AYALA CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

Republic of the Philippines COURT OF TAX APPEALS Quezon City FIRST DIVISION AYALA CORPORATION, CTA Case No. 9024 Petitioner, For: Refund -versus- Members: DEL ROSARIO, P.J., Chairperson, COMMISSIONER OF UY,and INTERNAL REVENUE, MINDARO-GRULLA, JJ. Respondent. Promulgated: 'FEB 13 22: ::z-:3-:;-fl? ~ DECISION MINDARO-GRULLA, J.: This case involves a Petition for Review1 filed by Ayala Corporation on April 8, 2015, before the Court in Division, pursuant to Section 7(a)(2) of Republic Act (RA) No. 1125, An Act Creating the Court of Tax Appeals, as amended2, as well as Rule 4, Section 3(a)(2), in relation to Rule 8, Section 4(a) of the Revised Rules of the Court of Tax Appeals (RRCTA)3, as amended. 1 Docket, pp. 10-19 2 Sec. 7. Jurisdiction.- The erA shall exercise: (a) Exclusive appellate jurisdiction to review by appeal, as herein provided: XXX XXX (2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds or internal revenue taxes, fees of other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code provides a specific period for action, in which case the inaction shall be deemed a denial; XXX XXX 3 Rule 4, Sec. 3. Cases within the jurisdiction of the Court in Division.- The Court in Division shall exercise: c.

CfA Case No. 9024 Page 2 of 27 Ayala Corporation vs. CIR DECISION Petitioner seeks the issuance of a tax credit certificate (TCC) pertaining to its alleged excess or unutilized creditable withholding tax (CWT) for calendar years (CY) 2012 and 2013 in the aggregate amount of One Hundred Twenty-Eight Million Seven Hundred Thirty-Five Thousand Sixty-Eight Pesos and 63/100 (P128, 735,068.63). Petitioner Ayala Corporation is a domestic corporation duly organized and existing under the laws of the Republic of the Philippines, with principal place of business at 33rd Floor, Tower One Exchange Plaza, Ayala Triangle, Ayala Avenue, Makati City.4 It is registered with the Bureau of Internal Revenue (BIR) as a Large Taxpayer with Taxpayer Identification No. (TIN) 000-153-610-000. As a Large Taxpayer duly classified and notified by the BIR, petitioner is required to file its Quarterly and Annual Income Tax Returns and other BIR forms through the Electronic Filing and Payment System (EFPS). 5 (a) Exclusive original over or appellate jurisdiction to review by appeal the following: XXX XXX (2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code or other applicable law provides a specific period for action: Provided, that in case of disputed assessments, the inaction of the Commissioner of Internal Revenue within the one hundred eighty day-period under Section 228 of the National Internal Revenue Code shall be deemed a denial for purposes of allowing the taxpayer to appeal his case to the Court and does not necessarily constitute a formal decision of the Commissioner of Internal Revenue on the tax case; Provided, furthe~ that should the taxpayer opt to await the final decision of the Commissioner of Internal Revenue on the disputed assessments beyond the one hundred eighty day-period abovementioned, the taxpayer may appeal such final decision to the Court under Section 3(a), Rule 8 of these Rules; XXX XXX Rule 8. Sec. 4. Where to appea~� mode ofappeal.- (a) An appeal from a decision or ruling or the inaction of the Commissioner of Internal Revenue on disputed assessments or claim for refund of internal revenue taxes erroneously or illegally collected, the decision or ruling of the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade & Industry, the Secretary of Agriculture, and the Regional Trial Court in the exercise of their original jurisdiction, shall be taken to the Court by filing before it a petition for review as provided in Rule 42 of the Rules of Court. The Court in Division shall act on the appeal. XXX XXX 4 Par. 1, Joint Stipulation of Facts, Joint Stipulation of Facts and Issues (JSFI), docket, p. 178 5 Par. 3, Joint Stipulation of Facts, JSFI, docket, pp. 178-179 (

