LICEL CALDERON, JULIETTE CALINGO, SHEILA DOROTHY CALLET, CARMELA CANARE, AGNES CANILLAS, MA. LAARNI CANONIZADO, REBECCA CANOY, ODESSA CANTO, CECILIA CAPARAS, EILEEN CAPILIT, MA. VIRGINITA CAPULONG, NINEBETH CARANDANG, MARY GRACE CARANTO, HELEN CARNECER, CYNTHIA CARREON, XANDRO JOAQUIN CASTANEDA, LEAH ANN CASTRO, MA. FATIMA CHERYL CATACUTAN, SYLVIA CATAPANG, ANA CERVANTES, LAURIE ANN CERVANTES, MA. ROWENA CHAM, MARY ANNE CHANECO, AZALEA CHANYONGCO, CANDY CHAO, PATRICIA TUAZON CHING, GERALDINE CHU, MAILA CINCO, MARILETH CO, CHRISTINE DIANNE COBARRUBIAS, MA. LORECA COBILLA, JERRY COLASITO, PAULIT

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY Second Division LICEL CALDERON, ET.AL., CTA CASE No. 9090 Petitioners, Members : - versus- CASTANEDA, JR. CASANOVA, COMMISSIONER OF MANAHAN, JJ . INTERNAL REVENUE, Promulgated : Respondent MAR 2 7 2018 ){- - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - ){ DECISION MANAHAN,J.: This is a Petition for Review1 filed on July 13, 2015 by several Filipino employees of the Asian Development Bank (ADB), praying for the refund of their alleged erroneously and illegally paid income tax in the aggregate amount of Forty-Five Million Seven Hundred Seventy- Two Thousand Six Hundred Sixty Pesos and 30/100 (P45,772,660 .30) for taxable years 2012 and 2013. PARTIES Petitioner Licel Calderon and her co-petitioners are all Filipino employees of ADB, whose office is located at 6 ADB Ave. , Mandaluyong City. 2 ~ 1 Docket, vol. 1, pp. 14-32 2 Par. 2, Petition for Review, docket, vol. 1, p. 17

CTA Case No. 9090 Page 2 of25 The Commissioner of Internal Revenue (respondent) is the government official charged with the administration and enforcement of national internal revenue laws and who has the power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto or other matters arising under the National Internal Revenue Code (NIRC) or other laws or portions thereof administered by the BIR. He holds office at the sth Floor, BIR National Office Building, Agham Road, Diliman, Quezon City. FACTS On April 12, 2013, respondent issued Revenue Memorandum Circular (RMC) No. 31-2013 entitled "Guidelines on the Taxation of Compensation Income of Philippine Nationals and Alien Individuals Employed by Foreign Governments/Embassies/Diplomatic Missions and International Organizations Situated in the Philippines." It provides, among others, that officers and staff of the ADB who are not Philippine nationals shall be exempt from Philippine income tax. Section 2(d)(1) of RMC No. 31-2013 states: "SECTION 2. Tax Treatment ofCompensation Income. - The tax treatment of Philippine nationals and alien individuals on compensation income received by them from foreign governments/embassies and missions and international organizations shall be as follows: XXX XXX XXX (d) Those Employed by Organizations Covered by Separate International Agreements or Specific Provisions ofLaw- 1. Asian Development Bank (ADB) Section 45 (b), Article XII of the Agreement between the Asian Development Bank and the Government of the Republic of the Philippines regarding the Headquarters ofthe Asian Development Bank provides: 'ARTICLE XII XXX XXX XX~

CTA Case No. 9090 Page 3 of25 Section 45. Officers and staff of the Bank, including for the purposes of this Article experts and consultants performing missions for the Bank, shall enjoy the following privileges and immunities: XXX XXX XXX (b) Exemption from taxation on or in respect of the salaries and emoluments paid by the Bank subject to the power of the Government to tax its nationals;' Underscoring supplied From the above, only officers and staff of the ADB who are not Philippine nationals shall be exempt from Philippine income tax." (Emphasis supplied) Since the said RMC was given retroactive effect, Filipino employees of the ADB were ordered to declare and pay income taxes for 2012 onwards. Petitioners paid the following amounts as their income taxes for taxable years 2012 and 2013:3 PETITIONER INCOME TAX PAID TOTAL Lice! Calderon 2012 2013 -p 106 983.60 Juliet Calinqo 257 387.59 Shiela Dorothy Callet p 106 983.60 p 162 123.74 Carmela Canare 257 387.59 588 016.16 Agnes Canillas 162 123.74 296.699.00 636 320.78 Ma. Laarni Canonizado 291,317.16 323,998.00 283 655.90 Rebecca Canoy 312 322.78 265 860.82 Odessa Canto 283 655.90 591,182.00 1102 140.43 Cecilia Caparas 265 860.82 469 399.70 Eileen Capilit 510,958.43 557 003.00 391 412.78 Ma. Viroinita Capulong 469 399.70 736 184.07 Ninebeth Carandang 391 412.78 1 909 154.95 Marv Grace Caranto 736 184.07 176 830.16 Helen Ca rnecer 189 066.29 Cynthia Carreon 1 352,151.95 494 824.75 Xandro Joaquin Castaneda 176 830.16 446 705.44 Lea Ann Castro 189 066.29 149 859.92 Ma. Fatima Cheryl 494,824.75 410,737.43 Catacutan 446,705.44 Sylvia Catapano 149,859.92 771 352.09 Ana Cervantes 410,737.43 482 286.57 Laurie Ann Cervantes 212 527.00 Ma. Rowena Cham 393,584.09 377 768.00 1,022,600. 73 Mary Anne Chaneco 482 286.57 522 407.00 149 764.00 Azalea Chanyongco 212 527.00 500 193.73 157 268.20 ._. 149 764.00 157,268.20 3 Par. 13, Petition for Review, docket, vol. 1, pp. 24-26

CTA Case No. 9090 319 245.04 211,473.00 530 718.04 Page 4 of25 400,276.59 407 773.00 808 049.59 377,315.80 395 135.00 772 450.80 Candy Chao 176 026.81 300 938.00 176 026.81 Patricia Tuazon Ching 262 409.93 563 347.93 Geraldine Chu 135,723.89 344 025.00 135,723.89 Maila Cinco 316 820.00 Marileth Co 340 859.03 256 600.00 340 859.03 Christine Dianne 102 030.41 456 754.00 102 030.41 Cobarrubias 323 348.72 264 465.00 667 373.72 Ma. Loreca Cobilla 316 431.20 153 440.00 633 251.20 Jerry Colasito 246 678.15 503 278.15 Paulita Cornia 451 792.08 49 237.52 908,546.08 Camille Contreras 249 082.64 268 775.00 513 547.64 Nedilla Correa 142 696.07 194 645.00 296,136.07 Josefa Maria Coscolluela 225 270.82 340 180.00 225,270.82 Melanie Covar 147 102.69 147,102.69 Mary France Creus 126 963.83 350 108.00 176 201.35 Marisol Crisostomo 267 498.26 139 867.00 536,273.26 Claribella Cruz 194 644.00 390,065.00 389,289.00 Fermirelyn Cruz 79 902.19 79 902.19 Gene Oliver Cruz 344 026.01 150,141.00 684 206.01 Grace Cruz 384 729.75 384 729.75 Jerome Cruz 198 313.46 154,855.00 198 313.46 Kristine Cruz 150 200.69 291,187.00 150 200.69 Ma. Lenina Tanya Cruz 337 721.94 687 829.94 Marqaret Rose Cruz 58 301.12 420 264.00 58 301.12 Mary Grace Kristine Cruz 275 744.81 131,662.00 415 611.81 Mary Jane Cruz 391 339.12 252 317.00 781 404.12 Shiela Cruz 267 508.39 211 904.00 267 508.39 Ligaya Cuevas-Arce 400 129.00 333 970.00 400 129.00 Tadeo Culla 144,848.51 441 761.00 294 989.51 Ramon Dacia 219 583.10 390 009.00 219 583.10 Lailaine Danao 134,895.30 411 220.00 134,895.30 Marie Remilyn Dandan 662 862.00 Marie Lullete Daria 263 434.29 120 369.00 263 434.29 Shiela Ann David-De 152 850.27 203 000.50 307 705.27 castro 474 379.69 474 379.69 Janeth De Belen 289,018.79 300 315.14 580,205.79 Juan Armando De Borja Elena De Castro 546 954.24 546 954.24 Maria Bernadette De 410,836.51 831100.51 Castro 152,808.56 Modesta De Castro 21,146.56 Arnel De Gracia 500 540.22 Charmaine Ruth De 248,223.22 297 685.52 Guzman 297,685.52 418 667.12 Ma. Cielo De Guzman 206 763.12 160 743.96 Maria Guia De Guzman 160,743.96 603 204.11 Mia Gracia De Guzman 269,234.11 142 966.09 Jennifer De Jesus 142,966.09 886 092.31 Rosarie Celine De Leon 444L331.31 757 216.23 Mary Jane De Ocampo 367 207.23 349 205.66 Eduardo De Vevra 349 205.66 819 994.32 Marisol Del Rosario 408 774.32 1,325,786.86 Marlo Del Rosario 662 924.86 161,391.67 Hazel Joy Dela Cruz 41 022.67 369 344.41 Ramoncito Dela Cruz 166 343.91 353,031.94 Shiela Dela Cruz 353,031.94 Fernando Dela Fuente 600,630.28 ~ Marcela Leonila Dela 300 315.14 Merced Excelsa Dela Santa

