JARDINE LLOYD THOMPSON INSURANCE BROKERS, INC. v. COMMISSIONER OF INTERNAL REVENUE

Republic of the Philippines COURT OF TAX APPEALS Quezon City SPECIAL SECOND DIVISION JARDINE LLOYD THOMPSON CTA Case No. 8273 INSURANCE BROKERS, INC. Members: Petitioner, CASTANEDA, JR., Chairperson CASANOVA, and -versus- MINDARO-GRULLA, JL. COMMISSIONER OF INTERNAL Promulgated: REVENUE, FEB 1 1 2014 / I Respondent. r 7 ~, .. r x---------------------- -------------------------------------------- ----------- -------------x DECISION CASANOVA,].: The instant Petition for Review,1 filed by petitioner-Jardine Lloyd Thompson Insurance Brokers, Inc., dated April 14, 2011, seeks the refund or issuance of Tax Credit Certificate (TCC) in the amount of P8,880,039.00, representing its excess and unutilized creditable income taxes withheld for calendar year (CY) 2008. The facts of the case, as culled from the records, are as follows: Petitioner is a domestic corporation duly organized and existing under Philippine laws, with principal office at 25 th Floor, Philamlife Tower, 8767 Paseo de Roxas, Makati City2 and is primarily engaged in the business of insurance brokerage, and as such, receives commission income from various insurance companies.3#- 1 Docket, pp . 4-1 3. 2 Par. I, Petition for Review, Ibid, p. 4. 3 Par. 2, Stipulations, Joint Stipulation of Facts and Issues (JSFI), Id, p. 176.

DECISION CTA CASE NO. 8273 Respondent is the duly appointed Commissioner of Internal Revenue empowered to perform the duties of said office including, among others, the power to decide, approve and grant refunds or tax credits of erroneously or excessively paid taxes and may be served with summons and other legal processes of this Court at 5th Floor, BIR National Office Building, BIR Road, Diliman, Quezon City.4 Petitioner is registered with the Bu,reau of Internal Revenue (BIR) and was issued Tax Identification Number (TIN) 000-125-711-000 and BIR Certificate of Registration bearing RDO Control No. 8RC0000019169.5 On April 15, 2009, petitioner manually filed with the BIR its Annual Income Tax Return (ITR) for CY 2008, where it reported gross revenues in the total amount of P121,890,522.00, consisting of revenues from commissions, and an income tax due ofP1,394,162.56.6 Thereafter, on March 29, 2010, petitioner filed with the BIR Large Taxpayers Service (LTS)-Regular Taxpayers its administrative claim for refund of its excess and unutilized creditable withholding taxes (CWT) for CY 2008 in the amount ofP8,880,039.00.7 To this date, respondent has yet to decide on petitioner's claim for refund of excess and unutilized CWT for CY 2008.8 Consequently, petitioner filed its Petition for Review before this Court on April14, 2011. In her Answer,9 filed on May 24, 2011, respondent averred the following special and affirmative defenses: "5. She reiterates andre-pleads the preceding paragraphs of this Answer as part of her Special and Affirmative Defenses ~ 4 Par. I, Admitted Facts, JSF I, Id, p. 175 . 5 Par. 3, Sti pulations, JSF I, Id, p. 176. 6 Par. 5, Petition fo r Review, Id, p. 5; Par. 4, Stipul ations, JSFI, Id, p. l 76. 7 Par. 5, Stipulations, JSFI, Id , p. 176. 8 Par. 6, Stipul ations, JSF I, Id . 9 ld, pp. l47-152 .

DECISION CTA CASE NO. 8273 6. Petitioner's alleged claim for refund is subject to administrative routinary investigation/examination by the Bureau. 7. Petitioner failed to demonstrate that the tax subject of the case at bar was erroneously or illegally collected. 8. Petitioner must show that it has complied with the provisions of Sections 204 (c) and 229 of the Tax Code on the prescriptive period for claiming tax refund/credit. 9. Taxes remitted to the BIR are presumed to have been made in the regular course of business and in accordance with provisions of law. 10. Petitioner failed to substantiate its claim for refund/issuance of tax credit certificate in the amount of Eight Million Eight Hundred Eighty Thousand and Thirty Nine Pesos (P8,880,039.00) representing alleged unutilized creditable withholding tax for the taxable year 2008. 11. In the case entitled 'Commissioner of Internal Revenue vs. Rosemarie Acosta', the Supreme Court had the occasion to say: 'xxx Noteworthy, the requirements under Section 230 (now Section 204) for refund claims are as follows: 1. A written claim for refund or tax credit must be filed by the taxpayer with the Commissioner; 2. The claim for refund must be a categorical demand for reimbursement;' 3. The claim for refund or tax credit must be filed, or the suit or proceeding therefor must be commenced in court within two (2) years from date of payment of the tax or penalty regardless of any supervening cause. ~

DECISION CTA CASE NO. 8273 In our view, the law is clear. A claimant must first file a written claim for refund, categorically demanding recovery of overpaid taxes with the CIR, before resorting to an action in court. This obviously is intended, first, to afford the CIR an opportunity to correct the action of subordinate officers: and second, to notify the government that such taxes have been questioned, and the notice should then be borne in mind in estimating the revenue available for expenditure xxx.' (emphasis and underscoring supplied) 12. In order to be entitled to the refund being sought, petitioner must satisfactorily comply with the following requisites: a.) 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; b.) 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 c.) That the income upon which the taxes were withheld was included in the return of the recipient. 13. Petitioner must prove that the administrative and judicial claims were filed within the period prescribed by law. 14. Petitioner must prove that it has fully complied with the requirements of Revenue Memorandum Order No. 53-98, for purposes of submission of the supporting documents, otherwise, there would be no sufficient compliance with regard to the filing of an administrative claim for tax creditjrefund,6L