CTA Case No. 9024 Page 3 of 27 Ayala Corporation vs. CIR DECISION On the other hand, respondent is the duly appointed Commissioner of the Bureau of Internal Revenue, 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 5th Floor, BIR National Office Building, Agham Road, Diliman, Quezon City. Petitioner filed its Annual Income Tax Return (ITR) for CY 2012 through the EFPS6 on April 15, 2013 and manually7 on April 26, 2013, showing unutilized CWT in the amount of P66,355,174.63. Petitioner indicated its choice to seek the issuance of tax credit certificate for the alleged unutilized CWT in the Annual ITR for CY 2012.8 Petitioner filed its Annual ITR for CY 2013 through the EFPS9 on April 10, 2014 and manually10 on April 22, 2014, showing unutilized CWT of P62,379,894.00, which petitioner opted to claim as tax credit certificate. 11 On March 2, 2015, petitioner filed an administrative claim for the issuance of tax credit certificate for its alleged unutilized creditable withholding taxes for CYs 2012 and 2013 in the aggregate amount of P128,735,068.63, computed as follows: CALENDAR YEAR AMOUNT 2012 p 66,355,174.63 2013 62 379,894.00 TOTAL P128,735,068.63 The administrative claim for the issuance of tax credit certificate was filed together with other supporting documents with the BIR Large Taxpayer Division .12 6 Exhibits "P-9-1" and "P-9-2" 7 Exhibit "P-9-3" 8 Line 37, 2012 Annual ITR, Exhibits "P-9-6" and "P-9-7" 9 Exhibits "P-10-1" and "P-10-2" 10 Exhibit "P-10-3" 11 Exhibits "P-10-6" and "P-10-7" 12 Par. 4, Joint Stipulation of Facts, JSFI, docket, p. 179 t.

CTA Case No. 9024 Page 4 of 27 Ayala Corporation vs. CIR DECISION In order to stop the running of the two-year prescriptive period for filing a refund claim, petitioner filed the instant Petition for Review before this Court on April 8, 2015. Within the extended time granted by the Court, respondent filed his Answer13 on July 1, 2015. Respondent interposed as special and affirmative defenses (1) that petitioner failed to exhaust administrative remedies prior to the filing of the instant Petition for Review; (2) that petitioner's claim must be denied for petitioner's failure to submit complete documents in support of its administrative claim for refund; and (3) that claims for refund are construed strictly against the taxpayer and in favor of the government. The pre-trial conference was scheduled on September 17, 2015. Thus, respondent filed his Pre-Trial Brief on September 10, 201514; while petitioner submitted its Pre-Trial Brief on September 11, 201515. Subsequently, the parties filed their Joint Stipulation of Facts and Issues16 on October 2, 2015 and a Supplemental Joint Stipulation of Facts and Issues17 on October 22, 2015. Both the Joint Stipulation of Facts and Issues and the Supplemental Joint Stipulation of Facts and Issues were approved by the Court via Resolution18 issued on October 29, 2015. In the same Resolution, the Court declared the pre-trial terminated. The Court likewise issued a Pre-Trial Order19 on November 26, 2015. Upon petitioner's motion, the Court commissioned Ms. Ma. Milagros F. Padernal of Uy Singson Abella & Co. as the Independent Certified Public Accountant (CPA) for the case on October 8, 2015. Within the extended time granted by the Court, petitioner filed its Formal Offer of Evidence20 on March 11, 2016, consisting of Exhibits "P-1" to "P-57-1", inclusive of sub-markings. 13 Docket, pp. 76-87 14 Docket, pp. 84-90 1s Docket, pp. 91-100 16 Docket, pp. 178-181 17 Docket, pp. 199-208 18 Docket, p. 217 19 Docket, pp. 279-296 20 Docket, pp. 343-379 c