CTA Case No. 9090 Page 5 of25 Ma. Melissa DelaTorre 446 192.17 243,708.00 446 192.17 Lamberto Delgado Jr. 246 244.52 331 066.00 489 952.52 Czareana Delio 156 570.63 176 392.00 156 570.63 Ma. Cristina Delos Santos 306,109.10 277 855.00 637 175.10 Merdinia Deguilla 110,477.00 128 333.34 110 447.00 Lyrah Tatiana Devanadera 131,722.89 308 114.89 Vladimer Diamonon 274,345.99 537 420.00 552 200.99 Maria Carmen Diaz 222 777.79 295 710.00 351111.13 Vanessa Dimaano 493,570.64 493 570.64 Linda Dimayuga 503,900.28 284 046.00 503 900.28 Ma. Juana Dimayuqa 541,724.84 1 079 144.84 Irene Dionisio 301,997.28 278 049.00 597 707.28 Michael Diza 171137.42 319,036.00 171137.42 Aivv Katherine Dizon 226 536.82 226 536.82 Madeline Dizon 285 420.28 372 543.00 569 466.80 Liza Jane Domingo 216 677.34 P15,229,352.50 216 677.34 Michelle Domingo 464 154.91 464 154.91 Julius Cesar Duque 273 741.04 551 790.04 Maria Josephine Duque- 610,668.83 929,704.83 Cornia Jessica Ebio 302 453.45 302 453.45 Ma. Helen Ebora 222 211.23 222 211.23 Irma Ebreo 361 234.49 733,777.49 TOTAL P30,543,307 .80 P45,772,660.30 On February 14, 2014, Mr. Erwin Salaveria and Ms. Portia Gonzales, Filipino employees of the ADB, filed a Petition to Nullify Section 2(d)(1) of RMC No. 31-2013, with the Regional Trial Court (RTC) Branch 213 of Mandaluyong City, docketed as Civil Case No. MC14-8775. On September 30, 2014, the RTC promulgated a decision in Civil Case No. MC14-8775 declaring Section 2(d)(1) of RMC No. 31-2013 as void for being issued without legal basis, in excess of authority and/or without due process of law due to absence of legislation and/or regulation to the contrary. A Motion for Reconsideration was filed by respondent but was denied on January 9, 2015. Respondent appealed the lower court decision to the Court of Appeals, docketed as CA-G.R. CV No. 104374, which dismissed it via Resolution dated July 3, 2015. The Court of Appeals ruled that the proper appeal would have been to file a petition with the Supreme Court via Rule 45 of the Rules of Court. Respondent filed a Motion for Reconsideration, but it was also denied by the Court of Appeals. Respondent then elevated the case before the Supreme Court by filing a Petition for Review on Certiorari. The case is still awaiting resolution by the High Tribunal.~

CTA Case No. 9090 Page 6 of25 Armed with a favorable RTC ruling, petitioners filed their respective administrative claims for refund of income tax with the BIR on June 11, 20154 and on June 22, 20155� Due to the inaction of respondent on the refund claims, petitioner was prompted to file the present Petition for Review before this Court on July 13, 2015. Respondent then filed his Answer6 on September 28, 2015. The pre-trial conference was initially scheduled on November 12, 2015, 7 but was subsequently cancelled and reset to December 10, 20158� Thus, petitioners filed their Pre-Trial Brief9 on November 6, 2015; while respondent submitted his Pre-Trial Brief10 on December 3, 2015. After presenting their witnesses, petitioners filed their Formal Offer of Evidence (for the Petitioners) 11 on October 17, 2016, consisting of Exhibits "P-1" to "P-17'', inclusive of sub-markings. In a Resolution 12 issued on December 12, 2016, the Court admitted all the formally offered exhibits as petitioner's evidence, except for Exhibit "P-2" for failure to submit the original document for comparison and Exhibit "P-7-2-a" for failure to submit the duly marked exhibit. On December 12, 201613 a Resolution to petitioners' FOE was issued admitting all except Exhibits "P-2" for failure to submit the original for comparison and "P-7-2-a" for failure to submit the duly marked exhibit. On the other hand, respondent, through counsel, manifested that he will no longer be presenting evidence. 14~ 4 Annex "A", Petition for Review, docket, vol. 1, pp. 134-144 5 Annex "B", Petition for Review, docket, vol. 1, pp. 145-155 6 Docket, vol. 1, pp. 208-221 7 Docket, vol. 1, pp. 222-223 8 Order, docket, vol. 1, p. 233 9 Docket, vol. 1, pp. 224-229 10 Docket, vol. 1, pp. 236-238 11 Docket, vol. 2, pp. 631-666 12 Docket, vol. 2, pp. 814-816 13 Docket, vol. 2, pp. 814-816 14 Order, docket, vol. 2, p. 820

CTA Case No. 9090 Page 7 of25 The Court declared the instant case submitted for decision on April 12, 2017, after the filing of the Memorandum for the Petitioners with Manifestation15 on March 6, 2017 and the filing of respondent's Memorandum16 on April 7, 2017. 17 ISSUES The parties submitted the following issues for the Court's resolution: 18 1. Whether or not the claim for refund and the Petition for Review were filed within the two-year prescriptive period provided under Section 229 of the NIRC; and 2. Whether or not petitioners are entitled to their claim for refund of income taxes paid in taxable years 2012 and 2013 alleged to be erroneously and/or illegally paid. Petitioners' Arguments On the jurisdictional issue and the timeliness of the filing of the claims for refund, petitioners presented a table with details of the dates of payment of each employee to prove that both the administrative and judicial claims were filed within the two year period pursuant to Section 229 of the National Internal Revenue Code of 1997 (NIRC of 1997). As regards the substantive issue of the claim, petitioners hold the theory that Philippine nationals employed by ADB are exempt from income tax on the compensation they received on the basis of categorical provisions contained in the ADB Charter. And being in the nature of a treaty, the Philippine Senate concurred in the ratification of the ADB Charter through Senate Resolution No. 6 dated March 16, 1966. On this basis, petitioners point out that since 1966 or for almost forty seven (47) years now, Filipino employees of ADB have been enjoying this tax exempt privilege without being assessed by the Bureau of Internal Revenue (BIR). ~ 15 Docket, vol. 2, pp. 821-835 16 Docket, vol. 2, pp. 839-859 17 Resolution, docket, vol. 2, p. 860 18 Issues, Joint Stipulation of Facts and Issues, docket, vol. 1, pp. 289-290

CTA Case No. 9090 Page 8 of25 Thus, proceeding from this legal argument, petitioners maintain that the income tax payments made for taxable years 2012 and 2013 were erroneously and illegally collected by the government qualifying such payments as proper subjects of refund. In addition, petitioners challenge the legality of the provisions of Revenue Memorandum Circular (RMC) No. 31-2013 which served as the focal point of the then Commissioner's authority to demand income tax payments from the compensation received by Filipino employees of the ADB. They cite the decision of the Regional Trial Court {RTC) in the case of Erwin Salaveria and Portia Gonzales vs. Commissioner of Internal Revenue19which ruled that Section 2 (d) (1) of RMC 31-2013 is void for having been issued without legal basis, in excess of authority and without due process of law. In petitioners' minds, this is tantamount to the affirmation by the RTC of the tax exempt status of the compensation received by Filipino employees of the ADB. In their Memorandum, petitioners manifested that they have no objection if the resolution of the issues in this case is deferred until after the Supreme Court resolves the appeal in G.R. No. 222214 following the aforesaid decision of the Court of Appeals. Respondent's Counter-Arguments Respondent asserts that this Court has no jurisdiction on the instant petition for their failure to file the claim for refund within the two-year prescriptive period pursuant to Section 229 of the NIRC of 1997. Further, respondent raised the defense that the assailed decision of RTC Branch 213 of Mandaluyong City, from which petitioners based their claims for refund, is void. Respondent alleges that the power to rule on the validity of revenue issuances administered by the BIR is within the jurisdiction of this Court and not the regular courts. On the substantive aspect of the claims for refund, respondent proffers the following legal arguments: 1. Petitioners are all Philippine citizens and residents of the Philippines and as such are subject to Philippine income tax law;~ 19 Civil Case No. MC14-8775, September 30, 2014.

CTA Case No. 9090 Page 9 of25 2. The ADB Headquarters Agreement, specifically Article XII, Section 45 (b) made a clear limitation in so far as its right to tax its nationals, thus: "Article XII. - Privileges and Immunities of Governors and Other Representatives of Members, Directors, President, Vice-President and Others Section 45. Officers and staff of the Bank, including for the purposes of this Article experts and consultants performing missions for the Bank, shall enjoy the following privileges and immunities: XXX XXX XXX (b) Exemptions from taxation on or in respect of the salaries and emoluments paid by the Bank subject to the power of the Government to tax its nationals. xxx" (italics ours)." Respondent avers that such tax exemption is still subject to the power of the Government to tax its nationals.20 Aside from these two main points, respondent raised the following conditions before a claim for refund may be granted: 1. That the taxpayer should file a written claim for refund or tax credit with the BIR Commissioner within two (2) years from the date of payment of the tax or penalty, non-compliance with which the latter is precluded from exercising his authority thereon; 2. That if denied or not acted upon within the said period, the petition for refund be filed with the CTA within thirty (30) days from receipt of the denial AND within said two (2) year period from the date of payment of the tax or penalty regardless of any supervening cause, otherwise, the claim for refund shall have prescribed; 3. The claim for refund must be a categorical demand for reimbursement; 4. There must be proof of payment of the erroneously or illegally collected taxes; and~ 20 Answer of Respondent, page 224, Docket.

