decision of the Bureau of Internal Revenue ("BIR"), which denied the request for reconsideration of the Final Decision on Disputed Assessments ("FDDA") for taxable year ("TY") 2005 issued against petitioner in the total amount ofPhp140,721,049.42 ("Assailed Decision") due to prescription and lack of factual and legal basis. 1 The Parties Petitioner is a corporation duly organized and existing under Philippine laws. It is primarily engaged in the marketing and selling of securities such as educational plans, pension plans, life plans and others.}/' See Statement of the Case in th e Pre-Trial Order, Records, Vol. 2, p. 553. 2 See Statem ent of Facts and Issue in the Pre-Tri al Order, id. , p. 554.

DECISION CTA CASE NO. 10002 Page 2 of24 Respondent is the head of the BIR, the government agency tasked to perform among others, collect all national internal revenue taxes. As CIR, rroaeetmsvhpeeeonrnnudmdeeaedttnat(tex"rheNssa,IsaRrfteihCseeis"n)pgo,oruowonthetdhreeertrorttachdxheealcNarigwdaeetssi,,odanpinseapdnluarItulnetlditeeessarsnaismanedlspsRormesegeevudneltnaisnut,ieorreenClfsauo.t3ndiodensoothff1eir9ne9tte7or,,naoasrl The Facts On 5 July 2006, a Letter of Authority ("LOA") was issued by the Officer-in-Charge ("OIC") of the Large Taxpayer Service ("LTS"), Merlinda LV(".eGyOSrra"d,)oJyRuoov,myinuSa.fladdvoeolarPPoloefcnRiaoesavueatnnhudoeriJOzoifsnfegipcthehriensme("tGRoaOae"ur)ldaiMnt ,aantaidnadsexFGaamrdoriuinpeIIpIS,euRtpiteeinorveniesDro'esr ba2no0yo0k5d.se4ofTifchaiiecscnLocuyOnAttasxwanlaidsabothitlheitenyrrafeoccrceoiTvuYendtisnbtgayrrtpeienctgoitrid1osnJfeaornruotanhrey1p12uJ0rup0l5oyset2o0o03f61d.e5Dteercmeimnibnegr tiwhssaeussaarnemcOceeeniodvfa3etadeD,NbtehoyceteipcmNeeItbiCoetifrowIn2nae0fsro0.i8r8sm,sSuahtelhodCertaolgyanfafotiehnrreesemtrnepceaeenfttti(eit"oiroN,nneIoeCdnr."7R2) A2OagsDcaoiernpcesyectmoopmfbettemhirteieo2nsn0dae0ierd8d.,6NtOtIhhCene informal conference was conducted. 9 the On 13 January 2009, the ROs issued a Memorandum recommending issuance of a Preliminary Assessment Notice ("PAN") against petitioner.10 On 22 January 2009, petitioner received an undated PAN.U Due to petitioner's alleged failure to respond to the PAN within the md("aaFtneLddDa3t"eJ)duInfFiefint2ea0eln0A9(,s1sr5ee)scsdomamyemnpteeNnridooitdni,cgtehtshe(e"RFiOsAssuNaon"n)cceaegoaafginaaisFntopirsemstuiateilodLnaeertMt.e12ermAofonDruaennmdduaamtned,d,-../ 3 Ibid. 4 Exhibit "R-1 ", BlR Records, Exhibit "R-1 5", Folder No.2, p. 1. 5 Statement of Facts and Issue in the Pre-Trial Order, Records, Vol. 2, p. 555. 6 BlR Records, Exhibit "R-15", Folder No.2, pp. 285-352. 7 Exhibits "R-4" and "P-3", BIR Records, Exhibit "R-1 5", Folder No. 2, pp. 354-359. 8 See Statement of Facts and Issue in the Pre-Trial Order, Records, Vol. 2, p. 555. 9 BIR Records, Exhibit "R-1 5", Folder No. 2, p. 359. 10 Exhibit "R-5", BIR Records, Exhibit "R-1 5", Folder No. 2, pp. 370-374. 11 See Statement of Facts and Issue in the Pre-Trial Order, Records, Vol. 2, p. 555; Exhibits "R-6" and "P- 4", BIR Records, Exhibit "R-1 5", Folder No. 2, pp. 385-390. 12 Exhibit "R-7", BIR Records, Exhibit "R-15", Folder No.2, pp. 402-403.

DECISION CTA CASE NO. 10002 Page 3 of24 FLD/FAN was received by petitioner on 23 June 2009. 13 On 8 July 2009, petitioner filed its Protest to the FLD/FAN .I 4 r2e0c1o3m, mrAefestpneodrwnindagerdnthst,eissisuasenudanthcueenFodDaftDtehdAe ,FwDMhDiecAmhowargaaansidntuhsmtenperetiRctieeoipnvoeerrd.tIb5yOwpneast2it1ioMinsesarureocdhn 25 March 2013.I6 qNipDsuesoeetuvciseteetidimmooOnnbbrenieeenrrcr2'gso422mAt0A0h1mp1ep8p8er,eF,in2alDt0d2lh.i0IDean91ngAC3Td.,IhItRpih'eteeOAitasinstssiisssuoesa1ensui3dlseaeernMtddhfcieDaelperecdAeochtsiiaftssni2iaoot0ihAnnl1eeep8dwrp,AeaDfaaosslersMrcwaeiticeshiletiemehoidvnotfehroDdaeelnflebfoOdceywuifcsfmtipiiinocevgenteRi.ltoIydei8ofpentdfohOieercertnnieCyowninIn1acR9sgy3 taxes: Tax Type Basic Surcharge Interest Compromise Total 31,218,834.97 91,407,187.86 Value Added 16,287,506.77 15,609,417.49 44,578,935.40 Tax ("VAT") 641,956.66 8,143,753.39 23,302,210.19 10,000.00 47,743,470.35 Expanded 53,999,030.60 Withholding Taxes ("EWT") 918,434.55 10,000.00 I ,570,391.21 Withholding Tax on Compensation ("WTC") 23,753,170.88 68,799 580.14 20,000.00 140,721,049.42 Total wtoarseisnpiOotinnadll2ey8nrtDaofefnlcee1dm1tobJaetnrhui2sa0rC1y8o2,u0pr1te'9sti.Ft2i2iornsteDr fiivliesdiotnh,ewinhsictahntthPenetiistsiounedYSTuhmemcoanses Respondent filed his Answer on 15 March 201923 and ele~ted the BIR Records appurtenant to this case entire on 21 March 2019.24Y 13 S6SRES8S"ee"eexe,ee,ecehBoBSiSSbSrItlttdRaitRaatasttte,"tReeRemRmmEeme-ecxe1ecenohnno0ntrittrd"btdoo,osisoft,fBf,fF"EFEIFRaFRaxaxcc-ahcth1tcRsitsi5tbsbsea"aiictan,ntaon"ddnF"rRdRddoII-sssl-I1d,ssI1ssuu5esE5sereu"u"x,eN,eiihnnFFoiiionbt.tonhhlil2dtetedth,e"hePPepRrerprrN-NePe.P1--or5r4oTTee."2.-r2r-2,Ti0iT,aa,-Frlrlp4ipioaOp2Oapll.l1d.rrO.d4deO6er1er7rrr4dN9d,,-e-eo4RRr6r,1.,e8e29Rcc8R,;oo.eeprrScddcpoesos.er,,rd6dTVVs5s,S8o,oNl-Vl.V6. ,o262old,1,l..ap.p2t..2e,5,d5p55p.I5.5I;5;5E5ME55x6xa;h;hriEcibEbhxixithts2hsi0i"b"b2RiRit0t--,"1"8Pp1P"p-"-7.a9a"n7"n,d,-d8BB"."PlPlR-R- 14 15 16 17 Records, Exhibit "R-15", Folder No. I, pp. 1-314. 18 BlR Records, Exhibit "R-15", Folder No. 1, pp. 696-697. 19 Id., pp. 700-712. Facts and Issue in the Pre-Trial Order, Records, Vol. 2, p. 556. 20 See Statement of 21 Records, Vol. 1, pp. 10-223. 22 ld, pp. 224-225. 23 Id., pp. 238-253. 24 !d., p. 254-257.