CTA case No. 9024 Page 5 of 27 Ayala Corporation vs. CIR DECISION In a Resolution21 dated May 17, 2016, the Court admitted Exhibits "P-1" to "P-57-1" as petitioner's evidence, except for Exhibits "P-11-3", "P-11-8", "P-15-5", "P-18-1", "P-22", "P-48" to "P-48-1", and "P-49" to "P-49-1" for failure to correspond with documents actually marked�, and "P-20-489"I "P-33-185"I "P-33-227"I "P-33-228"I "P-33- 258", "P-33-625", "P-37-122", and "P-51-145" for not being found in the records. As a result, petitioner filed an Urgent Motion for Partial Reconsideration22 of the Court's May 17, 2016 Resolution on June 1, 2016. On August 3, 201623, petitioner was given ten (10) days to file an amended Formal Offer of Evidence; thus, the resolution of the Urgent Motion for Partial Reconsideration was held in abeyance. Petitioner filed its Amended Formal Offer of Evidence24 on September 22, 2016. It was resolved by the Court via Resolution25 dated December 13, 2016, admitting Exhibits "P-11-8", "P-15-5", "P- 48" to "P-48-1" and "P-49" to "P-49-1", "P-33-185"I "P-33-258"I "P-33- 625", "P-37-122", and "P-51-145". Petitioner's documentary evidence which were admitted by the Court are as follows: Exhibit: Description: P-1 Petitioner's Certificate of Registration issued by the Bureau P-2 of Internal Revenue (BIR). P-3-1 BIR Letter dated August 21, 1998 classifying the Petitioner as a Large Taxpayer. P-3-2 Petitioner's Original Annual Income Tax (ITR) for Calendar P-3-3 Year (CY) 2005 duly filed through Electronic Filing and P-3-4 Payment System (EFPS) on April 11, 2006 Filing Reference Number on the filing of Petitioner's Annual ITR for CY 2005 filed through the EFPS Petitioner's Annual ITR for CY 2005 manually filed with the Large Taxpayer Service Office (LTSO) on April 18, 2006 Petitioner's amended Annual ITR for CY 2005 duly filed through EFPS on May 31, 2006 21 Docket, pp. 390-394 22 Docket, pp. 404-419 23 Docket, pp. 431-433 24 Docket, pp. 447-495 25 Docket, pp. 498-500 c.

CTA Case No. 9024 Page 6 of 27 Ayala Corporation vs. CIR DECISION P-3-5 Petitioner's amended Annual ITR for CY 2005 manually filed P-3-6 with the LTSO on June 02, 2006 P-3-7 Independent Auditors' Report with comparative Financial P-4-1 Statements attached to Petitioner's Annual ITR for CY 2005 P-4-2 Filing Reference Number on the filing of Petitioner's P-4-3 Amended Annual ITR for CY 2005 filed through the EFPS P-4-4 Petitioner's Annual ITR for CY 2007 duly filed through the P-5-1 EFPS P-5-2 Filing Reference Number on the filing of Petitioner's Annual P-5-3 ITR for CY 2007 filed through the EFPS P-5-4 Petitioner's Annual ITR for CY 2007 manually filed with the P-5-5 LTS on April 14, 2008 P-6-1 Independent Auditors' Report with comparative Financial P-6-2 Statements attached to Petitioner's Annual ITR for CY 2007 P-6-3 Petitioner's Annual ITR for CY 2008 duly filed through the P-6-4 EFPS on April 15, 2009 P-6-5 Filing Reference Number on the filing of Petitioner's Annual P-7-1 ITR for CY 2008 filed through the EFPS P-7-2 Petitioner's Annual ITR for CY 2008 manually filed with the P-7-3 LTSO on April 15, 2009 P-7-4 Independent Auditors' Report with comparative Financial P-7-5 Statemens attached to Petitioner's Annual ITR for CY 2008 P-7-6 Line 33 of Petitioner's Annual ITR for CY 2008 manually filed P-8-1 with the LTS P-8-2 Petitioner's Annual ITR for CY 2009 duly filed through the EFPS on April 13, 2010 P-8-3 Filing Reference Number on the filing of Petitioner's Annual P-8-4 ITR for CY 2009 filed through the EFPS Petitioner's Annual ITR for CY 2009 manually filed with the LTSO on April 15, 2010 Independent