DECISION CTA CASE NO. 8273 which is a condition sine qua non prior to the filing of judicial claim; 15. In an action for refund, the burden of proof is on the taxpayer to establish its right to refund, and failure to sustain the burden is fatal to the claim for refund. 16. Claims for refund are construed strictly against the claimant for the same partake the nature of exemption from taxation. 17. Basic is the rule that tax refunds are regarded as tax exemptions that are in derogation of sovereign authority and are to be construed in strictissimi juris against the person or entity claiming the exemption (Philippine Phosphate Fertilizer Corporation v. Commissioner of Internal Revenue, G.R. No. 141973,]une 28, 2005). The law does not look with favor on tax exemption and that he who would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted (Sea Land Service Vs. Court of Appeals, 357 SCRA 444)." On July 22, 2011, the parties filed their Joint Stipulation of Facts and Issues. 10 During trial, petitioner presented the following witnesses: 1) Ms. Ma. Milagros F. Padernal11, Independent Certified Public Accountant (ICPA) and Ms. Maria Esperanza Rosario R. Dellosa12, petitioner's Assistant Vice- President (AVP). Thereafter, petitioner filed its Formal Offer of Evidence13 (FOE) on August 6, 2012. A Comment (On Petitioner's Formal Offer of Evidence) 14 was filed by respondent on August 17, 2012~ 10 ld, pp. 175 -1 78. 11 Minutes of the Hearin g dated October 12, 20 II , Id, p. 233; and, Min utes of the Heari ng dated March 5, 2012, ld, p. 26 1; 12 Minutes of the Hearin g dated October 12, 2011 , ld, p. 233; Min utes of the Heari ng dated December 12,20 II , ld, p. 242; Minutes of the Hearing dated April 23, 20 12, Id, p.l267; and, M inutes ofthe Heari ng dated May 28, 20 12, Id, p. 268. 13 ld, pp. 286-306.

DECISION CTA CASE NO . 8273 In a Resolution1s promulgated on September 19, 2012, the Court resolved petitioner's FOE and admitted Exhibits "A" to "1", "K", and "R" to "XX", inclusive of their sub-markings, but noted the following discrepancies: "a. Two documents were marked Exhibit MMf-302; and b. Exhibit 'K-1' described as 'Line 30A of petitioner's Annual ITR for CY 2009 showing prior year's excess credits other than MCIT in the amount of Php47.737.418.51 reported by petitioner', actually pertains to the amount of Php47.837.418.51." In the November 14, 2012 hearing16, respondent's counsel manifested the instant case has no report of investigation and that she has no witness to present. Thus, upon motion of the parties' counsels, the Court ordered them to file their respective Memorandum within thirty (30) days from November 14, 2012 or until December 14, 2012. On February 14, 2013, the Court considered the case submitted17 for decision taking into consideration respondent's Memorandum18 filed on December 4, 2012 and petitioner's Memorandum19 filed on January 28, 2013. On February 14, 2013, petitioner filed a Motion for Additional Time to File Formal Offer of Evidence2o which was denied by this Court in a Resolution21 promulgated on February 15, 2013. Hence, this Decision.pZ-- 14 ld, pp. 3 11-314. 15 ld, pp. 3 19-320. 16 Jd, p. 324. 17 Resolution dated February 14, 2013 , Td, p. 385 . 18 Id, pp. 325-335 . 19 Jd, pp. 366-382. 20 Id, pp. 386-388 . 21 Id, p. 390.

DECISION CTA CASE NO. 8273 The following are the parties' jointly stipulated issues22 submitted for this Court's resolution: 1. Whether or not petitioner had unutilized CWT for CY 2008 in the amount of Eight Million Eight Hundred Eighty Thousand and Thirty Nine Pesos (P8,880,039.00). 2. Whether or not petitioner's unutilized CWT amounting to Eight Million Eight Hundred Eighty Thousand and Thirty Nine Pesos (P8,880,039.00), for CY 2008 are duly substantiated by documentary evidence. 3. Whether or not the fact of withholding of the CWT for CY 2008, being claimed for refund was established. 4. Whether or not the income from which the subject CWT was withheld was reported as part of petitioner's gross income in its Annual ITR for CY 2008. 5. Whether or not petitioner's unutilized CWT for CY 2008 was applied against its income tax liability for the succeeding taxable year. 6. Whether or not petitioner filed its administrative and judicial claims for refund of excess CWT for CY 2008 within the two-year prescriptive period provided in Sections 204(C) and 229, Tax Code. 7. Whether or not petitioner is entitled to its claim for refund or issuance of Tax Credit Certificates for its excess and unutilized CWT for CY 2008 in the amount ofP8,880,039.00. Pertinent to the resolution of this case is the provision of Section 76 of the 1997 National Internal Revenue Code (NIRC), as amended, which provides: "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 orpc- 22 Issues, JSF I, ld, p. 177.

DECISION CTA CASE NO. 8273 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 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." Based on the afore-quoted provisions, a corporation entitled to a tax credit or refund of the excess income taxes paid in a given taxable year has two options: (1) to carry over the excess credit or (2) to apply for the issuance of a tax credit certificate or to claim a cash refund. If the option to carry-over the excess credit is exercised, the same shall be irrevocable for that taxable period and no application fo r cash refund or issuance of tax credit certificate shall be allowed therefor. The corporation must signify in its annual corporate adjustment return (by marking the option box provided in the BIR form) its intention, whether to request for a refund or claim for an automatic tax credit for the succeeding taxable year. To ease the administration of tax collection, these remedies are in the alternative, and the choice of one precludes the other.2.k_ 23 Philippine Bank of Comm unications vs. Co mm issioner of Intern al Revenue et at. , G. R. No. 11 2024, January 28, 1999.