DECISION CTA CASE NO. 10002 Page 4 of24 In a Resolution, dated 22 March 2019, the case was referred to mediation,25 which was then reported as unsuccessful on 4 July 2019.26 Order, dated 8 July 2019, this Court issued a Notice of Pre-Trial setting the Pre-Trial on 10 October 2019.27 In an Conference then filed its Pre-Trial Brief on 4 October 2019,28 while his Pre-Trial Brief on 8 October 2019.29 Petitioner respondent filed Pre-Trial ensued on 10 October 2019.30 On 21 October 2019, pMMeetaiattiinoawsnheFrialeds,uribrImeIsIip,ttooenndd2teh3netOJscuutdobibcmeiairtlt2eA0d1ff9tih.d3ea2 vJitudoifciiatsl witness, Ester L. Reyes?1 Affidavit of his witness, RO FOarcdtesraOwnndasI4sissNusueo3ev3dewmbhybiecthrhe2thC0e1on9ut,rettrhomeninp4aaDtretiedecstehmseubPbermer-i2Ttt0er1ida9l..t3h354eTirhJeorienatftSerti,pauPlartei-oTnrioalf witnesOs,nE2stMeraLrc. hR2e0y2e0s,,36pewtihtioonwearsfipleladctehdeoAnmtheendweidtnJeusdsicsitaalnAd fofnid1a1viMt oafricths 202037 July 2020, petitioner filed its Formal Offer ofEvidence,38 to which interposed no objections.39 On 1 respondent pat1hpe5etp-irBtieiso"scI,unina"eetPsri'oa-si1nn5RvoE-oeCfxlsv"thoh,eilebd"uiPitriti-nsop1ntu5h,rs-epuDdobp"asjr,eteee"cssdP,te-nm12tt5oa3ct-aeEsrSt"iehae,ilep"sixPttyec-m,Ce1pr5obet-eulFEerr"vtx',a2sh"n0iPbc2f-iy0it1,ns,5aa"-lntPGhd-i"1es,pv5"ra"CoPl,bu-o"1aauP5ttrii--tvo1Hen5a"-vd,Aama"l"nPui,dte-t"/1eoPtd5or--; 25 ld., pp. 258-260. 26 ld., p. 267. 27 !d., pp. 275-276. 28 ld., pp. 279-288. 29 [d., pp. 294-297. 30 ld, pp. 303-307. 31 ld., pp. 308-506. Vol. 2, pp. 507-517. 32 Exhibit "R-16", Records, 33 l d., pp. 529-535. 13 November 2019, id.. pp. 550-551. See Resolution, dated 34 35 ld., pp. 553-560. 36 Exhibit "P-18", id., pp. 591-866. 37 ld., pp. 868-870. 38 Records, Vols. 2-3, pp. 873-1107. 39 Records, Vol. 3, pp. 1109-112.

DECISION CTA CASE NO. 10002 Page 5 of24 I""E1f"PPa6"'i---l'"11uGP5"6r"-eP-"1,Q-'t51"o""P-7,PJp--"-1"Fr1'eP6"6"s--'Pe-H1An-"5"1Pt"-' 5-Rt'h1"-""KeP7,P--"o-1G"' 'r1P7i""6g'-P''-i1Bn-5""1aP"P-5lS's---1"1"Lf,7P7o"--r-"'HA1P"c6"P-"o-1''m-C51""p"-5PPTa'---rM"1"1i,Ps77"o--"-'1BnIP""6."-P4'-10'D-5""1P-"P5U-'--11N""77P,"---"J'C1"P"6"'-P-1'a-E"51n"P-5dV'--1"0""7P,P"--'-D"11"P6"7P--'-1-FK1"5"P5-"'W--1"PfP7o""-,-r' On 9 February 2021, respondent placed its witness, RO Fadri III, on the witness stand.41 Subsequently, op2ne5ti1tJiMuonnaeerrc2hfi0l2e20d12,a1a,Cdromemsiptmtoenedndtea/nOlltpfopilofesdriteiisotspno.F4n3odrTemhnaetl'sCOoofuffferetr,reoindf Evidence,42 to which a Resolution, dated Exhibits.44 a1d1mDisescOieonmn2bb7eyrOth2ci0tso2bC1e.oruT2rh0t.e2451p,TrpehveistiiotwuiosanlsyenrdoteetenndideebdryeEdthxiihtssibCEitoxsuhrwibt eiintrseawtRhheeincshomlwuatediroeen,pdeadnratiteeoddf the records of this case.46 On 4 November 2021, petitioner filed its Memorandum,47 while respondent filed none.48 Thus, on 23 February 2021, this Court issued a Resolution submitting the instant case for Decision.49 Hence, this Decision. The lssues50 DWCEOITFMIHCPH"IEWEONNLHSCDAEYITTNHIOGENRVTAOALIRXNUNEAO-ATNTHDDPEDEEWTDITITTOIHOTHNATOAELRLXD,ISAINMLGEIOAXUBTPNALATEXNDFOOEODNR F // 40 /d,pp. 1114-1118. 41 /d,pp.1119-1121. 42 ld, pp. 1122-1133. 43 /d.,pp. 1136-1143. 44 !d., pp. 1144-1147. 45 /d.,pp. 1148-1159. 46 !d.. pp. 1226-1228. 47 !d., pp. 1163-1224. 48 !d., p. 1229. 49 !d., p. 1231. 50 See Issue in the Pre-Trial Order, Records, Vol. 2, p. 556.