Auditor's Report with comparative Financial Statements attached to Petitioner's Annual ITR for CY 2009 Line 33 of Petitioner's Annual ITR for CY 2009 manually filed with the LTS Petitioner's Annual ITR for CY 2010 duly filed through the EFPS on April 14, 2011 Filing Reference Number on the filing of Petitioner's Annual ITR for CY 2010 filed through the EFPS Petitioner's Annual ITR for CY 2010 manually filed with the LTSO on April 15, 2011 Independent Auditors' Report with comparative Financial Statements attached to Petitioner's Annual ITR for CY 2010 Line 33 of Petitioner's Annual ITR for CY 2010 manually filed with the LTSO Line 33 of Petitioner's Annual ITR for CY 2010 filed with through the EFPS BIR System-generated message dated April 16, 2012 addressed to an officer of the Petitioner Petitioner's Annual ITR for CY 2011 manually filed with the LTSO on April 24, 2012 following the instruction in Revenue Memorandum Circular (RMC) No. 15-2012 Independent Auditors' Report with comparative Financial Statements attached to Petitioner's Annual ITR for CY 2011 Line 37 of Petitioner's Annual ITR for CY 2011 manually filed with the LTSO t..

CTA Case No. 9024 Page 7 of 27 Ayala Corporation vs. CIR DECISION P-8-5 Petitioner's Annual ITR for CY 2011 duly filed under EFPS P-8-6 on August 24, 2012 P-8-7 Filing Reference Number on the filing of Petitioner's Annual P-8-8 ITR for CY 2011 filed through the EFPS P-9-1 Line 37 of Petitioner's Annual ITR for CY 2011 filed through P-9-2 EFPS P-9-3 Notes to Financial Statements under Notes 24, page 56 P-9-4 Petitioner's Annual ITR for CY 2012 duly filed through the P-9-5 EFPS on April 15, 2013 Filing Reference Number on the filing Petitioner's Annual P-9-6 ITR for CY 2012 filed through the EFPS P-9-7 Petitioner's Annual ITR for CY 2012 manually filed with the P-9-8 LTSO on April 26, 2013 P-9-9 Independent Auditors' Report with comparative Financial Statements attached to Petitioner's Annual ITR for CY 2012 P-9-10 Signatures of the Petitioner's Treasurer and Managing Director and Chief Finance Officer as shown in page 3 of the P-9-11 ITR Line 37 of Petitioner's Annual ITR for CY 2012 manually filed P-9-12 with the LTSO Line 37 of Petitioner's Annual ITR for CY 2012 filed with P-9-13 through the EFPS Petitioner's Quarterly Income Tax Return for the First P-9-14 Quarter of CY 2012 filed through the EFPS on May 25, 2012 Petitioner's Quarterly Income Tax Return for the First P-10-1 Quarter of CY 2012 manually filed with the LTSO on May P-10-2 25, 2012 P-10-3 Petitioner's Quarterly Income Tax Return for the Second P-10-4 Quarter of CY 2012 filed through the EFPS on August 24, P-10-5 2012 Petitioner's Quarterly Income Tax Return for the Second P-10-6 Quarter of CY 2012 manually filed with the LTSO on August 28, 2012 Petitioner's Quarterly Income Tax Return for the Third Quarter of CY 2012 filed through the EFPS on November 22, 2012 Petitioner's Quarterly Income Tax Return for the Third Quarter of CY 2012 manually filed with the LTSO on November 26, 2012 Note 25 appearing on page 61 of the Independent Auditors' Report as attached to the Petitioner's Annual ITR for CY 2012 Petitioner's Annual ITR for CY 2013 duly filed through the EFPS on April 10, 2014 Filing Reference Number on the filing of Petitioner's Annual ITR for CY 2013 filed through the EFPS on April 10, 2014 Petitioner's Annual ITR for CY 2013 manually filed with the LTSO on April 22, 2014 Independent Auditors' Report with comparative Financial Statements attached to Petitioner's Annual ITR for CY 2013 Signatures of the Petitioner's Treasurer and Managing Director and Chief Finance Officer as shown in page 1 of the ITR Line 21 of Petitioner's Annual ITR for CY 2013 manually filed with the LTSO t..