CTA Case No. 9090 Page 10 of25 5. No refund shall be given resulting from availment of incentives granted pursuant to special laws for which no actual payment was made. RULING OF THE COURT Pertinent to the resolution of the issue on the timely filing of the administrative and judicial claims for refund is Section 229 of the NIRC of 1997, as amended, which is quoted hereunder for ready reference: "SEC. 229. Recovery of Tax Erroneously or Illegally Collected. - No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid." (Emphasis supplied) Based on the afore-quoted provision, the claim for refund must be filed with the Commissioner of Internal Revenue and the Court of Tax Appeals within the two-year prescriptive period from the date of payment of tax. Below is the table detailing the significant dates relative to petitioners' respective income tax payments: Name of Date of Full Payment of Income Last day to file refund claim Date of filing of Date of Employee Tax Admin. Claim filing of 2012 l 2013 Judicial Lice! Calderon Claim July 15 2015 I 2012 I 2013 July 15 201321 I June 11, 2015 July 13, 2015,... ~- 21 Exhibit "P-6-11", docket, vol. 1, p. 345

CTA Case No. 9090 Page 11 of25 Juliet Calingo July 15, 201322 July 15, 2015 June 11, 2015 July 13, 2015 July 15, 2015 June 11, 2015 July 13, 2015 Shiela Dorothy July 15, 201323 callet July 15, 2015 June 11, 2015 July 13, 2015 July 15, 2015 June 11, 2015 July 13, 2015 Carmela canare July 15, 201324 April14, 201425 July 15, 2015 April14, June 11, 2015 July 13, 2015 2016 Agnes Canillas July 15, 201326 April14, 2014; Julyl5 2015 June 11 2015 July 13 2015 July 15, 201328 Julyll 201427 July 15, 2015 July 11, 2016 June 11, 2015 July 13, 2015 Ma. laarni Canonizado July 15, 2015 July 14, 2016 June 11, 2015 July 13, 2015 Rebecca Canoy July 15 201329 Apri115, 201431 July 15 2015 April15, June 11 2015 July 13 2015 Odessa Canto July 15, 201330 and July 14, July 15, 2015 2016 June 11, 2015 July 13, 2015 201432 July 15, 2015 June 11, 2015 July 13, 2015 Cecilia Caparas July 15, 201333; July 15, 2015 July 11, 2016 June 11, 2015 July 13, 2015 September 2, April 15, 201439 July 15 2015 June 11 2015 July 13 2015 Eileen capilit 201334 July 15 2015 June 11 2015 July 13 2015 Ma. Virginita July 15 201335 July 15, 2015 June 11, 2015 July 13, 2015 Capulong July 15, 201336 Ninebeth July 15 2015 June 11 2015 Julyl3 2015 Carandanq July 15, 201337; July 15, 2015 June 11, 2015 July 13, 2015 Mary Grace August 30 201338 July 15, 2015 June 11, 2015 July 13, 2015 Caranto Helen Carnecer July 15, 201340 July 15 2015 June 11 2015 July 13 2015 Cythia carreon July 15, 2015 June 11, 2015 July 13, 2015 Xandro Joaquin July 15 201341 Castaneda July 15 201342 -- _r. ~ July 15, 201343 Leah Ann Castro July 15 201344 April14, 2014 Ma. Fatima July 15, 201345 Cheryl Catacutan and July 11, Sylvia catapang July 15, 201346 201447 Ana Cervantes July 15 201348 laurie Ann July 15, 201349 Cervantes 22 Exhibit "P-6-1", docket, val. 1, p. 345 23 Exhibit "P-6-33", docket, val. 1, p. 346 24 Exhibit "P-6-12", docket, val. 1, p. 345 25 Exhibit "P-5-1", docket, val. 1, p. 339 26 Exhibit "P-6-2", docket, val. 1, p. 345 27 Exhibit "P-5-2", docket, val. 1, p. 339 28 Exhibit "P-6-3", docket, val. 1, p. 345 29 Exhibit "P-6-29", docket, val. 1, p. 346 30 Exhibit "P-6-40", docket, val. 1, p. 346 31 Exhibit "P-5-30", docket, val. 1, p. 343 32 Exhibit "P-5-31", docket, val. 1, p. 343 33 Exhibit "P-6-13", docket, val. 1, p. 345 34 Exhibit "P-5-3", docket, val. 1, p. 340 35 Exhibit "P-6-43", docket, val. 1, p. 346 36 Exhibit "P-6-4", docket, val. 1, p. 345 37 Exhibit "P-6-14", docket, val. 1, p. 345 38 Exhibit "P-5-5", docket, val. 1, p. 340 39 Exhibit "P-5-4", docket, val. 1, p. 340 40 Exhibit "P-6-15", docket, val. 1, p. 345 41 Exhibit "P-6-34", docket, val. 1, p. 346 42 Exhibit "P-6-16", docket, val. 1, p. 345 43 Exhibit "P-6-30", docket, val. 1, p. 346 44 Exhibit "P-6-17", docket, val. 1, p. 345 45 Exhibit "P-6-44", docket, val. 1, p. 346 46 Exhibit "P-6-27", docket, val. 1, p. 346 47 Exhibit "P-5-27", docket, val. 1, p. 343 48 Exhibit "P-6-39", docket, val. 1, p. 346 49 Exhibit "P-6-5", docket, val. 1, p. 345

CTA Case No. 9090 Page 12 of25 Ma. Rowena July 15, 201350 March 21, July 15, 2015 July 14, 2016 June 11, 2015 July 13, 2015 Cham 201451 and July July 15, 201353 July 15, 2015 April14, June 11, 2015 July 13, 2015 Mary Anne July 15, 201354 14 201452 July 15, 2015 2016 June 11, 2015 July 13, 2015 Chaneco July 15, 201355 July 15, 2015 June 11, 2015 July 13, 2015 Azaleah July 15, 201357; April14, 201456 July 15, 2015 July 14, 2016 June 11, 2015 July 13, 2015 Chanyonqco April 12, 201358 July 11, 2016 Candy Chao July 15, 201361 April10, July 15, 2015 June 11, 2015 July 13, 2015 201459and July ~ril2 2016 Patricia Tuazon July 15 201363 July 15 2015 June 11 2015 July 13 2015 Ching July 15 201364 14 201460 Julyl5 2015 June 11 2015 July 13 2015 July 15, 201366 April10, 2014 July 15, 2015 June 11, 2015 July 13, 2015 Geraldine Chu July 15, 201367 and July 11, July 15, 2015 June 11, 2015 July 13, 2015 Maila Cinco 201462 June 11, 2015 July 13, 2015 Marileth Co June 11, 2015 July 13, 2015 Christine Dianne A_pril 2 201465 June 11, 2015 July 13, 2015 Cobarrubias Ma. Loreca July 15, 201368 April15, 2014; July 15, 2015 July 10, 2016 June 11, 2015 July 13, 2015 Cob ilia July 15, 201369 July 10 201470 July 15, 2015 July 14, 2016 June 11, 2015 July 13, 2015 July 15, 201371 July 15, 2015 June 11, 2015 July 13, 2015 Jerry Colasito April14, March 6, July 15, 201374 201472; July 14, July 15, 2015 2016 (ru-,_ Paulita Cornia July 15, 201376 July 15, 2015 July 12, 201378 201473 July 15, 2015 July 8, 2016 Camille March 6, 201475 July 15, 2016 Contreras April14, 2014; Nedilla Correa July 8 201477 Josefa Maria April11, Coscolluela 201479; July 15, Melanie Covar 201480 50 Exhibit "P-10", docket, vol. 1, p. 358 51 Exhibit "P-6-31", docket, vol. 1, p. 346 52 Exhibit "P-5-6", docket, vol. 1, p. 340 53 Exhibit "P-6-18", docket, vol. 1, p. 345 54 Exhibit "P-6-19", docket, vot. 1, p. 345 55 Exhibit "P-6-45", docket, vol. 1, p. 346 56 Exhibit "P-5-22", docket, vol. 1, p. 342 57 Exhibit "P-6-46", docket, vol. 1, p. 346 58 Exhibit "P-5-26", docket, vol. 1, p. 343 59 Exhibit "P-5-25", docket, vot. 1, p. 343 60 Exhibit "P-5-26", docket, vot. 1, p. 343 61 Exhibit "P-6-20", docket, vol. 1, p. 345 62 Exhibit "P-5-7", docket, vol. 1, p. 340 63 Exhibit "P-8", docket, vol. 1, p. 352 64 Exhibit "P-6-38", docket, vol. 1, p. 346 65 Exhibit "P-5-28", docket, vol. 1, p. 343 66 Exhibit "P-6-21", docket, vot. 1, p. 345 67 Exhibit "P-5-8", docket, vol. 1, p. 340 68 Exhibit "P-6-42", docket, vot. 1, p. 346 69 Exhibit "P-6-6", docket, vol. 1, p. 345 70 Exhibit "P-5-9", docket, vot. 1, p. 340 71 Exhibit "P-6-35", docket, vot. 1, p. 346 72 Exhibit "P-5-10", docket, vot. 1, p. 341 73 Exhibit "P-5-11", docket, vot. 1, p. 341 74 Exhibit "P-6-22", docket, vol. 1, p. 345 75 Exhibit "P-5-12", docket, vol. 1, p. 341 76 Exhibit "P-6-28", docket, vol. 1, p. 346 77 Exhibit "P-5-29", docket, vol. 1, p. 343 78 Exhibit "P-11", docket, vol. 1, p. 361 79 Exhibit "P-5-23", docket, vol. 1, p. 342 80 Exhibit "P-5-24", docket, vol. 1, p. 343