DECISION CTA CASE NO. 10002 Page 6 of24 PINHTPE1R40E,7S2T1,,F0O49R.4T2H, EINTCALXUASBIVLEE OF SURCHARGE AND YEAR 2005." Arguments of the Parties Petitioner's Arguments51 Petitioner avers the following in its Memorandum: a) The period to assess the alleged deficiency taxes has prescribed; 1. Pbeeytiotinodnethreretchereivee(d3)thyeeaFrLpDe/rFioAdNtooanslsyesosn; 23 June 2009, clearly The ten (I 0)-year period to assess deficiency taxes under Sections 203 and 222 ofthe NI RC is not applicable; 11. 111. The assessment of withholding taxes is subject to prescription; b) Ttwheenitnyv(e1s2ti0g)adtiaoyns,arnedndaeurdinitgotfhethaessBeIsRsmlaesnttedvomido;re than one hundred c) There is no legal or factual basis for the alleged deficiency VAT against the petitioner for TY 2005; I. The total amount of Trust Fund Contribution IS Php300,349,118.08 and not just Php54,204,044.00, as erroneously stated in the FLD/FAN; 11. Handling Fees are not subject to VAT on the part of petitioner; iii. The FLO, FDDA, and tbhaesiAs sisnaidleisdalDloewciinsigoncefratailiendintopuitntfaoxrmes petitioner of the factual amounting to Phpl,812,667.06; There is no legal and factual basis for the alleged deficiency EWT against the petitioner forTY 2005; d) I. The amount of Com;nissions in TY 2005 only amounts to Php88,352, 164.00; .Y 51 Records, Vol. 3, pp. 1167-1222.

DECISION CTA CASE NO. 10002 Page 7 of24 ii. TPhhep224C,o1m40m,2i3ss9ioanlrseadayndincluOdveertrhiedeDs efeirnredthCeommamisosuionnt s of for TY 2004 amounting to Phpl35,788,075; iii. The Office Rentals Paid for an Office Space in Hong Kong is not subject to EWT in the Philippines; 1v. The Purchases o f Goods and Services are from Non-Regular Suppliers and are less than PhplO,OOO.OO per transaction, hence, not subject to EWT; e) There is no legal and factual basis for the alleged deficiency WTC against the petitioner forTY 2005; 1. TpCehotemitcipooenmnespra'ustitaoctnoionntErioxbfpuwetinoitsnheshtoofladPiilnhegidlhtaetxaoltohn,taTSkooetcailailnStSaoleacrucieroisntyasniSddeerrOvattihicoeenrs ("SSS") and Pag-lbig; and f) Tnohesruercahrearngoe,dienftiecrieesntc, yortacxoems pwrhoimchiseshsohuoludldhahvaevebebeenenpacidh;artgheedreffroorme, petitioner. Respondent's Counter-Arguments52 Respondent counter argues as follows in his Answer: a) Respondent's right to assess petitioner has not yet prescribed; b) The assessment of withholding taxes is imprescriptible; c) The conduct nooftthienvaauldiditatbeeythoendasthseessomneenhtu. nTdhreedatswseensstyme(n1t20r)em- adianys period does valid; d) The assessment has factual and legal bases. Petitioner is liable for deficiency VAT, EWT and WTC; and e) Petitioner is liable for surcharge, interest & compromise penalty. The Ruling of the Court The instant Petition is impressed with merit./ 52 See Answer, Records, Vol. l, pp. 239-251.

DECISION CTA CASE NO. 10002 Page 8 of24 The Court has jurisdiction over the present Petition. Jurisdiction by this Court over the instant case is conferred by Section 7 (1) ofRA 1125, to wit: "SEC. 7. Jurisdiction. - The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as herein provided- (ifml(neIaE)ewvamstoDstelpooverhrscrianoipssagtaiihrsoridestnariiosnnscfpdgohluafauutwrntenghdddeaeeesdarr,CsmspctsohieoenmenrsiisasnmNmltgteaii,reesteinsOsoditinuosbm,arnyslrpe.et)orIhfnsueotenefBddrInsuinanrtoleerafReruinlneaoavtteifleorlnRnnnuateeetlvhrreenCernavoeuletdoeRne,ueiooenvrretcanooaxuttshheeeese;s,"rr rwpptseheurasoerbpstvjaoseidainscnimIidtsniopneemnnugtahattetsethCttdoleaIoirtRbnndysi,gmsetawfpaawnisyechtitiittiechhctbnihaieeoncsnyaaeatef,phfprptie.ppareemeTxjatualiherltahedeiiossaddtsAnsheiebsebcsrsetseaiafmeiooissnlnesreeeantdoisptmssftpDhmeetiehrlaseeycilnsfiiCnsetmCirgocoraoouendtudnrhetrite..sta,tioAaAnaencsdiddcsneaoiciinritltdsehmtiidehonaegnDyalFyboevD,ocfaivDttslhheiidAoeelncyCtsihtabtIeariRyddyt DotfFDfohoifoenleerecTlclCerao2iaems8oxwvijTmoubiAiheDnndempewgriepc(icr2isietf.eea0hesiaclmli.1iel,oossa8d,brn3p.d(eeppw"UsrrDeeRintosa2teiRhhdltf0ciioCeebI1onnwrme8nTtftS,eeAbhoterrhtier"nchrerah)tatiyt,iaslt2ohdp"0Rndi[Ce1saatetho83]yivCti,)useirp,oorRtnatyauonurufrretpettl(yer.re3u.ro.A0arn.8perd)tsmeecivolcdrepealefai2yeryviytstpheeiJsaattdealipysnfoospRtrunhofuaeeaemefmaavrfrlyeiAecfstcrdiooe2setlpeedsc0tjddyaheu1Rieir9ltbopuieh,ysCtfdeldweoasoiisDucuinfdtctoreshetithtchoicfabnienitdnsyshietwiAoeoopcPnhvnsieCesiset.ocitiaor.oithn.itiunlitooeorh.t3n"dotnfe present case. Ppyraeerseettsauisertrusinospmmsnr.epeestArnicoctwrsnicpaoastripdvtaphiebnlailgpetelesyrt,oiiiottnhdoevtfthieotlhereitrdsuecsreaunsef(ea3ttlhas)aeex-t bar. Section 203 of the NIRC provides a three (3 )-year prescriptive period to assess deficiency taxes, viz.: "SEC. 203. Period SoefecLatiirmosniataf2tt2ieo2rn,t hUienptoleanrsntAadslsaersesvmerenesnucterainbtadexdCesbollsehlcaatwilol nfb.oe-r Except as provided in assessed within three 3