CTA case No. 9024 Page 8 of 27 Ayala Corporation vs. CIR DECISION P-10-7 Line 37 of Petitioner's Annual ITR for CY 2013 filed with P-10-8 through EFPS P-10-9 Petitioner's Quarterly Income Tax Return for the First Quarter of CY 2013 filed through the EFPS on May 30, 2013 P-10-10 Petitioner's Quarterly Income Tax Return for the First Quarter of CY 2013 manually filed with the LTSO on June P-10-11 04, 2013 Petitioner's Quarterly Income Tax Return for the Second P-10-12 Quarter of CY 2013 filed through the EFPS on August 28, 2013 P-10-13 Petitioner's Quarterly Income Tax Return for the Second Quarter of CY 2013 manually filed with the LTSO on August P-10-15 30, 2013 P-10-16 Petitioner's Quarterly Income Tax Return for the Third P-11-1 Quarter of CY 2013 filed through the EFPS on November 20, P-11-2 2013 P-11-4 Petitioner's Quarterly Income Tax Return for the Third P-11-5 Quarter of CY 2013 manually filed with the LTSO on P-11-6 November 27, 2013 P-11-7 Schedule 1, page 3 of Petitioner's Annual ITR for CY 2013 P-11-9 manually filed with the LTSO P-11-10 Schedule 3, page 4 of Petitioner's Annual ITR for CY 2013 manually filed with the LTSO P-11-11 Petitioner's Annual ITR for CY 2014 duly filed through the P--11-12 EFPS on April 01, 2015 Filing Reference Number on the filing of Petitioner's Annual P-11-13 ITR for CY 2014 filed through the EFPS on April 01, 2015 Petitioner's Annual ITR for CY 2014 manually filed with the P-11-14 LTSO on April 01, 2015 Independent Auditors' Report with comparative Financial P-11-15 Statements attached to Petitioner's Annual ITR for CY 2014 Page 6, Schedule 7, Line 1 of Petitioner's Annual ITR for CY 2014 filed through the EFPS Page 6, Schedule 7, Line 1 of Petitioner's Annual ITR for CY 2014 filed with LTSO Line 31A of Petitioner's Quarterly Income Tax Return for the First Quarter of CY 2014 filed under EFPS Petitioner's Quarterly Income Tax Return for the First Quarter of CY 2014 manually filed with the LTSO on June 10, 2014 Line 30A of Petitioner's Quarterly Income Tax Return for the First Quarter of CY 2014 filed with LTSO Petitioner's Quarterly Income Tax Return for the Second Quarter of CY 2014 filed through the EFPS on August 26, 2014 Petitioner's Quarterly Income Tax Return for the Second Quarter of CY 2014 manually filed with the LTSO on August 28, 2014 Petitioner's Quarterly Income Tax Return for the Third Quarter of CY 2014 filed through the EFPS on November 05, 2014 Petitioner's Quarterly Income Tax Return for the Third Quarter of CY 2014 manually filed with the LTSO on November 06, 2014 c

CTA Case No. 9024 Page 9 of 27 Ayala Corporation vs. CIR DECISION P-12-1 Administrative Claim for issuance of TCC filed by Petitioner P-12-2 on March 02, 2015 P-12-3 BIR Stamped Received dated March 02, 2015 appearing on P-13-1 the upper portion of Exhibit P-12-1 P-13-2 Signature of Petitioner's Officer appearing on page 6 of P-13-3 Exhibit P-12-1 P-13-4 CTA Decision in CTA Case No. 7754 dated March 16, 2011 P-13-5 Page 12 of CTA Decision in CTA Case No. 7754 P-13-6 Page 13 of CTA Decision in CTA Case No. 7754 P-13-7 Page 11 of CTA Decision in CTA Case No. 7754 Sworn