CTA Case No. 9090 Page 13 of25 Mary France July 15, 201381 March 21, July 15, 2015 March 21, June 11, 2015 July 13, 2015 Creus July 15, 201383 201482 July 15, 2015 2016 June 11, 2015 Marisol July 15 201384 July 15 2015 June 11 2015 July 13, 2015 Crisostomo July 15 201385 AprilS 201486 July 15 2015 AprilS 2016 June 11 2015 Claribella Cruz July 15 201387 April 8 201488 July 15 2015 AprilS 2016 June 11 2015 July13 2015 Fermirelyn Cruz July 15, 201389 July 15, 2015 July 15, 2016 June 11, 2015 July 13 2015 Gene Oliver Cruz April15, July13 2015 Grace Cruz July 15 201392 201490; July 15, July 15 2015 June 25, June 11 2015 July 13, 2015 July 15, 201393 July 15, 2015 2016 June 11, 2015 Jerome Cruz July 15, 201395 201491 July 15, 2015 June 11, 2015 July 13 2015 Kristine Cruz July 15, 201396 April10, 2014; July 15, 2015 July 15, 2016 June 11, 2015 July 13, 2015 July 15, 201397 June 25 201494 July 15, 2015 June 11, 2015 Ma. Lenina July 15, 201398 July 15, 2015 April14, June 11, 2015 July 13, 2015 Tanya Cruz April15, 2016 Margaret Rose July 15 2015101 201499; July 15, July 15 2015 June 11 2015 July 13, 2015 Cruz July 15, 2013102 July 15, 2015 July 4, 2016 June 11, 2015 Mary Grace July 15, 2013104 2014100 July 15, 2015 June 11, 2015 July 13, 2015 Kristine Cruz July 15 2013106 April14, July 15 2015 June 30, June 11 2015 Mary Jane Cruz July 15 2013107 2014103 July 15 2015 2016 June 11 2015 July 13, 2015 July 15, 2013108 April 4, 2014; July 15, 2015 June 11, 2015 Shiela Cruz July 4 2014105 Julyl3 2015 Ligaya Cuevas- July 15, 2013110 July 15, 2015 June 11, 2015 July 13, 2015 Arce July 15, 2013111 April15, 2014; July 15, 2015 June 11, 2015 Tadeo Culla June 30, July 13, 2015 2014109 Ramon Dacio July 13 2015 Lailanie Danao Julyl3 2015 Marie Remilyn July 13, 2015 Dandan July 13, 2015 Marie Lullete Daria July 13, 2015 Shiela Anne David-Castro (~ 81 Exhibit "P-6-23", docket, val. 1, p. 346 82 Exhibit "P-6-32", docket, val. 1, p. 346 83 Exhibit "P-6-7", docket, val. 1, p. 345 84 Exhibit "P-6-8", docket, val. 1, p. 345 85 Exhibit "P-5-13", docket, val. 1, p. 341 86 Exhibit "P-5-14", docket, val. 1, p. 341 87 Exhibit "P-6-36", docket, val. 1, p. 346 88 Exhibit "P-5-19", docket, val. 1, p. 342 89 Exhibit "P-5-15", docket, val. 1, p. 341 90 Exhibit "P-5-15", docket, val. 1, p. 341 91 Exhibit "P-5-20", docket, val. 1, p. 342 92 Exhibit "P-6-47", docket, val. 1, p. 346 93 Exhibit "P-6-24", docket, val. 1, p. 346 94 Exhibit "P-5-16", docket, val. 1, p. 341 95 Exhibit "P-6-9", docket, val. 1, p. 345 96 Exhibit "P-7-2", docket, val. 1, p. 350 97 Exhibit "P-6-25", docket, val. 1, p. 346 98 Exhibit "P-6-10", docket, val. 1, p. 345 99 Exhibit "P-5-17", docket, val. 1, p. 342 100 Exhibit "P-5-18", docket, val. 1, p. 342 101 Exhibit "P-6-26", docket, val. 1, p. 346 102 Exhibit "P-6-41", docket, val. 1, p. 346 103 Exhibit "P-5-32", docket, val. 1, p. 344 104 Exhibit "P-6-37", docket, val. 1, p. 346 105 Exhibit "P-5-21", docket, val. 1, p. 342 106 Exhibit "P-4-1", docket, val. 1, p. 337 107 Exhibit "P-4-2", docket, val. 1, p. 337 108 Exhibit "P-4-3", docket, val. 1, p. 337 109 Exhibit "P-3-1", docket, val. 1, p. 330 110 Exhibit "P-4-4", docket, val. 1, p. 337 111 Exhibit "P-4-5", docket, val. 1, p. 337

CTA Case No. 9090 Page 14 of25 Janeth De Belen July 15 2013112 April15, Julyl5 2015 Apri115, June 11 2015 July_ 13 2015 Juan Armando July 15, 2013m 2014114 July 15, 2015 2016 June 11, 2015 July 13, 2015 De Borja July 15 2013115 JuJyl5 2015 June 11 2015 July 13 2015 Elena De Castro July 15, 2013116 April10, July 15, 2015 July 14, 2016 June 11, 2015 July 13, 2015 Maria Bernadette 2014117; July De Castro July 15, 2013119 14 2014118 July 15, 2015 March 27, June 11, 2015 July 13, 2015 July 15, 2013120 2016 June 11, 2015 July 13, 2015 Modesta De July 15, 2013122 April15, 2014; July 15, 2015 June 11, 2015 July 13, 2015 Castro July 15, 2013124 July 15 2014121 July 15, 2015 April 7, 2016 June 11, 2015 July 13, 2015 Arnel De Gracia July 15, 2013126 July 15, 2015 June 11, 2015 July 13, 2015 July 15, 2013127 March 27, July 15, 2015 April11, June 11, 2015 July 13, 2015 Charmaine Ruth July 15, 2013129 2014123 July 15, 2015 2016 June 11, 2015 July 13, 2015 De Guzman July 15, 2013130 July 15, 2015 June 11, 2015 July 13, 2015 Ma. Cielo De July 15, 2013132 April 7, 2014125 July 15, 2015 April10, June 11, 2015 July 13, 2015 Guzman July 15, 2013133 July 15, 2015 2016 June 11, 2015 July 13, 2015 Maria Guia De July 15, 2013135 April11, July 15, 2015 June 11, 2015 July 13, 2015 Guzman July 15, 2013137 2014128 July 15, 2015 April11, June 11, 2015 July 13, 2015 Mia Gracia De July 15, 2013138 July 15, 2015 2016 June 11, 2015 July 13, 2015 Guzman July 15, 2013140 April10, July 15, 2015 June 11, 2015 July 13, 2015 Jennifer De 2014131 July 11, 2016 Jesus c:~ Rosarie Celine April11, March 21, De Leon 2014134 2016 Mary Jane De April10, 2014; Ocampo July_ 11 2014136 July 15, 2016 Eduardo De Veyra March 21, Marisol Del 2014139 Rosario April10, Mario Del Rosario 2014141; July Hazel Joy Dela 15 2014142 Cruz Ramoncito Dela Cruz 112 Exhibit "P-7-1", docket, val. 1, p. 347 113 Exhibit "P-4-6", docket, val. 1, p. 337 114 Exhibit "P-3-2", docket, val. 1, p. 330 115 Exhibit "P-4-7", docket, val. 1, p. 337 116 Exhibit "P-4-8", docket, val. 1, p. 337 117 Exhibit "P-3-3", docket, val. 1, p. 330 118 Exhibit "P-3-4", docket, val. 1, p. 330 119 Exhibit "P-4-9", docket, val. 1, p. 337 120 Exhibit "P-4-10", docket, val. 1, p. 337 121 Exhibit "P-3-5", docket, val. 1, p. 330 122 Exhibit "P-4-11", docket, val. 1, p. 337 123 Exhibit "P-3-6", docket, val. 1, p. 330 124 Exhibit "P-4-12", docket, val. 1, p. 337 125 Exhibit "P-3-7", docket, val. 1, p. 331 126 Exhibit "P-4-14", docket, val. 1, p. 337 127 Exhibit "P-4-13", docket, val. 1, p. 337 128 Exhibit "P-3-8", docket, val. 1, p. 331 129 Exhibit "P-4-15", docket, val. 1, p. 337 130 Exhibit "P-4-16", docket, val. 1, p. 337 131 Exhibit "P-3-9", docket, val. 1, p. 331 132 Exhibit "P-4-17", docket, val. 1, p. 337 133 Exhibit "P-4-18", docket, val. 1, p. 337 134 Exhibit "P-3-10", docket, val. 1, p. 331 135 Exhibit "P-4-19", docket, val. 1, p. 337 136 Exhibit "P-3-11", docket, val. 1, p. 331 137 Exhibit "P-4-20", docket, val. 1, p. 337 138 Exhibit "P-4-21", docket, val. 1, p. 337 139 Exhibit "P-4-48", docket, val. 1, p. 338 140 Exhibit "P-4-22", docket, val. 1, p. 337 141 Exhibit "P-3-12", docket, val. 1, p. 332 142 Exhibit "P-3-13", docket, val. 1, p. 332

CTA Case No. 9090 Page 15 of25 Shiela Dela Cruz July 15, 2013143 April14, July 15, 2015 April14, June 11, 2015 July 13, 2015 July 15, 2013145 2014144 July 15, 2015 2016 June 11, 2015 July 13, 2015 Fernando Dela July 15, 2013147 April10, July 15, 2015 June 11, 2015 July 13, 2015 Fuente July 15, 2013148 2014146 July 15, 2015 April10, June 11, 2015 July 13, 2015 Marcela Leonila July 15, 2013150 July 15, 2015 2016 June 11, 2015 July 13, 2015 Dela Merced July 15, 2013151 April14, 2014; July 15, 2015 June 11, 2015 July 13, 2015 Exelsa Dela July 15, 2013153 July 15 2014149 July 15, 2015 July 15, 2016 June 11, 2015 July 13, 2015 Santa July 15, 2013154 July 15, 2015 June 11, 2015 July 13, 2015 Ma. Melissa Dela July 15 2013156 April 8, 2014152 July 15 2015 AprilS, 2016 June 11 2015 July 13 2015 Torre July 15, 2013157 July 15, 2015 June 11, 2015 July 13, 2015 Lamberto July 15, 2013159 April10, 2014; July 15, 2015 July 9, 2016 June 11, 2015 July 13, 2015 Delgado Jr. July 15, 2013161 July 9 2014155 July 15, 2015 June 11, 2015 July 13, 2015 Czareana Delio July 15, 2013163 July 15, 2015 April10, June 11, 2015 July 13, 2015 July 15 2013164 April10, July 15 2015 2016 June 11 2015 July 13 2015 Ma. Cristina July 15, 2013165 2014158 July 15, 2015 June 11, 2015 July 13, 2015 Delos Santos March 21, March 21, Merdinia Deguilla July 15, 2013168 2014160 July 15, 2015 2016 June 11, 2015 July 13, 2015 Lyrah Tatiana July 15 2013170 March 18, July 15 2015 June 11 2015 July 13 2015 Devanadera July 15, 2013171 2014162 July 15, 2015 March 18, June 11, 2015 July 13, 2015 Vladimer July 15, 2013172 July 15, 2015 2016 June 11, 2015 July 13, 2015 ,~ Diamonon April14, Maria Carmen 2014166; July July 14, 2016 Diaz 14 2014167 Vanessa April 14, 2014; July 15, 2016 Dimaano July 15 2014169 Linda Dimayuga April14, Ma. Juana April14, 2016 Dimayuga 2014173 Irene Dionisio Michael Diza Aivy Katherine Dizon Madeline Dizon 143 Exhibit "P-4-23", docket, vol. 1, p. 337 144 Exhibit "P-3-14", docket, vol. 1, p. 332 145 Exhibit "P-4-24", docket, vol. 1, p. 337 146 Exhibit "P-3-15", docket, vol. 1, p. 332 147 Exhibit "P-9", docket, vol. 1, p. 355 148 Exhibit "P-4-25", docket, vol. 1, p. 337 149 Exhibit "P-3-16", docket, vol. 1, p. 332 150 Exhibit "P-4-26", docket, vol. 1, p. 337 151 Exhibit "P-4-27", docket, vol. 1, p. 337 152 Exhibit "P-3-17", docket, vol. 1, p. 332 153 Exhibit "P-4-28", docket, vol. 1, p. 337 154 Exhibit "P-4-29", docket, vol. 1, p. 337 155 Exhibit "P-3-18", docket, vol. 1, p. 333 156 Exhibit "P-4-30", docket, vol. 1, p. 337 157 Exhibit "P-4-31", docket, vol. 1, p. 337 158 Exhibit "P-3-19", docket, vol. 1, p. 333 159 Exhibit "P-4-32", docket, vol. 1, p. 337 160 Exhibit "P-4-49", docket, vol. 1, p. 338 161 Exhibit "P-4-33", docket, vol. 1, p. 337 162 Exhibit "P-3-20", docket, vol. 1, p. 333 163 Exhibit "P-4-34", docket, vol. 1, p. 338 164 Exhibit "P-4-35", docket, vol. 1, p. 338 165 Exhibit "P-4-36", docket, vol. 1, p. 338 166 Exhibit "P-3-21", docket, vol. 1, p. 333 167 Exhibit "P-3-22", docket, vol. 1, p. 333 168 Exhibit "P-4-37", docket, vol. 1, p. 338 169 Exhibit "P-3-23", docket, vol. 1, p. 333 170 Exhibit "P-4-38", docket, vol. 1, p. 338 171 Exhibit "P-4-39", docket, vol. 1, p. 338 172 Exhibit "P-4-40", docket, vol. 1, p. 338 173 Exhibit "P-3-24", docket, vol. 1, p. 333