DECISION CTA CASE NO. 8273 A perusal of petitioner's manually and electronically filed Annual Income Tax Return for taxable year 200824 shows that petitioner had total tax credits of PS8,111,621.00 which consisted of the prior year's excess credits in the amount of P49,231,582.00 and creditable taxes withheld during the year 2008 in the amount of P8,880,039.00 2S. Petitioner's MCIT in the amount of P1,394,162.56 was paid using a portion of its prior year's excess credits of P49,231,582.00 leaving the prior year's excess credits in the amount of P47,837,419.44 and creditable taxes withheld during the year 2008 in the amount of P8,880,039.00 totaling to PS6,717,458.44 unutilized as of December 31, 2008, as shown below: I Minimum Corporate Income Tax (MCIT) I p I ,394, 162.56 Less : Prior Year's Excess Credits I 49,23 I ,5 82.00 Ba lance of Prior Year's Excess Credits I p 47,837,419.44 Add : Creditable Taxes Withheld - 2008 I 8, 880 ,039. 00 Excess Creditable Taxes Withheld as of December 31 , 2008 p 56,717,458.44 Inasmuch as petitioner marked the option "To be refunded" in its Annual Income Tax Return for taxable year 200826 and reflected only the amounts ofP40,474,717.00 27 and P47,837,418.512Bas "Prior Year's Excess Credits" in its original and amended Annual Income Tax Returns for 2009, respectively, as well as in its Quarterly Income Tax Return for the 1st,29 2nd3o and 3rd3 l quarters of 2009, the unutilized creditable withholding taxes for taxable year 2008 in the amount of P8,880,039.00 may be the subject of a claim for refund under Section 76 of the NIRC of 1997, as amended. However, in addition to the requisite provided under Section 76 of the NIRC of 1997, a taxpayer must satisfY the following requirements in order to be entitled to a refund or issuance of tax credit certificate for excess/unapplied CWT:~ 24 Exh ib its " D" and "E". 25 P6,900,68 1.00 plus P1 ,979,358. 00, Lines 28C and 28 0 , Exhi bits " D" and "E". 26 Exhib its " D" and "E". 27 Amount carried over is lower by P7,362,702.44, Li ne 28A, E~i b it " I" (origina l 2009 Ann ua l Inco me Tax Return). 28 Amount carried over is lower by P 0.93 , Line 30A, Exhibit" "(amended 2009 Annuallncome Tax Return). 29 Exhi bit "FF". 30 Exhib it "GG". 31 Exhi bit " HH".

DECISION CTA CASE NO. 8273 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; 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.32 Anent the first requisite} the applicable provisiOns are Sections 204(C) and 229 of the 1997 NIRCJ as amended}which respectively provide: "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.}} "SEC. 229. Recovery of Tax Erroneously or Illegally Collected.- No suit or proceeding shall be maintained in any ~ 32 Section 2.58, Revenue Regul ations No. 2-98, as amended; Citibank N.A. vs. Court of Appeals and CIR, G.R. No. I07434, October I 0, 1997; ACC RA In vestment Corporation vs . CA, et al. , G.R. No . 96322, December 20, 199 1.

DECISION CTA CASE NO. 8273 Page II of 24 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." In the case of ACCRA Investments Corporation vs. The Honorable Court of Appeals, eta/., 33 the Supreme Court held that the reckoning of the two- year prescriptive period for the filing of a claim for refund or tax credit of excess income tax paid/withheld provided in the above-quoted provisions should commence from the date of filing of the final adjustment return. Applying the foregoing ruling to the case at bench, records show that petitioner manually filed its Annual Income Tax Return on April 15, 200934. Counting from this date, it can be inferred that the administrative claim3s filed by petitioner on March 29, 2010, as well as the Petition for Review filed on April 14, 2011, fell within the two-year prescriptive period. Thus, the first requirement has been complied with. In compliance with the second requisite, petitioner presented its Schedule of Creditable Taxes Withheld for 200836 and Certificates of__ 33 G.R. No. 96322, December 20, 199 1. 34 Par. 4, Stipul ations, JSF I, Docket, p. 176. 35 Exhi bits "C- 1 and " C". 36 Exhibit "JJ".

DECISION CTA CASE NO. 8273 Creditable Tax Withheld at Source37 [BIR Form 2307] issued to it by various withholding agents for the year 2008 which were examined by the Court- commissioned independent CPA, Uy Singson Abella & Co., through its partner, Ms. Ma. Milagros F. Padernal. In her report dated February 17, 2012, Ms. Padernal summarized her findings38 as follows: Exhibit Amount of Amount of No. KK BIR Form No. 2307 Income Payment Taxes Withheld LL Supported w ith original BIR Form No. 2307 in p 97,270,01 9.3 0 p 8,879,416 .89 the Petiti oner's name Not supported w ith ori ginal BIR Form No. 230r 3,252.49 325 .25 Error in recordin g 3,000 .00 300 .00 p 97,276,271.79 p 8,880,042.14 The ICPA explained that the error in recording pertains to a certificate of creditable tax withheld at source (BIR Form No. 2307) from Insurance Company of North America wherein the amount of tax withheld was reported in the summary prepared by petitioner39 as P1,838.24 but the actual BIR Form No. 2307 reflects only P1,538.24.40 The Court finds the !CPA's report in order. The total amount of P625.25 (P325.25 plus P300.00) requires a downward adjustment to the petitioner's claim. Therefore, out of the total claimed CWT of P8,880,039.00, petitioner was able to substantiate by proper withholding tax certificates only the creditable withholding taxes in the amount of P8,879,416.89 (Exhibit KK) for taxable year 2008. This brings us to the third requireme t of whether or not the income upon which the subject taxes were withheld were included and reported by petitioner in its Annual Income Tax Return for the taxable year 2008 ~ 37 Exh ib its " KKl " to " KK212". 38 Par. 6 of Exh ibit " UU", p. 6 of 15. 39 Exhibit "JJ". 40 Par. 6 of Exhibit "UU", p. 6 of 15.