Statement of Maria Susana C. Babies submitted in P-13-8 CTA Case No. 7754 consisting of 10 pages P-14-1 Supplemental Sworn Statement of Maria Susana C. Babies P-14-2 submitted in CTA Case No. 7754 consisting of 3 pages P-14-3 Report submitted by the Independent Certified Public P-14-4 Accountant (CPA) in CTA Case No. 7754 consisting of 11 P-14-5 pages excluding its annexes and supporting documents Sworn Statement of the !CPA Ma. Milagros F. Padernal P-14-6 submitted in CTA Case No. 7754 consisting of 16 pages CTA Decision in CTA Case No. 8262 dated November 11, P-15-1 2013 consisting of 20 pages P-15-2 CTA Amended Decision in CTA Case No. 8262 dated March 21, 2014 consisting of 8 pages P-15-3 Sworn Statement of Maria Susana C. Babies submitted in CTA Case No. 8262 consisting of 17 pages P-15-4 Supplemental Sworn Statement of Maria Susana C. Babies P-16 submitted in CTA Case No. 8262 consisting of 2 pages P-17 Final Amended Report submitted by the !CPA in CTA Case P-17-1 No. 8262 consisting of twenty-three (23) pages excluding P-18 its annexes and supporting documents P-18-1 Sworn Statement of the !CPA Ma. Milagros F. Padernal P-19 submitted in CTA Case No. 8262 consisting of seven (7) pages Judicial Affidavit of Maria Susana C. Babies submitted in CTA Case No. 8629 consisting of forty-three (43) pages The First Folder of !CPA Report submitted in CTA Case No. 8629 consisting of twenty-three (23) pages excluding its annexes and supporting documents The Second Folder of !CPA Report submitted in CTA Case No. 8629 consisting of lists and schedules from Exhibit P-16 to P-54 and their sub-markings Judicial Affidavit of the !CPA Ma. Milagros F. Padernal consisting 14 pages Judicial Affidavit of the !CPA Ma. Milagros F. Padernal consisting of 4 pages Summary of Annual ITR filed to the BIR thru EFPS for CYs 2005 to 2014 and Quarterly ITR for CY 2014 2005 Amended Annual ITR Summary of Annual ITR manually filed with the BIR for CYs 2005 to 2014 and Quarterly ITR for CY 2014 2005 Amended Annual ITR manually filed with the BIR on June 2, 2006 Schedule of Creditable Taxes Withheld (CTW) for CYs 2012 and 2013 (

CTA Case No. 9024 Page 10 of 27 Ayala Corporation vs. CIR DECISION P-20 Summary of crw for CYs 2012 and 2013 supported by P-20-1 to Original Certificate of CWf at Source (BIR Form No. 2307) P-20-245 issued by Payor in the Petitioner's name P-20-246 Copies of Original Certificate of CfW at Source (BIR Form No. 2307) issued for CY 2012 to Copies of Original Certificate of CfW at Source (BIR Form P-20-248 No. 2307) issued for CY 2013 and Summary of crw for CYs 2012 and 2013 supported by P-20-250 Original Certificate of CWf at Source (BIR Form No. 2307) to issued by Payor not in the Petitioner's name and stamped P-20-519 "Received" by BIR LTDO P-21 Copies of Original Certificate of crw at Source (BIR Form P-21-1 to No. 2307) P-21-9 P-23 toP- Summary of Rental Income for CY 2012 and its general 23-1 ledger (1/7) to (7/7) P-24 toP- Summary of Directors' Fees for CY 2012 and its general 24-1 ledger (1/12 to Summary of Other Income for CY 2012 and its general 12/12) ledger P-25 to P- 25-1 Summary of Proceeds