CTA Case No. 9090 Page 16 of25 Liza Anne July 15, 2013174 April 7, 2014177; July 15, 2015 July 7, 2016 June 11, 2015 July 13, 2015 Domingo July? 2014178 April15, Michelle July 15, 2013175 July 15, 2015 2016 June 11, 2015 July 13, 2015 Domingo April15, Julius Cesar July 15, 2013176 2014180 July 15, 2015 March 21, June 11, 2015 July 13, 2015 Dug_ue 2016 Maria Josephine July 15, 2013179 March 21, July 15, 2015 June 11, 2015 July 13, 2015 Duque-Cornia 2014184 Jessica Ebio July 15 2013181 July 15 2015 June 22 2015 July 13 2015 Ma. Helen Ebora July 15 2013182 July 15 2015 June 22 2015 July 13 2015 Irma Ebreo July 15, 2013183 July 15, 2015 June 22, 2015 July 13, 2015 Applying the aforequoted provisions of law and the foregoing table, this Court finds that petitioners have established that they were able to file both their administrative and judicial claims for refund for 2012 and 2013 within the two-year period. We now proceed to the main issues of this case. Petitioners rely heavily on Chapter VIII, Article 56 (2) of the ADB Charter as the basis of the non-imposition of income tax on their compensation as ADB employees and we quote: " CHAPTER VIII Article 56. (2) No tax shall be levied on or in respect of salaries and emoluments paid by the Bank to the Directors, alternates, officers or employees of the Bank, including experts performing missions for the Bank, except where a member deposits with its instrument of'ratification or acceptance a declaration that such member retains f'or itself'anditspoliticalsubdivisions the right to taxsalaries and emoluments paid by the Bank to citizens or nationals of'such member." (Emphasis supplied) The above proviso in the ADB Charter has in effect been "carved in stone" as it has been the practice for several decades of the ADB not to withhold tax on the compensation of the people covered by the aforequoted Section 56 (including Filipino employees) which practice, 174 Exhibit "P-4-41", docket, vol. 1, p. 338 175 Exhibit "P-4-42", docket, vol. 1, p. 338 176 Exhibit "P-4-44", docket, vol. 1, p. 338 177 Exhibit "P-3-25", docket, vol. 1, p. 334 178 Exhibit "P-3-26", docket, vol. 1, p. 334 179 Exhibit "P-4-43", docket, vol. 1, p. 338 180 Exhibit "P-3-27", docket, vol. 1, p. 334 181 Exhibit "P-4-45", docket, vol. 1, p. 338 182 Exhibit "P-4-46", docket, vol. 1, p. 338 183 Exhibit "P-4-47", docket, vol. 1, p. 338 184 Exhibit "P-4-50", docket, vol. 1, p. 338

CTA Case No. 9090 Page 17 of25 was claimed to have been disturbed only by the issuance of RMC 31- 2013 dated April 12, 2013, the relevant portions of which were quoted earlier. The ADB Charter and the ADB Headquarters Agreement" both partake the nature of a treaty or an international agreement185� As an international agreement, it forms part of the law of the land in accordance with Section 2, Article II of the 1987 Constitution which reads as follows: ARTICLE II Declaration of Principles Section 2. The Philippines renounces war as an instrument of national policy, adopts the generally accepted principles of international law as part ofthe law ofthe land and adheres to the policy of peace, equality, justice, freedom, cooperation and amity with all nations." (emphasis supplied) This constitutional principle adheres to the basic tenet of international law of pacta sunt servanda or international comity which demands the performance in good faith of treaty obligations as aptly defined in the case of Deutsche Bank AG Manila Branch v. C/~86, and we quote: "Our Constitution provides for adherence to the general principles of international law as part of the law of the land. The time-honored international principle of pacta sunt servanda demands the performance in good faith of treaty obligations on the part of the states that enter into the agreement. Every treaty in force is binding upon the parties, and obligations under the treaty must be performed by them in good faith. More importantly, treaties have the force and effect of law in this jurisdiction." The instant case, however, clearly indicates that the issue at bar is not a controversy suggestive of whether our country should observe its commitments under an international agreement but rather centers on its coverage of the privileges and the interpretation which may or~ 185 Memorandum Circular issued by the Office of the President on May 31, 1994 and signed by President Fidel Ramos which in part provides, thus,: "The Charter and the Headquarters Agreement, which are international treaties executed by the Executive Branch of the Government of the Republic of the Philippines and ratified by the Senate of the Republic of the Philippines, are incorporated as part of the law of the Republic of the Philippines." (italics ours). 186 G.R. No.188550 promulgated on August 19, 2013.

CTA Case No. 9090 Page 18 of25 may not include tax exemption of Filipino employees of the ADB on their compensation income. The very same provisions, both of the ADB Charter and the ADB Headquarters Agreement, relied upon by the petitioners are the same ones that would produce the bases of this Court's denial of their petition. An examination of the entirety of Section 56 (2), Chapter VIII of the ADB Charter clearly contains an exception to the tax exempt privilege accorded by this Agreement to the covered ADB personnel as encapsulated by the clause "except where a member deposits with its instrument of ratification or acceptance a declaration that such member retains for itself and its political subdivisions the right to tax salaries and emoluments paid by the Bank to citizens or nationals of such member." The grant of tax exempt privileges as worded in the ADB Charter although explicit in nature accords respect to the municipal law of the host country by recognizing the latter's prerogative in taxing its citizens i.e. Philippine citizens, or in a more general sense, its national laws on taxation. Rightfully so because under the doctrine of incorporation, as applied in most countries, "rules of international law are given a standing equal, not superior, to national legislative enactments". 187 (italics ours) However, unlike the municipal laws of a member country, treaties or international agreements are not enacted by the Legislative branch of the government but instead ratified by the Philippine Senate as what was done in the case of the ADB Charter. Under the 1935 Philippine Constitution which was the prevailing Constitution in 1966, it is the President of the Philippines, as head of State who ratifies the treaty while the Philippine Senate concurs with the President's ratification.188 Then as now, in strict constitutional legalese, ratification of treaties is made by the President while concurrence is done by two thirds of all the members of the Senate. 189 Such ratification and concurrence are the operative acts that endow the ADB Charter with the character of a law.~ 187 Philip Morris Inc. vs. Court of Appeals, G.R. No. 91332 dated July 16, 1993. 188Article VII, Section 10 of the 1935 Philippine Constitution: "The President shall have the power, with the concurrence of two thirds of all the members of the Senate to make treaties xxx xxx. " ." 189 Article VII, Section 21 of the 1987 Constitution. " No treaty or international agreement shall be valid and effective unless concurred in by at least two thirds of all the members of the Senate."

CTA Case No. 9090 Page 19 of25 Treaties or conventional international law must go through a process prescribed by the Constitution for it to be transformed into municipal law that can be applied to domestic conflicts. 190 In our analysis of the taxability of the compensation received by Filipino employees of the ADB, we go no further than the statements contained in the ADB Charter and the presidential ratification which followed where then President Ferdinand Marcos declared that the Philippine government "retains for itself and its political subdivisions the right to tax salaries and emoluments paid by the Bank to its citizens or nationals of the Philippines." This Court finds that this particular statement overrules and clarifies any semblance of tax exemption accorded by the two international agreements pertaining to Filipino employees of the ADB and upholds the applicability of national laws on taxation insofar as their compensations are concerned. Under our national tax laws, Philippine citizens are taxable on their income derived from both inside and outside the country. Section 23 of the 1997 National Internal Revenue Code (NIRC) specifically provides as follows: "Section 23. General Principles of Income Taxation in the Philippines.- Except when otherwise provided in this Code: (A) A citizen of the Philippines residing therein is taxable on all income derived from sources within and without the Philippines." Section 24. Income Tax Rates.- (A) Rates of Income Tax on Individual Citizen and Individual Resident Alien of the Philippines. - (1) An income tax is hereby imposed: (a) On the taxable income defined in Section 31 of this Code, other than income subject to tax under subsections (B), (C) and (D) of this Section, derived for each taxable year from all sources within and without the Philippines by every individual citizen of the Philippines residing therein.~ 190 Pharmaceutical & Health Care Assn. of the Philippines vs. Health 1secretary Duque, et. AI. , G.R. No. 173034 dated October 19, 2007.