DECISION CTA CASE NO. 8273 In the Supplemental Sworn Statement of Ms. Maria Esperanza Rosario R. Dellosa, petitioner's Assistant Vice-President, she explained the recording of petitioner's revenues in this wise: 41 "The Company's income is derived from its commissions and service fees. For the commission income, when a premium falls due, our insurer issues a billing statement to the Company for a particular policyholder. Upon receipt of the billing statement, the Company prepares a separate billing statement to be issued to the policy holder for the set-up of the receivables due from the client and the commissions earned by the Company for the particular billing. For service fees, a billing statement is likewise issued to our client. Once the Company has prepared the billing statements, for both commission income and service fees, a Production Report is prepared which summarizes, among others, the amount of the commission income and the service fees for that particular day. The total commission income and service fees reflected in the Production Report are thereafter posted in the Company's General Ledger. The total income posted in the Geneual Ledger will be the basis for the Company's Annual Income Tax Return." A perusal of petitioner's 2008 Annual Income Tax Return and Audited Financial Statements reveals that petitioner reflected revenues from its sale of services amounting to P121,890,522.0042. On the other hand, the valid withholding tax certificates showed that the creditable income taxes of P8,879,416.89 for taxable year 2008 were withheld on gross income payments ofP97,270,019.30, broken down as follows: ~ 41 A6, Exhibit " WW". 42 Line ISC, Exhibit "E".

DECISION CTA CASEN0. 8273 I Per Certificates [~ come Income Tax Nature of Income Payments Payments Withheld Commiss ion Income and Service Fees Other Income p 96,184,699.30 p 8,825, 150.89 Total I,0 85,320.00 54,266.00 p 97,270,019.30 p 8,879,416.89 The ICPA compared the total amounts of income payments relating to commission income and service fees indicated in the "Schedule of Production Report Generated from the Petitioner's BOSS System" for the calendar years 200843 and 200744 against the amounts of income per Summary of General Ledger account classification for the years 2008 and 2 0 0 7 4 5. The results of ICPA's comparison are summarized in the following table: 46 Particu Iars Classification Exhibit No . GL Amount Exhibit GL Amount (C 2008) No. (CY 2007) Commission Production Reports income MMa-1 P74,893 ,566.46 MMb-1 P55,867,499 .62 to MMa-1308 to MMb-472 43,587,562.50 Fees and other 99,455,062.12 47,916,584.78 income 122,81 0,151.24 Total Production Reports General Ledger NN 122, 136,315.86 NN I 01,086,280 .96 Difference (P 673,835.38) Pl,631,218.84 The petitioner explained that the difference is due to the following: Particulars 2008 2007 Fo reign exchange differences P745,793.77 P677, I56.17 Adj ustment made on estimated c lai ms hand ling cost (1,418,835.86) 951 '794.49 Accumu lated small differences adju sted in the current ear 2,268.18 Unaccounted difference (663.19) Difference (130.10) P1 ,631,218.84 (P 673,835.38) 43 Exhibits " MMa-1 " to " MMa-1308". 44 Exhibits "MMb-1" to "MMb-472". 45 Exhibit "NN" . 46 Par. 7 (c) ofExhibit "UU", p. 10 of 15 .

DEClSION CTA CASE NO. 8273 Accordingly, the foreign exchange differences relate to foreign exchange gains or losses arising from foreign currency denominated transactions which are recorded separately in the general ledger under Account Number 14049947. The claims handling cost are provided in the accounts by the petitioner based on the expectation of future servicing requirements for which an element of income is deferred to cover the associated contractual obligation. The adjustment in 2008 pertains to the lower provision set up in the accounts compared to the expected future servicing requirements while the 2007 adjustment relates to the higher accrued provision compared to the expected future servicing requirements. The ICPA also compared the amounts of commission income and service fees per general ledger for the calendar years 2008 and 2007 with the commission income and service fees declared as revenue per 2008 and 2007 Annual Income Tax Returns as follows: 4B Exhibit No. Parti cul ars CY 2008 CY 2007 NN Total per General Ledger P 122, 136,3 15.86 PI 0 I,086,280.96 12 1,890,522. 00 98,957,330.00 D Per Annual In co me Tax Return p 245,793. 86 p 2, 128,950.96 Diffe rence T he petitioner' s explanati ons for th e above di fference are summ arized as fo ll ows: Foreign exchange ga in per GL acco unt no. 140499 CY 2008 CY 2007 included as reconcil ing item in the Annual In co me Tax Return P745 ,793 .77 P677, 156.00 (500, 000. 00) 500,000.00 Accru al (reversal) of contingent profit co mmi ssion 95 1,794.00 Non-deductible handling cost for tax purposes 0.09 0.96 Roundin g-off d ifference P245 ,793.86 P2, 128,950 .96 To show that petitioner's commission income and service fees of P96,184,699.30 formed part of petitioner's gross income of P121,890,522.00 and P98,957,330.0049 in its 2008 and 2007 Annual Incom~ 47 Exhibits "NNa-3 " and "NNa- b". 48 Par. 7 (d) of Exhib it " UU" , pp. 10- 11 of 15. 49 Line 15C, Exhibit " H" .