DECISION CTA CASE NO. 10002 Page 9 of24 ttppffhhireeleoererimdiofcoidolbdit:lnhelegfpePcorrdtoreoieaofsvycnttihhrdtieoehebefdrelae,dsrstueTutcbtrhduhynaar,nyttJaaaxwipwnnedra,sesanstshofchicerlpaaieblrsdtlohee.cdrbFeweeeobehdyrbei(epnJ3rgague)wu-riynpanfeooacarsroferetuttsepuhrroteretnrwfhfitoeiihlitdsihinseogxfsSuihplteteaihcardlaetslitsroibbeeoneseon,syfmaocsoonherfudenasnttluluttfhceorbhdnere considered as filed on such last day." (Emphasis and underscoring, Ours.) parreestcurriAnp,tsibva)enfpielexerscieoapdftiatoolsnae,sSrseeetscustrindo,enfoi2rc2ice2)nf(ciayl)etsoaxafetfhsraeiunNdcuIaRlseeCntaprtreaotxuvpriadnye, estora: wate)intf:a(i1ls0)to-yfeialer "SEC. 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes.- tiaoatanhntrxedacooncomeiryuvxioriest(ltifcsamfiouf)oaorteInoirnclr:wurtyithPrmi,hteerehtoihtncivocenaoiadlflsftileaeaeleedccncot,ttai(fiToo1oarnh0fnef)atffaotruoylafrsireunenstadhu,aroectssrhfhhrcafeaaorftulattlaldaleuxexbrdcaemttmushisjolaeuaeenysdyndstitbihmbcserieecaeeroflanetilvsoutlyesefrwed.rtn"asyhwkswioeceiidhfntth,hthhcooaioerunsgtaftnbaeapielnzsscrtsaiootentycmosc,eseeefemvrdofaeaiifnunndaitdgenl, (Emphasis and underscoring, Ours.) pRasRoumeebsttoiusututriranonnHnsntstemi(iarits.ehloep,ar.u,retnripemdtpesheepataritont-ifidtnaoi3ecdon0iceneel%neraetrravaolamitlfpdieopatgehndlneiaedceoteldfydatsethfahcasaleliuetalsbesrt,edesatnrdiatedonci(nt1etraiie0axtpphl)tor-e,eyurotVetnurasdArrainenlTrpeci-ssrodr,eemefsratcceuellrcsraieneiprn.i)atp5.itp3vtiIoeeottnrpiptoiiienosnrcinitooesimdtrst'hseoaVVintnAAtihatTTnse rptttoehorceeepestsiruapcomxatvWspppe,aethtyihoiofelrraenrotmiciiisnttabcnhtihooasbemudetnaerfdpuiolepvetroledeitsrcrhacuaeacoltfttciumsoutsneeruiantobcthehyfeatrehpeavetrpueisdrlrsueoneubsnsnmus.gc5tmpee4artnpitttootieinaontlhno(e1uf ont0chdfo)e-enyfrftaeraalaldssrreiiyttcpy.ylraeoIrosnafcrdttriheiofpeenrtdair,uveodetifun,prsnoeasrruladieocneshdd,r Was the petitioner able to so refute the presumption of falsity of its returns? The Court finds that it has successfully done so. In the Assailed Decision, which merely affirmed the assessment assessment issued against petitioner was contained in the FDDA, tpe VAT computed, as follows: 5:.r-" 53 See Answer, Records, Vol. 1, pp. 239-242. Corporation, G.R. No. 221590,22 February 2017. 54 See Commissioner of Internal Revenue v. Asalus 55 See Assailed Decision, Annex "A" of the Petition, Records, Vol. I, p. 48.

DECISION CTA CASE NO. 10002 Page 10 of24 Premium Collection Php506,829,611.00 Add: Other Income Subject to Php64,886,238.00 84,034,384.04 VAT: 9,000,000.00 Ph_p590,863,995.04 Handling Fee 5,192,069.00 Manag_ement Fee 4,346,494.00 54,204,044.00 Commission Fee 609,583.04 Php536,659,951.04 Others Sale of Property and Equipment Total Less: Trust Fund Contribution Taxable Receiptsper Audit Output Tax Due Php53,665,995.10 Less: Allowable Input Tax Php5,904,398.26 4,091,731.20 1,812,667.06 Php49,574,263.00 Input Tax per Return Less Disallowed per Audit 18,355,428.93 Php31 ,218,834.97 VAT Due per Audit 60,188,352.89 Less VAT Paid_Q_er Return Php91,407, 187.86 Basic Deficiency VAT Add Increments: of the Php 15,609,417.49 Surcharge (Sec. 248 (B) NIRC-50%) 44,578,935.40 Interest from 01125/06 to 03/15/13 Total Deficiency VAT As can be gleaned, above, the taxable receipts, per respondent's audit, amounted to P536,659,951.04. On the other hand, the taxable receipts per petitioner's Quarterly VAT Returns, only amounted to P242,600,271.90, as follows: VAT Return Total Gross Receipts Exhibit No. Subject to VAT First Quarter Php74,058,925.90 Exh. No. 11-C-1 Second Quarter 55,243,063.60 Exh. No. 11-F Third Quarter 60,493,265.50 Exh. No. 11-J Fourth Quarter Exh. No. 11-0 52,805,016.90 Total Php24 2, 600,2 71.90 dbsuiassbcisrseeqopCuafoenrmnecsytppaaooprrnipnduligencndatteth'irsoednsfieenocdlftaiwntrhaogetitothfeinagntuop(rfe1ets0ta,i)xt-iaytohbenelaeerrer'rpserwcVeesoAicuprTtlisdp.RtiOaveptebupvrpeineaosrruiasotlrdoye,ffbotaherlsiseaaswasena1ssd2s1ithnh%iegs deficiency taxes..#