CTA Case No. 9090 Page 20 of25 We cannot take cognizance of the declarations made by the RTC in its decision in the case entitled ''Erwin Salaveria and Portia Gonzales vs. Commissioner of Internal Revenue'; which declared void the provisions of RMC No. 31-2013 issued on April 12, 2013 for being issued without legal basis. Decisions of lower courts are not binding precedents as succinctly enunciated by the Supreme Court in the case of Visayas Geothermal Power Company vs. Commissioner of Internal Revenue191, viz: "Only decisions of this Court constitute binding precedents, forming part of the Philippine legal system". We find the clarifications provided by RMC 31-2013 as to the taxability of the compensation received by the petitioners, in accord with the ADB Charter and the subsequent ratification made by the President of the Philippines. The contention of the petitioners that the exclusion of Filipino employees from the tax- exempt provisions of the ADB Charter would entail an enactment of an enabling law to put this into effect is bereft of merit as it is clear that the Philippines had already enacted its own Tax Code at the time of the ratification of the ADB Charter imposing the types and rates of tax of citizens of the Philippines. The word "reservation" in the aforequoted ratification therefore is to be construed as an excepting clause to the tax exemptions found in the treaty establishing the ADB. In the case of PHAP vs. Duqu&92, the Supreme Court clearly delineated the two processes by which international agreements or treaties are incorporated as part of the domestic law or municipal law, thus: "Under the 1987 Constitution, international law can become part of the sphere of domestic law either by transformation or incorporation. The transformation method requires that an international law be transformed into a domestic law through a constitutional mechanism such as local legislation. The incorporation method applies when, by mere constitutional declaration, international law is deemed to have the force of domestic law. Treaties become part of the law of the land through transformation pursuant to Article VII, Section 21 of the Constitution which provides that "[n]o treaty or international agreement shall be valid and effective unless concurred in by at least two-thirds of all the members of the~ 191 G.R. No. 197525 dated June 4, 2014. 192 G.R. No. 17303 4 dated October 9, 2007.

CTA Case No. 9090 Page 21 of25 Senate." Thus, treaties or conventional international law must go through a process prescribed by the Constitution for it to be transformed into municipallawthat can be applied to domestic conflicts. (emphasis supplied) By the same token, both the ADB Charter and the ADB Headquarters Agreement became valid and effective and had the force and effect of a municipal law upon the concurrence of the Senate as prescribed by the Constitution. Such process no longer necessitated a local legislation for it to take effect as the concurrence of the Senate was sufficient to transform the treaty as part of the "domestic law" of the land. There should be no question then that the tax exemption on the compensation income of the Filipino employees of the ADB are subject to tax and that respondent Commissioner of Internal Revenue did not abuse his discretion in issuing the controverted RMC No. 31-2013. However, this Court finds that the clarificatory nature of the provisions of RMC 31-2013 issued on April 12, 2013, should apply prospectively and should not affect the tax exempt privilege availed of by the Filipino ADB employees in 2012 (prior to the issuance of RMC 31-2013). Section 7 of RMC 31-2013 clearly provides that the provisions thereof "shall take effect immediately" which means that it should take effect starting May 2, 2013 the date when a copy was officially submitted to the Office of the National Administrative Register of the UP Law Center pursuant to the requirement of the Administrative Code, Section 3, Chapter 2, Book VII, which provides: Filing. (l) Every agency shall file with the University of the Philippines Law Center three (3) certified copies of every rule adopted by it. Rules in force on the date of effectivity of this Code which are not filed within three (3) months from the date shall not thereafter be the basis of any sanction against any party or persons. Pursuant to the abovementioned provision, the Supreme Court emphasized in National Association of Electricity Consumers for Reforms v. Energy Regulatory Commission, G.R. No. 163935, February 2, 2006 that both the requirements of publication and filing of administrative issuances are mandatory for their effectivity.~

CTA Case No. 9090 Page 22 of25 However despite these clear wordings on its effectivity, respondent still proceeded to collect income tax payments from petitioner starting 2012. Seen against the backdrop of confirmations and affirmations of various revenue officials that their income was subject to lower income tax rates or to zero income tax until the issuance/publication of RMC No. 31-2013, the principles of fair play and substantial justice dictate that its provisions should apply to claims starting only from 2013 and onwards. For emphasis, we provide below the various pronouncements of revenue officials with regard to the taxability of the income tax payments of ADB personnel, to wit: 1. In BIR Ruling No. 029-99 dated March 11, 1999, the former BIR Commissioner, Beethoven Rualo, in response to a query on the taxability of the compensation income of ADB personnel, stated as follows: "Such being the case, Filipinos employed and are occupying managerial and technical positions as those of aliens employed by the bank xxx xxx are subject to the preferential tax of 15% of their gross compensation income." 2. In a Letter Opinion dated January 29, 2001, BIR Regional Director Antonio Ortega confirmed that officers and staff of the ADB need not secure Tax Identification Numbers (TINs) since their salaries are exempt from taxation. 3. In an opinion issued by the Chief of the Legal Division of Revenue Region No. 7 dated February 6, 2013, Amado Rey B. Pagarigan reiterated the opinion of Mr. Rualo and opined that the Filipino employees of ADB are subject to the preferential tax rate of 15�/o on their compensation income. The ADB as employer as well as the concerned employees should not be faulted on the apparently confirmatory but inconsistent opinions of senior officials of the BIR. It was only by the issuance of RMC 31- 2013 that then Commissioner Kim Henares categorically clarified that they are subject to tax. Pertinent portions of the said RMC are quoted below:~

CTA Case No. 9090 Page 23 of25 "The tax treatment of Philippine nationals and alien individuals on compensation income received by them from foreign governments/embassies and missions and international organizations shall be as follows: XXX XXX XXX From the above, only officers and staff of the ADB who are not Philippine nationals shall be exempt from Philippine income tax." More than the lifeblood doctrine, we find that the principles of fundamental fairness and equity behoove us to apply the non- retroactive rule under Section 246 of the Tax Code and we quote: "SEC. 246. Non- Retroactivity of Rulings. - Any revocation, modification or reversal of any of the rules and regulations promulgated in accordance with the preceding Sections or any of the rulings or circulars promulgated by the Commissioner shall not be given retroactive application if the revocation, modification or reversal will be prejudicial to the taxpayers, except in the following cases: (a) Where the taxpayer deliberately misstates or omits material facts from his return or any document required of him by the Bureau of Internal Revenue; (b) Where the facts subsequently gathered by the Bureau of Internal Revenue are materially different from the facts on which the ruling is based; or (c) Where the taxpayer acted in bad faith "(emphasis supplied) In the case of ABS-CBN Broadcasting Corporation vs. Court of Tax Appea/s93, the Supreme Court rejected the retroactive application of rulings and circulars when such would cause prejudice to the taxpayers, thus: "It is clear from the foregoing that rulings or circulars promulgated by the Commissioner of Internal Revenue have no retroactive application where to so apply them would be prejudicial to taxpayers. The prejudice to petitioner of the retroactive application of Memorandum Circular No. 4-71 is beyond question. It was issued only in 1971, or three years after 1968, the last year that petitioner had withheld taxes under General Circular No. V-334. The assessment and demand on ~ 193 G.R. No. L-52306 dated October 12, 1981.

CTA Case No. 9090 Page 24 of25 petitioner to pay deficiency withholding income tax was also made three years after 1968 for a period of time commencing in 1965. Petitioner was no longer in a position to withhold taxes due from foreign corporations because it had already remitted all film rentals and no longer had any control over them when the new Circular was issued. And in so far as the enumerated exceptions are concerned, admittedly, petitioner does not fall under any of them. XXX XXX XXX " without doubt, private respondent would be prejudiced by the retroactive application as it would be assessed of deficiency excise tax ." Further in the case of Commissioner of Internal Revenue vs. Court of Appeals, Court of Tax Appeals and Alhambra Industries, Inc. 194/ the Supreme Court enunciated the non-retroactivity principle in this manner: "However, well entrenched is the rule that rulings and circulars, rules and regulations promulgated by the CIR would have no retroactive application if to so apply them would be prejudicial to the taxpayers." "Without doubt, private respondent would be prejudiced by the retroactive application as it would be assessed of deficiency excise tax." It bears stressing that the retroactive application of the provisions of RMC 31-2013 to income received by the petitioners in 2012 made prior to its publication in 2013 already caused serious prejudice to the Filipino employees who relied heavily on the pronouncements/interpretations made by the government officials earlier mentioned. To put it more concretely, the Filipino employees were not ready to incur such huge tax obligations for the past taxable year 2012, neither were they prepared to face the grim prospect of law suits and potential garnishment of their bank deposits, assets if they fail to settle such deficiency income tax assessment. WHEREFORE, in light of the foregoing, the Petition for Review filed by petitioners is hereby PARTIALLY GRANTED.~ 194 G.R. No. 117982 dated February 6, 1997.