DECISION CTA CASE NO. 8273 Tax Returns, respectively, petitioner offered the following documents: Summary of Income Payments with Tax Withheld Traced to Production Reports, Remittance Reports, Payment Vouchers and Official Receipts50; Schedule of Production Report Generated from BOSS System for taxable years 200851 and 200752; Remittance Reports53; Payment Vouchers for Premiums54 and Creditable Withholding Tax55; official receipts56; billing statements for 200857; Summary of General Ledger Account Classification5B; General Ledger Balance Detail- Income for 200859 and 200760; Account No. 100001 - Brokerage and Others61; Account No. 120003 - Profit Commissions62; Account No. 140499- Exchange Difference63; and, Account No. 150506- Input64. Upon examination of the aforesaid documents, the Court finds that petitioner has proven that the income payments of P96,184,699.30 upon which the valid creditable taxes of P8,825,150.89 were withheld were declared in its 2007 and 2008 Annual Income Tax Returns except for the amount of P58,332,023.13 the corresponding creditable tax withheld of which amounts to P5,309,498.52, to wit: Exhibit Period I Amount of Amount of No. Covered Payor Income Payment Taxes Withheld KK1 1st quarter Asalus Corporation p 688.04 p 68 .80 KK2 1st quarter Asalus Corporation 1 , 5 6 0 .3 0 156 .03 KK3 1st quarter Asalus Corporation 2,356 .36 235.64 KK4 1st quarter Asalus Corporation 2,498 .30 249.83 KK6 1st quarter Asalus Corporation 3,923 .10 392.31 KK8 1st quarter Asalus Corporation 15,997.82 1,599 .78 KK9 1st quarter Asalus Corporation 48,823.01 4,882 .3 0 50 Exhibit "MM". 51 Exhibits " MMa-1 " to "MMa-1308". 52 Exhibits " MMb-1 " to " MMb-472". 53 Exhibits " MMc-1 " to " MMc-319" . 54 Exhibits " MMd-1 " to " MMd-309". 55 Exhibits " MMe-1 " to " MMe-3 00". 56 Exhibits "MMf-1" to " MMf-302". 57 Exhibits "MMf303" to " MMf61 02". 58 Exhibit "NN ". 59 Exhibit "NNa". 60 Exhibit "NNb". 61 Exhibits "NNa-1 " and "NNb-1 ". 62 Exhibits "NNa-2" and "NNb-2". 63 Exhibits "NNa-3 " and "NNb-3 ". 64 Exhibits "NNa-4" and "NNb-4".

DECISION CTA CASE NO. 8273 KK10 1st quarter Asalus Corporation 128,584.45 12,858.44 KK13 1st quarter 252,268 .65 25,2 26.87 KK15 1st quarter Asalus Corporation 2,551,426.20 255 , 142 .6 2 KK18 2nd quarter KK19 2nd quarter Asalus Corporation 1,288.37 128.84 KK24 2nd quarter 1,506.60 150.66 KK28 2nd quarter Asalus Corporation 14,921.98 1,492. 20 KK31 3rd quarter 58,380.18 5,838.02 KK30 2nd quarter Asalus Corporation KK32 3rd quarter 698 .92 69 .89 KK34 3rd quarter Asalus Corporation 18,786.92 1,878.74 KK40 3rd quarter KK43 3rd quarter Asalus Corporation 1,125 .68 112.57 KK52 4th quarter 7,829 .88 782 .99 KK46 4th quarter Asalus Corporation 15,146.67 1, 514 .67 KK50 4th quarter 26,723 .18 2,67 2.32 KK53 4th quarter Asalus Corporation 2,246.42 224 .64 KK54 4th quarter KK42 3rd quarter Asalus Corporation KK45 3rd quarter KK56 4th quarter Asalus Corporation KK57 4th quarter KK59 4th quarter Asalus Corporation KK60 4th quarter KK61 4th quarter Asalus Corporation KK63 1st quarter KK64 1st quarter Asalus Corporation KK65 2nd quarter KK66 3rd quarter Asalus Corporation KK67 1st quarter KK68 1st quarter Asalus Corporation KK69 3rd quarter KK70 4th quarter Asalus Corporation KK71 2nd quarter KK72 2nd quarter Asalus Corporation 45.36 4.54 KK73 3rd quarter 29.47 2.95 KK74 4th quarter Asalus Corporation 166,965.21 16,696.53 KK75 1st quarter 5,835.46 583 .55 KK76 2nd quarter Asalus Corporation 8,838 .59 883.86 KK77 3rd quarter 21,569 .55 2, 156 .96 KK78 4th quarter Asalus Corporation 45,277 .82 4,527 .78 KK79 1st quarter 246 .01 24.60 Asalus Corporation 225 .21 22 .53 353,834 .91 35 , 38 3.49 Asalus Corporation 785.13 78.43 1,969.11 1, 579 .07 Asalus Corporation 570,313.43 57,031 .34 24,877.61 2,487 .76 Asalus Corporation 146,546.81 14, 654 .68 28,725 .51 2,872.55 Asia Insurance (Philippines) Corporation 829,127 .58 82,913 .86 1,053,410.57 105,341.69 Asia Insurance (Philippines) Corporation 754,728.67 76, 765 .00 753,918 .08 75 , 392 .53 Asia Insurance (Philippines) Corporation 213,755.40 21,375 .54 Asia Insurance (Philippines) Corporation I 922,059.40 92,205 .94 87 .89 8.83 Asianlife and General Assurance Corporation 215,643.54 21 ,564 .35 59,330.40 5,933.04 -= Asianlife and General Assurance Corporation ~ Asianlife and General Assurance Corporation Asianlife and General Assurance Corporation BPI/MS Insurance Corporation BPI/MS Insurance Corporation BPI/MS Insurance Corporation BPI/MS Insurance Corporation I Federal Phoenix Assurance Company, Inc. Federal Phoenix Assurance Company, Inc. Federal Phoenix Assurance Company, Inc. Federal Phoenix Assurance Company, Inc. I First Guarantee Life Assurance Company, Inc.