DECISION CTA CASE NO. 10002 Page II of24 Petitioner, however, has successfully presented evidence refuting such presumption of falsity. cpdRtooreuemdVl-uinpAnceatgTTenedodiDbeafsApbrsleto-eao0gmdn2ib.no75et6an-wux0tIsia6htteb,hedli,wsegtTrohronerepsoucrsaetseytrirdpeFetcithsssueeppnifpuoobdttnresecdnbdfoeeernnofitnithtmtrgsaoibtppVourifsAtneaitmeohiTddenieustpTxhmlaeararsumtnesopphtfrrtuoe.pFnl-adudTnyensehrmdeisssdeeacintpsso-tluspncaplrtnreroesibavcbryaeiudfritpreveiooredsmednu-isnnbfBrejtoaeIhermRcdeet plan holders, net of actual Trust Fund contribution, viz.: dareseqsliuuvrieererdyd"oIntfoorfetphctlheeaeicvceipansprgeoamtrhtoeifsoebfpdetrnhegee-fonipoetsredodsocfeactehnodemdsirposaienfnrvvtiheeisces,etmssp,aerlenep-trsniene-aennbdedaenidpnklsaocnoradsmhepTroalrtdonueiseertsnsfsuuaanrrredee where they earn income. NmtTBttffdotprhtireranuhuhenerueuepelescenuneapeelanstseteitcdnsadupatntrevhdpRttbsaiaasfeieefrP;locltiriuupeearsiitadilonefAsxlnolsn(aaaeuua-m6hdsfdcnlnusnsnuatn);eheus,ppssd,nidod(pdonrttatdi(ufeuefpateoclnc2ondfnr,dxforttacs)oryhhiefodgaiespealnro,ecereuvteusttietrsssartdrsrei:au;dbtausdPuiooarercSpvlahsueas(nhcpo(fineet4dtnsnhoiIsfomock)ltrta)tafsiroftoeri,ttpglpidefinuahyeemafotupperuinsseopnennestsaittrt,nhrenhee,aahdPeyNau1eeemdrrfa;gilnioyu6nbisnaelintP(oeddl.naisnfigw3omvnennterdnbNpo)eehesfgltskeairtl;nts-Rots;coahvahiehNt)nlampuenma(edecdea5swteprlsheengaheby)eeihSrPacirndndrsnoadtaserorascaeohstvg'lecudsaoonl(Pidfe-peutbsrc7unnchNrldbsrparyc)aaaetoeooiyerrotentwtbnuhoireaofmtifer.byheeadsepdndad4fueasdee(eseldat5tprstRnehmrrrnCRa%iios/autrteoasecttyihsvironeseeusnngen,aCaitmgaourtvosciigolsmhbfusseolwfeerpreufottltlrmsastirepoeanabpi5hrntaptirnatdiemem%henatiezhrwtryiorehttdeaaoefmioc-,itninesdtosIon8hntoeas.dseharnet0aCn9ienmfsdedaaot%utttoodTrevennrrrsanoaneadaxaad.d,rb,ndfmdtwefculppfeFltucrd,RtoisoeSsoeaaueseoitropn'raumnlshrtpuffrrsoFlrittplaeoeaihnieefuscuacfgndoyreptesssayenhmeocrstdrIrtnwfaaeddet,)ofioofcmlbrnuifpuilrTvnPfbtettrltmnoernrieohilytrphnutudrclhedmtheretitbhosese-eayse'oanedtteesrr-t sales. phacsoeerlmdmcpeiananntnCadtyrglaeuettaoserotdlgfybub,tyhaycreaoataphnnmrettreeoie-SbnuEutenhCteteidsoafnccansooidltmlhteofprcuetaeltqnhducyeoifrmraetonrdpmdulsiteaottanhrfbceumeenpaoddlrafekntpreheodhepsoiraotledesbsdelerirnegswsat,eitwtriahovhneciadceuhrtfntruadauniresndert the plan. y tcphouanrtstrguirabonuFsttsoitoorreneSgceoefociipnrtitgospnuop4rrfpe.a1om0spie8rss-ee3-son, pefceaocdrnoasmgciordpamepurlpteyiadnGn,g)ywothsefheRohuR1el0rdNe%bboye.v1anc6leou-tn2eof-0iaf0rdma5dc,etwyudaohlutiactrxrhuods(ptVeiffnAiuninoTedns) 'Pre-need Companies' as follows: 56 BIR Ruling DA-027-06, 31 January 2006.

DECISION CTA CASE NO. 10002 Page 12 of24 'SEC. 4.108-3. Definitions and Specific Rules on Selected Services. 'xxx xxx xxx' (j) Pre-need Companies are corporations registered with the Securities and Exchange Commission and authorized/licensed to sell or offer for sale pre-need plans, whether a single or multi-plan. They are engaged in business as seller of services providing services to plan holders by managing the funds provided by them and making payments at the time of need or maturity of the contract. As service providers, the compensation for their services is the premiums or payments received from the plan holders.' As defined above, pre-need companies are considered to be engaged in business as seller of services providing services to plan holders by managing the funds provided by them. As service providers, the gross receipts of pre-need companies for VAT purposes should only be the premium or payment collected from the plan holders excluding the 'funds' provided by the plan holders. which are being managed by the pre-need companies for them. The 'funds' provided by the plan holders, which are being managed by the pre-need companies, pertain to such amount of trust fund contributions as mandated by the SEC. Therefore, such amount of trust fund contributions do not form part of the gross receipts of the pre-need companies for purposes of determining their gross receipts subject to 10% VAT. To disallow such amount credited to the trust fund would be tantamount to taxing that percentage of contributions of plan holders which actually are held in trust by pre-need companies, and earmarked as reserved fund to guarantee the payment of services and/or delivery of the property or cash surrender/termination value to plan holders. (BIR Ruling No. UN-248-A-95 dated July 16, 1995)" (Emphasis and underscoring, Ours.) Indeed, Trust Fund contributions are exempted from VAT as Sec, I 08 ofthe NIRC merely imposes VAT on the gross receipts derived from the sale or exchange of services. Trust Fund contributions are not received by petitioner as payment for its pre-need services but are received only for management by petitioner, from which the pre-need benefits of the plan holders will be obtained from. Accordingly, all Trust Fund contributions received by petitioner, being VAT exempt, should be deducted from its gross receipts subject to VAT. Herein lies the error in the instant case. As may be gleaned from the computation of respondent in its Decision, he only considered the amount of Pj4,204,044.00 as an allowed deduction from petitioner's taxable receipts.~