CTA Case No. 9090 Page 25 of25 Accordingly, respondent is ORDERED TO ISSUE A TAX REFUND/TAX CREDIT CERTIFICATE in favor of petitioners in the amount of Php30,543,307.80 to be individually allocated based on the tabular summary provided earlier, representing the illegally collected income taxes for taxable year 2012. As regards the 2013 claim for tax refund/tax credit certificate in the amount of Php15,229,352.50, the same is hereby DENIED for lack of legal basis. ~';./If~ CATHERINET.MANAHAN Associate Justice WE CONCUR: CAESA~ANOVA Associate Justice ~~Jo c.~o4,;Sl. (~h-Concurring and Dissenting Q1Sinion) JUANITO C. CASTANEDA, JR. Associate Justice 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. JtR lAN~ITc O C.. C~AStTA' NE~ D~,�JR. Acting Presiding Justice

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SECOND DIVISION LICEL CALDERON, ET AL., CTA CASE NO. 9090 Petitioner, Members: -versus- Castaneda, Jr., Chairperson Casanova Manahan, 11. COMMISSIONER OF Promulgated : INTERNAL REVENUE, Respondent. x----------------------------------------------------------------------------------x CONCURRING AND DISSENTING OPINION CASTANEDA, JR., J.: I concur with the ponencia of J. Manahan on the denial of the claim for refund/tax credit of income taxes paid in 2013. However, with due respect, I am constrained to disagree on the grant of the claim for refund/tax credit of income taxes paid in 2012. Petitioners argue that the income tax payments made by them were erroneously and/or illegally collected by the respondent for failure of the latter to recognize the tax-exempt status granted to ADB employees. Petitioners further assert that the Filipino ADB employees are exempt from income tax since the establishment of the ADB. There has been no subsequent or enabling legislation that modified or ~

CONCURRING AND DISSENTING OPINION CTA Case No. 9090 otherwise reinterpreted the ADB Charter provisions on "Exemption from Taxation" and that, in addition, their tax-exempt status has always been observed and practiced. Contrary to these arguments, Filipino officers and employees of the ADB are, under the law, subject to income tax on salaries and emoluments they receive from the ADB. A plain reading of the pertinent treaty provisions and domestic legislation clearly show the intention of Congress to do so. The "Agreement Establishing the Asian Development Bank" (ADB Charter) included a provision on tax-exemption and an exception to said privilege, thus: "Article 56 EXEMPTION FROM TAXATION 1. The Bank, its assets, property, income and its operations and transactions, shall be exempt from all taxation and from all customs duties. The Bank shall also be exempt from any obligation for the payment, withholding or collection of any tax or duty. 2. No tax shall be levied on or in respect of salaries and emoluments paid by the Bank to Directors, alternates, officers or employees of the Bank, including experts performing missions for the Bank, except where a member deposits with its instrument of ratification or acceptance a declaration that such member retains for itself and its political subdivisions the right to tax salaries and emoluments paid by the Bank to citizens or nationals of such member." (Emphasis supplied) On March 16, 1966, in Senate Resolution No. 6, the Philippine Government ratified and confirmed the ADB Charter but categorically included a reservation of the Philippine's right to tax the Filipino employees of ADB, to wit: "NOW THEREFORE, be it known that I, FERDINAND E. MARCOS, President of the Republic of the Philippines, having seen and considered the Agreement Establishing the Asian Development Bank done on December 4, 1965 at Manila, Philippines, do hereby in pursuance of the aforesaid concurrent of the Senate of the

CONCURRING AND DISSENTING OPINION CTA Case No. 9090 Philippines, ratify and confirm the said Agreement and every article and clause thereof, subject to the reservation that the Philippines declares that it retains for itself and its political subdivision the right to tax salaries and emoluments paid by the Bank to citizens or nationals of the Philippines. II (Emphasis supplied) The "Agreement Between the Asian Development Bank and the Government of the Republic of the Philippines Regarding the Headquarters of the Asian Development Bank" (ADB Headquarters Agreement) included a similar proviso recognizing the right of the Philippine Government to tax Filipino ADB employees, viz.: "ARTICLE XII Privileges and Immunities of Governors and Other Representatives of Members, Directors, President, Vice-President and Others XXX XXX XXX Section 45. Officers and staff of the Bank, including for the purposes of this Article experts and consultants performing missions for the Bank, shall enjoy the following privileges and immunities: (a) Immunity from legal process with respect to acts performed by them in their official capacity except when the Bank waives the immunity; (b) Exemption from taxation on or in respect of the salaries and emoluments paid by the Bank subject to the power of the Government to tax its nationals xxx. II (Emphasis supplied) Although these provisions grant tax exemption to the salaries and emoluments paid by ADB to its officers and employees, in general, they also contain a proviso wherein a member-country, such as the Philippines, may choose to retain its right to tax the salaries and emoluments paid to its citizens or nationals. If the Philippine Government had really intended to exempt from income tax the salaries or emoluments that its citizens or nationals would earn from ADB, a full ratification of the ADB Charter should have been made, wffhoutreservaaon ~

CONCURRING AND DISSENTING OPINION CTA Case No. 9090 The National Internal Revenue Code of 1997 further underscores the reservation made by the Philippine Government of its right to tax the income derived by its citizens from all sources within and without. Sections 23(A) and 24(A)(1)(a) of the NIRC of 1997, as amended, declare: "SEC. 23. General Principles of Income Taxation in the Philippines.- Except when otherwise provided in this Code: (A) A Citizen of the Philippines residing therein is taxable on all income derived from sources within and without the Philippines; XXX XXX XXX SEC. 24. Income Tax Rates.- (A) Rates ofIncome Tax on Individual Citizen and Individual Resident Alien ofthe Philippines. - (1) An income tax is hereby imposed: (a) On the taxable income defined in Section 31 of this Code, other than income subject to tax under Subsections (B), (C) and (D) of this Section, derived for each taxable year from all sources within and without the Philippines by every individual citizen of the Philippines residing therein;" (Emphasis supplied) The text of Sections 23 and 24 of the NIRC of 1997, as amended, clearly impose a global tax on the income of resident citizens. In the absence of a specific grant of tax-exemption, therefore, the salaries and emoluments received by Filipino ADB employees are subject to income tax. Petitioners' income tax payments for salaries and emoluments received from the ADB for taxable years 2012 and 2013 cannot be considered as erroneously and/or illegally collected by the BIR under Section 229 of the NIRC of 1997, as amended. Such income tax payments cannot, likewise, be refunded under Section 229. On the argument that the issuance and the retroactive application of RMC No. 31-2013 enabled the BIR to illegally and/or erroneously collect income taxes from them, it must be pointed out)<=-

CONCURRING AND DISSENTING OPINION CTA Case No. 9090 that the taxation of salaries and emoluments of Filipino ADB employees is not anchored on the retroactive application of RMC No. 31-2013. On this score, I must reaffirm the discussion in my Concurring and Dissenting Opinion in Rowena Vicente eta/. v. Commissioner of Internal Revenue. 1 RMC 31-2013 merely reiteratesthe general principles laid down in Section 23(A) and amplifies Section 24(A)(1)(a), both of which have been in effect since January 1, 1998, before the income tax payments of the petitioners in 2012 and 2013. The preface of RMC 31-2013 in Section 1 states these objectives when it cites Sections 23 and 24 of the 1997 NIRC as the foundation and states that the guidelines were intended to address the "confusion on the correct tax treatment of the compensation income earned by Philippine nationals xxx employed by foreign governments/embassies/diplomatic missions and international organizations xxx," thus: "SECTION 1. BACKGROUND.- Foreign governments/embassies/diplomatic m1ss1ons and international organizations situated in the Philippines acting as employers enjoy immunity from collecting taxes on salaries and emoluments of their employees, whether they are foreigners or Philippine nationals. This immunity from being constituted as withholding agents of the Philippine Government is accorded to these entities on the basis of international comity as embodied in several international agreements to which the Philippines is a signatory, such as, the Vienna Convention for International Relations (for embassies and diplomatic missions), Convention on the � Privileges and Immunities of the United Nations, Convention on the Privileges and Immunities of Specialized Agencies (for the various agencies of the United Nations), Asian Development Bank Headquarters Agreement (for ADS), Articles of Agreement of the International Finance Corporation, among others. In recognition of this immunity, the Withholding Tax Regulations (Revenue Regulations No. 2-98, as amended), clearly reiterate the exemption from the withholding tax system of the remunerations being paid by foreign governments and international organizations to their employees who are residents or nationals of the Philippines. Section /V' 2.78.1(6)(5) provides thus: 1 CTA Case No. 9096, July 7, 2017.

CONCURRING AND DISSENTING OPINION CTA Case No. 9090 XXX XXX XXX However, it has been observed that the foregoing provisions have been a source of confusion on the correct tax treatment of the compensation income earned by Philippine nationals and alien individuals employed by foreign governments/embassies/diplomatic missions and international organizations. To clarify, the exemption from withholding taxes on the compensation of officials and employees applies to foreign governments/embassies/diplomatic m1ss1ons and international organizations. Since the withholding of tax is merely a method of tax collection, the exemption from withholding taxes does not equate to the exemption from paying the income tax itself. Section 23 of the National Internal Revenue Code (Tax Code) lays down the general principles in the taxations of citizens and alien individuals, to wit: XXX XXX XXX As an exemption to the general rule, it is noted that most international agreements which grant withholding tax immunity to foreign governments/embassies/diplomatic m1ss1ons and international organizations also provide exemption to their officials and employees who are foreign nationals and/or non-Philippine residents from paying income taxes on their salaries and other emoluments. The tax consequence of compensation income received by those employed by foreign governments/embassies/ diplomatic missions situated in the Philippines hinges on the provisions of the duly recognized international agreements or local laws granting tax privileges to employees of said institutions. It bears to emphasize that the exemption should only cover those individuals who were expressly and unequivocally identified in said international agreements or laws. Those not covered shall be subject to the general rule on taxability of Philippine nationals and alien individuals. Thus with respect to those not exempted by the provisions of applicable international agreements or laws, although their compensation income is exempt from withholding tax under the international agreements or the Withholding Tax Regulations, they are not relieved of their duty to report their compensation income to the Bureau and pay the taxes due thereon pursuant to Section 24 of the National Internal Revenue Code of 1997, as amended C'Tax Code'). (underscoring and emphases supplied) Section 246 on the non-retroactivity of issuances should be r- carefully read when viewed in the light of ABS-CBN v. Court of Tax Appeals/ an assessment case wherein the revocatory administrative 2 G.R. No. L-52306, October 12, 1981, 108 SCRA 148.