DECISION CTA CASE NO . 8273 KK83 2nd quarter Fortune General Insurance Corporation 1,569.10 156.91 KK84 2nd quarter 982,434.00 98,243.40 KK85 4th quarter Fortune General Insurance Corporation KK86 3rd quarter 59 ,327 .50 5,932.7 5 KK87 3rd quarter Fortune General Insurance Co rporation 34,746 .30 3,4 74.63 KK89 4th quarter 675 , 253.30 65,8 09 .44 KK90 1st quarter Fortune Medicare Inc. 395,557.25 39,55 5.72 KK93 4th quarter 33 ,378 .84 3,33 7. 89 KK94 1st quarter Fortune Medicare Inc. 393,44 2.49 39, 344 .25 KK95 2nd quarter 716,861 .10 7 1,6 86.1 1 KK96 2nd quarter Fortune Medicare Inc. I KK97 3rd quarter 253.54 25.41 KK98 3rd quarter Generali Pilipinas Insurance Company, Inc. 500,676 .50 50,0 67 .65 KK99 4th quarter 782,620 .10 78,262 .0 1 KK101 2nd quarter Generali Pilipinas Insurance Company, Inc. 628 ,335 .10 62,833.51 KK10 2 3rd quarter KK103 3rd quarter Generali Pilipinas Life Assurance Company, Inc. 46 .8 4 4.69 KK105 4th quarter 137,162.40 13, 716.24 KK107 4th quarter Generali Pilipinas Life Assurance Company, Inc. 246,449 .10 24,644.91 KK108 4th quarter KK1 09 2nd quarter Generali Pilipinas Life Assurance Company, Inc. 60.81 6.08 KKllO 3rd quarter 104, 277 .74 10,427.77 KK111 4th quarter Generali Pilipinas Life Assurance Company, Inc. KK112 1st quarter 47,014.76 4,701 .48 KK113 2nd quarter Generali Pilipinas Life Assurance Company, Inc. 74,419.10 7,44 1.9 1 KK114 3rd quarter KK115 4th quarter Generali Pilipinas Life Assurance Company, Inc. 71.90 7.20 KK119 1st quarter 14, 754 .75 1,475.47 KK120 2nd quarter Insurance Company of North America 954,460 .70 95,4 46 .07 KK1 21 3rd quarter 1,038,536 .33 103,8 53.63 KK1 22 4th quarter Insurance Company of North America 765 ,808 .70 76,580.87 KK124 3rd quarter 1,843, 708 .69 184,3 70 .8 7 KK125 3rd quarter Insurance Company of North America 613, 858 .06 61,385.8 1 KK126 4th quarter 788,710.29 78,8 7 1.03 KK127 1st quarter Insurance Company of North America 719,895 .70 7 1,98 9 .57 KK128 2nd quarter 2,373,158. 20 237,3 15.82 KK1 29 1st quarter Insurance Company of North America KK130 2nd quarter 110.42 11. 04 KK131 3rd quarter Insurance Company of North America 236,160.20 23, 616. 02 KK133 1st quarter KK136 4th quarter MAA General Assurance Phils., Inc. 6,609 .98 66 1.00 KK137 1st quarter 70,000.00 7,000 .00 MAA General Assurance Phil s., Inc. 1, 245,609.40 12 4,56 0 .94 73,468 .60 7,346 .86 MAA General Assurance Phils., Inc. 34,648 .82 3,464 .88 14,395 .6 2 1,439.43 M alayan Insurance Company, Inc. 2,937,260 .65 293 ,726. 07 128 ,637 .10 12,8 63.72 Malayan In surance Company, Inc. 271,068.40 27,106 .84 Malayan In surance Company, Inc. Malayan Insurance Company, Inc. Maxicare Healthcare Corp. Maxicare Healthcare Corp. Maxicare Healthcare Corp. Maxicare Healthcare Corp. Medicard Philippines, Inc. Medicard Philippines, Inc. Medicard Philippines, Inc. New Hampshire In surance Company New Hampshire In surance Company PGA Sompo Japan Insurance Inc. PGA Sompo Japan In surance Inc. PGA Sompo Japan In surance Inc. Philam Insurance Company, Inc. Philam Insurance Company, Inc. Philamcare Health Systems, Inc.