DECISION CTA CASE NO. I0002 Page 13 of24 According to petitioner, however, its total Trust Fund Contributions for the year amounted to P300,349, 118.00. This comprised the P54,204,044.00 allowed deduction by respondent and the amount ofP246,145,074.00 which was the actual contribution amount to the Trust Fund for that year. Its witness, Ester L. Reyes, testified on this as follows: "54 Q: You earlier stated in the FLD that the total VAT deficiency is P9!,407,187.86, can you tell us what is the reason why you say that this is erroneous? A: The computation of the VAT deficiency is erroneous because in arriving at the total VAT liability of PET Plans, the amounts corresponding to Trust Find Contributions and Handling Fees should have been excluded. The VAT computation in the FDDA is as follows: Premium Collection Ph]J_ 64,882,238.00 Php 506,829,611.00 Add: Other Income Php 9,000,000.00 Subject to Vat Php 5,192,069.00 Php 84,034,384.04 Hand!ing Fee Php 4,346,494.00 Php 590,863,995.04 Management Fee Php 609,583.04 Php 54,204,044.00 Commission Fee Php 536,659,995.10 Others Sale of property and equipment Total Less: Trust Fund Contribution Taxable Receipts per Audit Outputs Tax Due Php 5,904,398.26 Php 53,665,995.10 Less: Allowable input Php I ,812,667.06 tax Php 4,09!,731.20 Input Tax per return Php 15,609417.49 Php49,574,263.00 Less Disallowed per Php 44,578,935.40 Php 18,355,428.93 audit Php 31,218,834.97 VAT Due per Audit Less VAT Paid per Php 60,188,352.89 Return Php 91,407,187.86 Basic Deficiency VAT Add Increments: Surcharge (Sec. 248(BJ. NIRC- 50%) Interest from 0 I I 25 I 06 to 03 I 15 I 13 Total Deficiency VAT The amount of Php 54,204,044.00 as Trust Fund Contributions is erroneous as the total amount of trust funds should he Php 300,349,118.08. 55 Q: What is your basis for saying thllt'the total amount of trust funds should be Php 300,349,118.08? ~

DECISION CTACASE NO. 10002 Page 14 of24 A: In the Audited Financial Statements for 2005 ("AFS") it can be seen that PET Plans deposited Php 300,349,118.08 as trust fund contributions, as shown in the following items of the AFS: AFS Portion Description Amounts Statements of Cash Contributions to Php 246,145,074.00 Flows investments in trust funds Php 54,204,044.00 Note 8. Trust Funds Equity Additional Php 300,349.118.00 contributions during Note 12. Actuarial the year Reserve Liabilities Subsequent deposits Total The BIR only took into consideration Note 12 of the Notes to Financial Statements and only considered the amount of Php 54,204,044.00 as trust fund contributions, which is only a portion of the total trust fund contributions. The BIR failed to consider the "Statements of Cash Flows" and "Note 8. Trust Funds" which show another trust fund deposits [sic] amounting to Php 246,145,074.00. The amount of Php 54,204,044.00 represents the subsequent deposits required in view of the Php 163,114,230.00 trust fund variance noted in Note 12. Actuarial Reserve Liabilites in the AFS."s7 It stands clear, then, that aside from the P54,204,044.00 allowed as deduction by respondent from petitioner's taxable receipts, the amount of P246, 145,074.00 should have also been deducted as VAT exempt. This amount has been penciled in twice in petitioner's Financial Statements for the year 2005 as contributions to its Trust Funds: First, as "(C)ontributions to investments in trust funds" under the heading "Cash Flows From Investing Activities" in petitioner's Statements of Cash Flows which is part of its Financial Statements for 2005.58 Second, as "(A)dditional contributions during the year" under the heading "Equity" in petitioner's Notes to Financial Statements under Note 8 on Trust Funds.59 This amount is, in fact, the actual contributions to the Trust Fund during the year. The amount of P54,204,044.00 was merely a subsequent deposit to the Trust Fund, prompted by the requirements of the Securities and Exchange Commission ("SEC") due to variance. Indeed, the amount was penciled in as "(S)ubsequent deposits" under Note 12 on Actuarial Reserve Liabilities of petitioner's Notes to Financial Statements where it was further explained that / "(A)nnual actuarial valuations of the pre-need contractual commitments are/ 57 Exhibit "P-18", pp. 14-16. Records, Vol. 2, pp. 604-606. 58 Exhibit "P-14", Records, Vol. 3, p. 1037. 59 Exhibit"P-14-B", id., p. 1051.

DECISION CTA CASE NO. 10002 Page 15 of24 based on the computation prescribed by the SEC. Any deficiency between amount and the trust fund should be funded by the Company within 120 days as discussed in Note 7".60 With only the amount of P54,204,044.00 allowed to be deducted from petitioner's gross receipts subject to VAT, the VAT assessment expectedly increased, resulting in what respondent found to be more than 30% discrepancy or under declaration of taxable receipts. With the evidence before this Court, the total Trust Fund Contributions exempt from VAT should be as follows: Contributions to Investment in Trust P246,145,074.00 Funds P54,204,044.00 Subsequent Contributions as mandated by the SEC due to Trust P300,349,118.00 Fund Variance Total Trust Fund Contribution Given this finding, the revised taxable receipts per audit should be as follows: Premium Collection Php64,886,238.00 Php506,829 ,611.00 Add: Other Income Subject to 9,000,000.00 VAT: 5,192,069.00 84,034,384.04 Handling Fee 4,346,494.00 Php590,863,995.04 Management Fee 609,583.04 Commission Fee 300,349,118.00 Others Php290,514,877 .04 Sale of Property and Equipment Total Less: Trust Fund Contribution Taxable Receipts per Audit Comparing the revised Taxable Receipts per Audit (i.e., Php290,514,877 .04) with the gross receipts subject to VAT per VAT returns filed by petitioner (i.e., 242,600,271.90), there is now a reduced discrepancy in the total receipts subject to VAT declared by petitioner in its VAT Returns in the total amount of Php47,914,605.14. This visible under-declaration is now just 20% of the totpl gross receipts subject to VAT declared by petitioner in its VAT Returns. t/ 60 Exhibit P-14-A, id., p. 1054.

DECISION CTA CASE NO. 10002 Page 16 of24 As respondent, himself, held out in his Answer, "the amount of trust fund contributions which petitioner can claim as a deduction to its total taxable receipts subject to VAT is a question of fact". 61 Evidence on that question of fact has been on the side of petitioner. All told, the Court finds that petitioner has successfully refuted the presumption that its VAT Returns were false. The burden ofproofthen shifted to respondent which failed to present any evidence to the contrary. Without actual proof that petitioner's tax returns are false or fraudulent, the applicable prescriptive period is the three (3)-year period to assess. The EWT and WTC assessments are not imprescriptible. In the Answer, respondent contended that the EWT and WTC assessments against petitioner are imprescriptible. This is terribly misplaced. In Commissioner ofInternal Revenue v. La Flor De/a lsabela, lnc.,62 the Supreme Court already declared that withholding tax assessments are subject to prescription, viz.: "Withholding taxes are internal revenue taxes covered by Section 203 of the NIRC. Section 203 of the NIRC provides for the ordinary prescriptive period for the assessment and collection of taxes, to wit: SEC. 203. Period of Limitation Upon Assessment and Collection.- Except as provided in Section 222, internal revenue taxes shall be assessed within three (3) years after the last day prescribed by Jaw for the filing of the return, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period: Provided, That in case where a return is filed beyond the period prescribed by Jaw, the three (3)-year period shall be counted from the day the return was filed. For purposes of this Section, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day. (Emphasis supplied) XXX XXX XXX The CIR, however, forwards a novel theory that Section 203 is inapplicable in the present assessment of EWT and WTC deficiency against La Flor. It argues that withholding taxes are not contemplated under the said provision considering that they are not internal revenue taxes but are penalties imposed on the wjthholding agent should it fail to remit the proper amount of tax withheld.y 61 Answer. p. 10; Records, Vol. I, p. 247. 62 G.R. No. 211289, 14 January 2019.