CONCURRING AND DISSENTING OPINION CfA Case No. 9090 issuances were not given retroactive application. In said case, the Supreme Court held that there will be an injustice and it would be violative of fair play if the withholding agent would be made to pay additional withholding taxes for 1965 to 1968 under the provisions of a circular later issued in 1971. The facts of the case at bench, a refund of income taxes paid by the taxpayers only in 2012 and 2013, are different from that of ABS- CBN. It is submitted that there has been no violation of the rules of justice and fair play when petitioners paid the income taxes. It is not in question that when the taxes were paid, the Reservation Clause in Senate Resolution No. 6 and the provisions of Sections 23(A) and 24(A)(1)(a) have long been in force and effect priorto these payments. Evidently, when an administrative agency renders an opinion by means of a circularor memorandum, it merely interprets a pre-existing law. 3 RMC 31-2013, therefore, was issued merely to construe the existing provisions of the 1997 NIRC in relation to the various existing treaty obligations of the Philippines. The circular was neither issued nor intended to impose additional tax burdens not already found in the law. Third, construction by an executive branch of government of a particular law although not binding upon courts must be given weight as the construction came from the branch of the government called upon to implement the law.4 It is well-settled that the power to fill in the details and manner as to the enforcement and administration of a law may be delegated to various specialized administrative agencies.5 RMC 31-2013 was precisely issued to fill in the details and manner of the enforcement of Sections 23(A) and 24(A)(1)(a) pursuant to Section 46 of the 1997 NIRC, as amended. fv 3 La Suerte Cigar and Cigarette Factory, et al v. Court of Tax Appeals, eta!., G.R. No. L-36130, January 17, 1985, 134 SCRA 39. 4 Senator Heherson T. Alvarez, et al v. Han. Teofisto T. Guingona, Jr., in his capacity as Executive Secretary, et al, G.R. No. 118303, January 31, 1996, 252 SCRA 703. 5 Commissioner of Internal Revenue v. Solidbank Corporation, G.R. No. 148191, November 25, 2003, 416 SCRA 436. 6 "SEC. 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. -The power to interpret the provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner, subject to review by the Secretary of Finance. The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under this Code or other laws or portions thereof administered by the Bureau of Internal Revenue is vested in the Commissioner, subject to the exclusive appellate jurisdiction of the Court of Tax Appeals."

CONCURRING AND DISSENTING OPINION CTA Case No. 9090 RMC 31-2013 belongs to a group of issuances that "disseminate and embody pertinent and applicable portions, as well as amplifications of the rules, precedents, laws, regulations, opinions and other orders and directives issued by or administered by the Commissioner of Internal Revenue, and by offices and agencies other than the Bureau of Internal Revenue, for the information, guidance or compliance of revenue personnel.'17 Based on this definition, RMC 31-2013 is an interpretative rule issued by the administrative agency headed by the respondent. In Republic of the Philippines v. Drugmaker's Laboratories, Inc./ et a/.,8 the Supreme Court held that Administrative Order No. 7, an administrative regulation issued by the Department of Health, and BFAD Circulars No. 1 and 8, issued by the Food and Drug Administration (FDA), were all valid issuances of administrative agencies tasked to implement the law. It discussed the nature and function of interpretative rules in this wise: "Administrative agencies may exercise quasi-legislative or rule- making powers only if there exists a law which delegates these powers to them. Accordingly, the rules so promulgated must be within the confines of the granting statute and must involve no discretion as to what the law shall be, but merely the authority to fix the details in the execution or enforcement of the policy set out in the law itself, so as to conform with the doctrine of separation of powers and, as an adjunct, the doctrine of non-delegability of legislative power. An administrative regulation may be classified as a legislative rule, an interpretative rule, or a contingent rule. Legislative rules are in the nature of subordinate legislation and designed to implement a primary legislation by providing the details thereof. They usually implement existing law, imposing general, extra-statutory obligations pursuant to authority properly delegated by Congress and effect a change in existing law or policy which affects individual rights and obligations. Meanwhile, interpretative rules are intended to interpret, clarify or explain existing )h-. 7 Section 3(g), Revenue Administrative Order No. 1-2003 provides: "SECfiON 3. Classification of BIR Rulings and Issuances. - The following terms shall have the meaning described below: XXX XXX XXX g) Revenue Memorandum Circulars (RMC) - These issuances shall disseminate and embody pertinent and applicable portions, as well as amplifications of the rules, precedents, laws, regulations, opinions and other orders and directives issued by or administered by the Commissioner of Internal Revenue, and by offices and agencies other than the Bureau of Internal Revenue, for the information, guidance or compliance of revenue personnel." 8 G.R. No. 190837, March 5, 2014, 718 SCRA 160-162.

CONCURRING AND DISSENTING OPINION CTA Case No. 9090 statutory regulations under which the administrative body operates. Their purpose or objective is merely to construe the statute being administered and purport to do no more than interpret the statute. Simply, they try to say what the statute means and refer to no single person or party in particular but concern all those belonging to the same class which may be covered by the said rules. Finally, contingent rules are those issued by an administrative authority based on the existence of certain facts or things upon which the enforcement of the law depends. In general, an administrative regulation needs to comply with the requirements laid down by Executive Order No. 292, s. 1987, otherwise known as the 'Administrative Code of 1987,' on prior notice, hearing, and publication in order to be valid and binding, except when the same is merely an interpretative rule. This is because '[wlhen an administrative rule is merely interpretative in nature. its applicability needs nothing further than its bare issuance. for it gives no real consequence more than what the law itself has already prescribed. When, on the other hand, the administrative rule goes beyond merely providing for the means that can facilitate or render least cumbersome the implementation of the law but substantially increases the burden of those governed, it behooves the agency to accord at least to those directly affected a chance to be heard, and thereafter to be duly informed, before that new issuance is given the force and effect of law.fff (underscoring and emphases supplied; citations omitted) More importantly, in The Philippine American Life and General Insurance Company v. The Secretary of Finance, et al.,9 the Supreme Court upheld the validity of RMC 25-2011, issued in 2011, and ruled that the retroactive application of the circular to the taxable transaction in 2009 did not contravene Section 246, thus: "Lastly, petitioner is mistaken in stating that RMC 25-11, having been issued after the sale, was being applied retroactively in contravention to Sec. 246 of the NIRC. Instead, it merely called for the strict application of Sec. 100, which was already in force the moment the NIRC was enacted." (underscoring supplied) Fourth, even assuming there was a failure in the past by the respondent to take a categorical position on the taxation of Filipino ADB employees, such failure does not operate to estop the government from correcting the same. In fact, prolonged practice of non-collection of certain taxes, if proven to be erroneous, does not ripen into validity as the Supreme Court En Bane held in the consolidated cases of La Suerte Cigar and Cigarette Factory v. Court ofAppeals. 10)It- 9 G.R. No. 210987, November 24, 2014, 741 SCRA 601. 10 G.R. No. 125346, November 11, 2014, 739 SCRA 561.

CONCURRING AND DISSENTING OPINION CfA Case No. 9090 "The cigarette manufacturers contend that for a long time prior to the transactions herein involved, the Collector of Internal Revenue had never subjected their purchases and importations of stemmed leaf tobacco to excise taxes. This prolonged practice allegedly represents the official and authoritative interpretation of the law by the Bureau of Internal Revenue which must be respected. We are not persuaded. In Philippine Long Distance Telephone Co. v. Collector of Internal Revenue. this court has held that this principle is not absolute, and an erroneous implementation by an officer based on a misapprehension of law may be corrected when the true construction is ascertained. Thus: The appellant argues that the Collector of Internal Revenue, previous to the transactions herein involved, had never collected the franchise tax on items of the same nature as those herein in question and this is strong evidence that such transactions are not subject to tax on the principle that a prolonged practice on the part of an executive or administrative officer in charge of executing a certain statute is an authoritative construction of great weight. This contention may be granted, but the principle is not absolute and may be overcome by strong reasons to the contrary. Ifthrough a misapprehension oflaw an officer has erroneously executed it for a long time, the error may be corrected when the true construction is ascertained. Such we deem to be the situation in the present case. Incidentally, the doctrine of estoppel does not apply here. (Emphasis supplied) This court reiterated this rule in Abello v. Commissioner ofInternal Revenue where it rejected petitioners' claim that the prolonged practice (since 1939 up to 1988) of the Bureau of Internal Revenue in not subjecting political contributions to donor's tax was an authoritative interpretation of the statute, entitled to great weight and the highest respect: This Court holds that the BIR is not precluded from making a new interpretation ofthe law, especially when the old interpretation was flawed. It is a well-entrenched rule that[:] ... erroneous application and enforcement of the law by public officers do not block subsequent correct application of the statute, and that the Government is never estopped by mistake or error on the part of its agents. (Emphasis supplied, citations omitted) Prolonged practice of the Bureau of Internal Revenue in not collecting the specific tax on stemmed leaf tobacco cannot validate ?c-- what is otherwise an erroneous application and enforcement of

CONCURRING AND DISSENTING OPINION CTA Case No. 9090 the law. The government is never estopped from collecting legitimate taxes because of the error committed by its agents. In La Suerte Cigar and Cigarette Factory v. Court of Tax Appeals. this court upheld the validity of a revenue memorandum circular issued by the Commissioner of Internal Revenue to correct an error in a previous circular that resulted in the non-collection of tobacco inspection fees for a long time and declared that estoppel cannot work against the government: XXX XXX XXX'' (underscoring and emphases supplied; citations omitted) As a final word, taxes are the lifeblood of the nation. Consequently, it must be remembered that tax refunds are construed strictly against the taxpayers. 11 Any claim for refund take the nature of tax exemptions that must be construed strictissimi juris against the claimants and liberally in favor of the taxing authority. This power of taxation being a high prerogative of sovereignty, its relinquishment is never presumed. 12 To reiterate, it is my position that resident citizens or nationals of the Philippines who are working with the ADB are taxable on their income from all sources, including those derived from the ADB. The taxability of their income from the ADB is not dependent on RMC No. 31-2013 but on pre-existing provisions of the NIRC of 1997 and the treaties obligations between the Philippine Government and the ADB. In sum, petitioners' income tax payments on salaries and emoluments received from the ADB for taxable years 2012 and 2013 were not erroneously and/or illegally collected by the BIR. Hence, such income tax payments cannot be refunded. Accordingly, I vote to DENY the instant Petition for Review for lack of merit. ~~" C.~.Q JtiANITO C. CASTANEffA: JR. Associate Justice 11 Commissioner ofInternal Revenue v. San Roque Power Corporation, G.R. No. 187485, February 12, 2013, 690 SCRA 417. 12 Nestle Philippines, Inc. (formerly Filipro, Inc.) v. Honorable Court ofAppeals, eta!., G.R. No. 134114, July 6, 2001, 360 SCRA 583.