DECISION CTA CASE NO . 8273 KK138 2nd quarter Philamcare Health Systems, Inc. 58,746.40 5,874.64 KK139 3rd quarter 61,831.60 6,183 .16 KK140 3rd quarter Philamcare Health Systems, Inc. I 37,530.27 3,350.92 KK141 3rd quarter 19,949.49 16,624.56 KK142 4th quarter Philippine AXA Life Insurance Corporation 61,366 .25 5,479.13 KK143 1st quarter 95,402.56 9,540 .24 KK145 3rd quarter Philippine AXA Life Insurance Corporation KK146 4th quarter 18.94 1.70 KK147 2nd quarter Philippine AXA Life Insurance Corporation 6,924.96 692.48 KK148 3rd quarter 348,401.44 34,840.27 KK149 3rd quarter Philippine Charter Insurance Corporation 40,035.27 5,477 .15 KK150 4th quarter 1,388,528.26 138,761.70 KK151 4th quarter Philippine Charter Insurance Corporation 27,825 .03 2,782.92 KK152 1st quarter 1,009,556.40 100,955 .64 KK153 2nd quarter Philippine Charter Insurance Corporation 551,868 .09 55,186 .93 KK154 3rd quarter 124,237.07 12,423 .71 KK155 4th quarter Pioneer Insurance and Surety Corporation KK160 1st quarter 18.42 1.71 KK161 2nd quarter Pioneer Insurance and Surety Corporation 102,246 .8 5 9,897.80 KK162 3rd quarter 5,352,468.49 535,246 .85 KK163 4th quarter Pioneer Insurance and Surety Corporation 289,603 .93 28,960.39 KK164 4th quarter 2,627,427 .11 262,742.71 KK165 1st quarter Pioneer Insurance and Surety Corporation 4,046 .96 KK166 2nd quarter 40,469 .60 99,729 .87 KK167 3rd quarter Pioneer Insurance and Surety Corporation 997,298.70 178,324.34 KK168 4th quarter 1,783,243.40 46,939 .90 KK169 4th quarter PNB General Insurers Co., Inc. 469,402 .80 74,715 .16 KK170 1st quarter 747,151 .60 56,631.53 KK172 3rd quarter PNB General Insurers Co., Inc. 566,315.30 82,882.73 KK174 1st quarter 828,827.30 38,403.86 KK175 3rd quarter PNB General Insurers Co., Inc. 384,038.55 6,254 .57 KK176 2nd quarter 4,301.26 KK178 1st quarter PNB General Insurers Co., Inc. 62,545 .66 11,471 .07 KK179 2nd quarter 43,012 .61 14,905.95 KK180 1st quarter Prudential Life Healthcare Inc. 114,710.69 KK181 1st quarter 149,059.39 550 .00 KK182 3rd quarter Prudential Life Healthcare Inc. 27,500.00 49,308 .78 KK183 4th quarter 493,087.87 68,904.3 6 KK184 3rd quarter Prudential Life Healthcare Inc. 689,043.60 10,110.05 KK185 4th quarter 101,100.50 KK186 3rd quarter Prudential Life Healthcare Inc. 918.30 KK188 1st quarter 9,183 .00 1,058 .62 Prudential Life Healthcare Inc. 10,342.84 7,196 .68 71,966.80 12,831.93 QBE Insurance Phils., inc. 128,319.30 51,961.30 219,306 .77 14,666.66 QBE Insurance Phils., inc. 733,333 .00 QBE Insurance Phils., inc. QBE Insurance Phils., inc. QBE Insurance Phils., inc. Standard Insurance Co., Inc. Standard Insurance Co ., Inc. Sunlife of Canada (Philippines) Inc. Sunlife of Canada (Philippines) Inc. Sunlife of Canada (Philippines) Inc. I Philippine American Life and General Insurance Company Tokio Marine Malayan Insurance Company, Inc. Tokio Marine Malayan Insurance Company, Inc. UCPB General Insurance Company, Inc. UCPB General Insurance Company, Inc. UCPB General Insurance Company, Inc. ' United Coconut Planters Life Assurance Corporation United Coconut Planters Life Assurance Corporation BPI/MS Insurance Corporation Glaxosmithkline Philippines, Inc.

DECJSJON CTA CASE NO. 8273 KK190 3rd quarter Glaxosmithkline Philippines, Inc. 2,359,575.50 47,191.51 KK191 1,217,525 .50 24,350.51 KK193 4th quarter Glaxosmithkline Philippines, Inc. KK194 27,782.51 2,778 .25 KK197 2nd quarter HMC Inc. 227,283.00 19,773 .62 KK199 1, 700,000.00 170,000.00 KK200 1st quarter lntertek Testing Services Phils., Inc. 336,041.20 KK201 166,919.50 6,720.82 KK202 3rd quarter Manila North Tollways Corporation 1,383,243 .68 3,338.39 KK203 498,804.00 27,664 .87 1st quarter Sara Lee Philippines Inc. 261,856.00 4,988 .04 p 58,332,023.13 2,618 .56 2nd quarter Sara Lee Philippines Inc. p 5,309,498.52 3rd quarter Sara Lee Philippines Inc. 3rd quarter Subic Water and Sewerage Company Inc. 4th quarter I Subic Water and Sewerage Company Inc. TOTAL COMMISSION INCOME AND SERVICE FEES The Court, however, cannot trace with certainty from the production report, general ledger and Annual ITR, the income payments of P58,332,023.13. We note that the Annual ITR merely provides summarized data without the supporting schedule or notes that will enlighten the Court as to the detailed items included therein. As for the amount of Pl,085,320.00, with a corresponding withholding taxes of P54,266.00 classified as Other Income, petitioner submitted before this Court documents such as the Lease and Sub-lease Agreements entered into by petitioner during the CY 200865; Lease Contracts (Philamlife Tower-Head Office66 and Kepwealth Property Phils., Inc., Cebu Branch67); Contracts of Sub-lease with Jardine Davies Investment, Inc.6s and York Philippines, lnc.69; Schedule of Rent Expense for 200870; Journal Vouchers on Rental and Other Charges to Jardine Davies Investment Inc.71 and York Philippines, lnc.72; Journal Voucher for the Reversal of Accrual of Rent Expense73; General Ledger of Rent Expense - Account No. 23000174; and, official receipts of rent income collected7S to support the same. According to petitioner, rental income is recorded as a reduction against the rent expense account in the general ledger. The ICPA reviewed.6_ 65 Exh ibit "00". 66 Exh ibit "00 1''. 67 Exhibit "002". 68 Exhibit " 003". 69 Ex hibit "004". 70 Exhibit " PP" . 71 Exhibits " PPI " to " PP1 3". 72 Exhi bits " PP1 4" to "P P18". 73 Exhi bit " PP 19". 74 Exhibits " PPa-1 " to " PPa-7". 75 Exhibits " PPb-1 " to " PPb-6".