DECISION CTA CASE NO. 10002 Page 17 of24 XXX XXX XXX Under the existing withholding tax system, the withholding agent retains a portion of the amount received by the income earner. In turn, the said amount is credited to the total income tax payable in transactions covered by the EWT. On the other hand, in cases of income payments subject to WTC and Final Withholding Tax, the amount withheld is already the entire tax to be paid for the particular source of income. Thus, it can readily be seen that the payee is the taxpayer, the person on whom the tax is imposed, while the payor, a separate entity, acts as the government's agent for the collection of the tax in order to ensure its payment. As a consequence of the withholding tax system, two distinct liabilities arise - one for the income earner/payee and another for the withholding agent... XXX XXX XXX It is true that withholding tax is a method of collecting tax in advance and that a withholding tax on income necessarily implies that the amount of tax withheld comes from the income earned by the taxpayer/payee. Nonetheless, the Court does not agree with the CIR that withholding tax assessments are merely an imposition of a penalty on the withholding agent, and thus, outside the coverage of Section 203 of the NIRC. XXX XXX XXX The liability of the withholding agent is distinct and separate from the tax liability of the income earner. It is premised on its duty to withhold the taxes paid to the payee. Should the withholding agent fail to deduct the required amount from its payment to the payee, it is liable for deficiency taxes and applicable penalties... XXX XXX XXX Thus, withholding tax assessments such as EWT and WTC clearly contemplate deficiency internal revenue taxes. Their aim is to collect unpaid income taxes and not merely to impose a penalty on the withholding agent for its failure to comply with its statutory duty. Further, a holistic reading of the Tax Code reveals that the CIR's interpretation of Section 203 is erroneous. Provisions of the NIRC itself recognize that the tax assessment for withholding tax deficiency is different and independent from possible penalties that may be imposed for the failure of withholding agents to withhold and remit taxes. For one, Title X, Chapter I of the NIRC provides for additions to the tax or deficiency tax and is applicable to all taxes, fees and charges under the Tax Code. The Supreme Court, in the aforecited case, stated in no uncertain terms that a withholding tax assessment is not merely an imposition of penalty on the withholding agent. On the contrary, it was categorically held that the collection of withholding taxes falls squarely within the purview of Section 203 ofthe NIRC. The three (3)-year prescriptive period undjr Section 203 of the NIRC thus applies to withholding tax assessments.63..}"' 63 Commissioner of Internal Revenue v. First Philippine Electric Corporation, CTA EB Case No. 2091, CTA Case No. 9199, II November 2020.

DECISION CTA CASE NO. 10002 Page 18 of24 The VAT, EWT and WTC assessments have all prescribed. tpWthhreeeTsCNctar/xiRRTpeCtoritveu.rteeruAnpprsepneaphsrtlia,yofdaidilsntehigrdseettshhfbpoeeyollsntohapdwrieedetnieinpttgi(rfo3oadn)ivl-eeieyarsdeidoaaltnirorne,peaeesdfaradifclouosherdceoaposfersropveviesfditsrdieamtneuiodecdnenuutelc:nerld'neseta,VrrlSyAtheTsech,tioaEowpnWpinl2iTgc0a3tabhnoladetf VAT Returns64 Return Date Due/ Date of Filing Last day for respondent to assess Monthly Value-Added February 15, 2005 Tax Declaration (2550- May 17,2005 February 14, 2008 May 17,2005 May 16, 2008 M) for January 2005 April 25, 2005 May 16,2008 May 25,2005 April 24, 2008 Amended Monthly June 24, 2005 May 24,2008 Value-Added July 22, 2005 June 23, 2008 July 21, 2008 Declaration (2550-M) for October 5, 2005 January 2005 August 25, 2005 October 4, 2008 September 23, 2005 August 24, 2008 Amended Monthly September 22, 2008 Value-Added / Declaration (2550-M) for February 2005 Quarterly Value-Added Tax Retum(2550-Q) for I st Quarter of 2005 Monthly Value-Added Tax Declaration (2550- M) for April 2005 Amended Monthly Value-Added Tax Declaration (2550-M) for May 2005 Quarterly Value-Added Tax Retum(2550-Q) for 2nd Quarter of 2005 Amended Quarterly value-Added Tax Return (2550-Q) for 2nd Quarter of2005 Monthly Value-Added Tax Declaration (2550- M) for July 2005 Amended Monthly Value-Added Tax Declaration (2550-M) for August 2005 64 Exhibits "P-I I" to "P-1 1-0-1'', Records, VoL 2, pp. 935-978

DECISION CTA CASE NO. I0002 Page 19 of24 Quarterly Value-Added October 25, 2005 October 24, 2008 Tax Return(2550-Q) for November 25, 2005 November 24, 2008 December 23, 2005 December 22, 2008 3rd Quarter of 2005 May 2, 2006 May I, 2009 Monthly Value-Added January 25, 2006 January 24, 2009 Tax Declaration (2550- May 2, 2006 May 1, 2009 M) for October 2005 Last day for respondent Amended Monthly to assess Value-Added Tax Declaration (2550-M) for November 2005 Amended Monthly Value-Added Tax Declaration (2550-M) for November 2005 Quarterly Value-Added Tax Return(2550-Q) for 4th Quarter of 2005 Amended Quarterly Value-Added Tax Return(2550-Q) for 4th Quarter of 2005 EWT Returns65 Return Date Due/ Date of Filing Annual Return of February 21,2006 February 20, 2009 Expanded Withholding February 15, 2005 February 14, 2008 Taxes(l604-E) for 2005 March 15, 2005 March 14, 2008 Monthly Remittance April 13, 2005 April 12, 2008 Return for Creditable May 13,2005 May 12,2008 Income Taxes Withheld (1601-E) For January 2005 Monthly Remittance Return for Creditable Income Taxes Withheld (1601-E) For February 2005 Monthly Remittance Return for Creditable Income Taxes Withheld (1601-E) For March 2005 Monthly Remittance Return for Creditable Income Taxes Withheld (1601-E) For April2005 65 Exhibits "P-12" to "P-12-L", Records, Vo1s. 2-3, pp. 979-1004.