DECISION CTA CASE NO. 8273 Page 2 1 of 24 the "rent expense based on the provisiOns of the agreements and JVs examined as summarized in the Schedule of Movements of Rent Expense"76 and "traced the income shown as deductions from the amount of rent expense reflected in the generalledger."77 Upon verification, the Court finds that petitioner was able to prove that the income payments in the amount of P1,085,320.00, upon which the withholding taxes of P54,266.00 were withheld, were indeed reported in its Annual ITR for the year 2008. In sum, petitioner has complied with the three (3) aforementioned substantiation requirements but only in as much as the CWT of P3,569,915.23 out of the total claim ofP8,880,039.00, as determined below: Clai m fo r Refund/TCC I Amount of Am ount of Income Payments CWT Less: Disa ll owed (No supporting BJR Form 2307 and error in record ing) p 97,276,271.79 p 8,880,039.00 Income payments can not be traced fro m the GL 625.25 6,252.49 Substantiated CWT 5,309,498 .52 58,332,023 .13 p 3,569,915.23 I p 38,937' 996.17 In order to prove that no amount of the subject claim was utilized to pay for its 2008 MCIT liability of P1,394,162.5678, petitioner presented various Certificates of Creditable Tax Withheld at Source for the years 1999 to 200779� Records show that the Prior Year's Excess Credits of P49,231,582.00 reflected in petitioner's 2008 Annual Income Tax Return represents the balance of petitioner's excess and unutilized tax credits from 1999 to 200780. For taxable years 1999 t o 2007, petitioner's creditable withholding taxes amounts to P57,314,802.00, tax payments of P550,819.00 and MCIT liability/income taxes due in the aggregate amount of P8,634,039.64, leaving the unapplied tax credits from 1999 to 2007 in the amount ofP49,231,581.36, detailed as fbllows: -GL- 76 Exh ibit "P P". 77 Exhibit " PPa-1" ; Par. 8 (b) ofExhibit "UU", p. 12 of 15. 78 Exh ibit "E-3" . 79 Exh ibits "QQ I" to "QQ 11 73 ". 80 Exhibits "W", "X", "Y", "Z", "AA", "BB", "CC", "D D" and ,, E".

DECISION CTA CASE NO. 8273 Exhibit Year Creditable Tax Tax MCIT/ Balance of Withheld Payments Income Tax Prior Years w 1999 Excess Credits p 3,076,766.00 p 550,8 19.00 Due p 2, 199,962.00 X 2000 2, 182,038.00 p 550,819.00 p 876,804.00 4,022,813 .00 4,382,000.00 y 200 1 9,257,991.00 I ,337,722. 16 8,404,81 3.00 8,342,787.00 1,651,372.16 16,325,081.84 z 2002 13,724,663 .00 I,34 1,007.48 23 ,0 16,496.68 9,345,042.00 I ,148,624.84 35,400, 152.20 AA 2003 1,22 6 ,4 85.32 43,596,569.36 To be refunded I,052,023 .68 42 ,370,084 .04 BB 2004 7,3 62,702.00 p 8,634,039.64 p 49,23 1,581.36 cc 2005 p 57,314,802.00 DD 2006 EE 2007 Total Out of the reported creditable withholding taxes for the years 1999 to 2007 of PS7,314,802.00, petitioner substantiated the amount of PS7,015,99S.SS which were summarized in the Schedule of Prior Years' Creditable Taxes Withheld on Commission Income and Service Fees supported by original BIR form 2307 for the taxable years 1999 to 200781. Therefore, the substantiated creditable tax withheld for the years 1999 to 2007 ofPS7,015,99S.SS are more than enough to cover the tax liabilities for years 1999 to 2007 in the aggregate amount of P8,634,039.64. Thus, petitioner has sufficiently proven that it has excess tax credits as of December 31, 2007 against which the tax liability of P1,394,162.56 for the year 2008 may be offset or credited. In fine, the Court finds the evidence adduced by petitioner to be sufficient for it to be entitled to its claim for refund or issuance of tax credit certificate in the reduced amount of P3,569,915.23, representing petitioner's excess and unutilized creditable income taxes withheld for calendar year 2008. WHEREFORE, premises considered, the instant Petition for Review is hereby PARTIALLY GRANTED. Accordingly, respondent is hereby ORDERED TO REFUND or TO ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the reduced amount of P3,569,915.23, representing petitioner's excess and unutilized creditable income taxes withheld for calendar year 2008. ~ 81 Exhi bit "QQ".

DECISION Associate Justice CTA CASE NO. 8273 SO ORDERED. WE CONCUR: ~c~CAc;{~A.il. - Associate Justice (On Leave) CIELITO N. MINDARO-GRULLA Associate Justice ATTESTAT ON 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. ;;;z~~ Ll. ~~-o4 . Q JUAN ITO C. CASTANEDA, }If. ' Associate Justice Chai person, Second Division

DECISION CTA CASE NO. 8273 CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, 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