DECISION June 15, 2005 June 14, 2008 CTA CASE NO. 10002 July 15, 2005 July 14, 2008 Page 20 of24 August 15, 2005 August 14, 2008 September 15, 2005 September 14, 2008 Monthly Remittance October 14, 2005 October 13, 2008 Return for Creditable November 15,2005 November 14, 2008 Income Taxes Withheld December 15, 2005 December 14, 2008 (160 1-E) For May 2005 January 13, 2006 January 12, 2009 Monthly Remittance Return for Creditable Income Taxes Withheld (1601-E) For June 2005 Monthly Remittance Return for Creditable Income Taxes Withheld [1601-E) For July 2005 Monthly Remittance Return for Creditable Income Taxes Withheld (1601-E) For August 2005 Monthly Remittance Return for Creditable Income Taxes Withheld (1601-E) For September 2005 Monthly Remittance Return for Creditable Income Taxes Withheld (1601-E) For October 2005 Monthly Remittance Return for Creditable Income Taxes Withheld (1601-E) For November 2005 Monthly Remittance Return for Creditable Income Taxes Withheld (1601-E) For December 2005 WTC Returns66 Return Date Due/ Date of Filing Last day for respondent January 31, 2006 to assess Amended Annual February 15, 2005 Information Return of January 30, 2009 Withholding Taxes on Compensation and Final February 14, 2008 Withholding Taxes ./ Monthly Remittance Return for Income Taxes Withheld on Compensation (1 oOl-E) for January 2005 66 Exhibits "P-13" to "P-13-L", Records, Vol. 3, pp. 1005-1030.

DECISION March 15,2005 March 14, 2008 CTA CASE NO. 10002 April 15, 2005 Page 21 of24 May 13,2005 April 14, 2008 June 15, 2005 Monthly Remittance July 15, 2005 May 12, 2008 Return for Income Taxes August 18, 2005 September 15, 2005 June 14, 2008 Withheld on October 14, 2005 Compensation (160 1-E) November 15, 2005 July 14, 2008 December 15,2005 for February 2005 January 15, 2006 August 17, 2008 Monthly Remittance Return for Income Taxes September 14, 2008 Withheld on October 13, 2008 Compensation (160 1-E) November 14, 2008 for March 2005 Monthly Remittance December 14, 2008 Return for Income Taxes January 14, 2009 v Withheld on Compensation (160 1-E) for April 2005 Monthly Remittance Return for Income Taxes Withheld on Compensation (1601-E) for May 2005 Monthly Remittance Return for Income Taxes Withheld on Compensation (1601-E) for June 2005 Monthly Remittance Return for Income Taxes Withheld on Compensation (1601-E) for July 2005 Monthly Remittance Return for Income Taxes Withheld on Compensation (1601-E) for August 2005 Monthly Remittance Return for Income Taxes Withheld on Compensation (1601-E) for September 2005 Monthly Remittance Return for Income Taxes Withheld on Compensation (160 1-E) for October 2005 Monthly Remittance Return for Income Taxes Withheld on Compensation (1601-E) for November 2005 Monthly Remittance Return for Income Taxes Withheld on Compensation (1601-E) for December 2005

DECISION CTA CASE NO. 10002 Page 22 of24 It is of note that during the cross-examination of respondent's witness, Revenue Officer Matias Fadri III, the Court requested the parties to enter into a stipulation that the last tax return subject of the instant case was filed on 2 May 2006, to which petitioner and respondent both agreed: "JUSTICE SAN PEDRO: All right, can you give the period the latest ofwhich because your point is that these were executed at the period of2005 and the latest early 2006 so that you do not have to go monthly because I think, I am correct you will enter into a stipulation. ATTY. TEJADA: Yes, Your Honors. ATTY. FAUSTINO: Your Honors, may we enter into a stipulation that the last of the return was filed on May 2, 2006, the quarterly returns the monthly VAT returns, the monthly EWT returns and monthly WTC returns the last of which was filed, when of the last of which was filed on May 2, 2006. JUSTICE SAN PEDRO: Can you stipulate on that? ATTY. TEJADA: Yes, as far as I could remember it. JUSTICE SAN PEDRO: So the stipulation is that the last quarterly or monthly was on May 2006 and that all the other returns were filed earlier. ATTY. FAUSTINO: Yes, Your Honors." 67 Given the foregoing stipulation and applying the three (3)-year prescriptive period, the last day for respondent to assess deficiency taxes based on the stipulation will be on 1 May 2009. The date of issuance of the FLD/FAN determines whether or not respondent was able to issue an assessment within the prescriptive period. In the present case, respondent issued an undated FLD/FAN. Hence, the actual date of issuance of the FLD/FAN cannot be determined. However, the Memorandum prepared by the ROs which recommended the issuance of such FLD/FAN was dated 3 June 2009. Considering this, the FLD/FAN could not have been issued earlier than 3 June 2009. Accordingly, the assessment in the present case is void because it was only issued on 3 June 2009 at the earliest, which is beyond any ofthe last days of the three (3)-year prescriptive periods as computed above, whether the date as stated in the tables above, which is the last day to assess deficiency taxes for each tax return subject of the present assessment, or the date which has been stipulated upon by the parties as the lat?St date of filing of any of the tax returns subject of the present assessment.Y 67 See TSN, dated 9 February 2021, pp. 11�12.

DECISIOI> CTA CASl NO. I0002 Page 23 of24 The deficiency VAT, EWT, and WTC assessment in the total amount of Php 140,721,049.42 is consequently null and void for being issued beyond the prescriptive period. Given the above discussions, the Court deems it unnecessary to tackle the other issues raised in the Petition. WHEREFORE, in light of the foregoing considerations, the instant Petition for Review is GRANTED. The PAN, FLO/FAN, FDDA, and the Assailed Decision issued against petitioner are declared NULL AND VOID. The deficiency VAT, EWT and WTC assessments issued against petitioner for TY 2005, in the aggregate amount of Php 140,721 ,049.42, are hereby CANCELLED and SET ASIDE. Respondent is ENJOINED and PROHIBITED from collecting the said amount against petitioner. SO ORDERED. WE CONCUR: ER~P.UY Associate Justice QJ....,, ~ .-yL_ MA. BELEN M. RINGPIS-LIBAN 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. ER~P.UY Associate Justice Chairperson

DECISION CTA CASE NO. 10002 Page 24 of24 CERTIFICATION Pursuant to Section 13 of Article VIJJ 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. Presiding Justice