from Sales of Land CY 2012 and its (1/11 to general ledger 11/11) P-26 to P- Summary of Others - Various Accounts for CY 2012 26-1 Copy of the General ledger - Interest Income - Taxable- (1/3 to Miscellaneous for CY 2012 Copy of the General ledger - Interest Income - Taxable - 3/3) Peso MMP for CY 2012 P-27 Copy of the General ledger- Employee Benefits-Sports for P-27-1 CY 2012 Summary of Rental Income for CY 2013 and its general P-27-2 ledger P-27-3 Summary of Directors' Fees for CY 2013 and its general ledger P-28 toP- 28-1 Summary of Other Income for CY 2013 and its general ledger (1/8 to 8/8) P-29 to P- 29-1 (1/12 to 12/12) P-30 toP- 30-1 (1/13 to 13/13) L

CTA Case No. 9024 Page 11 of 27 Ayala Corporation vs. CIR DECISION P-31 Summary of Others-Various Accounts for CY 2013 P-31-1 Copy of the general ledger - Interest Income Taxable - Miscellaneous for CY 2013 P-31-2 Copy of the general ledger - Interest Income - Taxable- Peso MMP for CY 2013 P-32 Summary of Comparison of Payor's Name and Amount of P-33 Income Payment between Summary of crw supported by P-33-1 to original certificate of CWT (BIR Form 2307) issued by Payor P-33-116 in Petitioner's name and Summaries of Rental Income, P-33-117 Directors' Fees, Other Income, Proceeds from Sale of Land and Others- Various Accounts for CYs 2012 and 2013 to Summary of Comparison of Payor's Name and Amount of P-33-317 Income Payment between the Summaries of Rental P-33-165 Income, Directors' Fees, Other Income, Proceeds from Sale P-33-259 of Land and Others - Various Accounts and Petitioner's P-33-318 Official Receipts, Bank Credit Memos and Bank Statements for CYs 2012 and 2013 to Copy of the Official Receipts, Bank Credit Memo and Bank P-33-549 Statements P-33-550 Copy of the Official Receipts, Bank Credit Memo and Bank Statements to P-33-627 Copy of Official Receipt No. 25925 Copy of Official Receipt No. 58411 P-34 Copy of the Official Receipts, Bank Credit Memo and Bank P-35 Statements P-36 P-37 Copy of the Official Receipts, Bank Credit Memo and Bank Statements P-37-1 to P-37-133 Schedule of Computation of Taxable Income for CY 2012 Schedule of Computation of Taxable Income for CY 2013 P-38 Schedule of CWT for CYs 2005 and 2007 Summary of CWT for CYs 2005 and 2007 supported by P-38-1 to Original Certificates of CfW at Source (BIR Form No. 2307) P-38-7 issued by the Payor in Petitioner's name and stamped P-39 "Received" by BIR Large Taxpayers Assistance Division for CYs 2005 and 2007 Copy of the Certificates of CfW at Source (BIR Form No. 2307) Summary of CWT for CYs 2005 and 2007 supported by Original Certificates of CfW at Source (BIR Form No. 2307) issued by the Payor allegedly not in Petitioner's name and stamped "Received" by BIR Large Taxpayers Assistance Division for CY 2007 Copy of the Certificates of CfW at Source (BIR Form No. 2307) Summary of CWT for CYs 2005 and 2007 supported by Original Withholding Tax Remittance Return for Transactions involving Real Property other than Capital Asset including Taxable and Exempt (BIR Form No. 1606) issued by the Payor in Petitioner's name and stamped "Received" by BIR Large Taxpayers Assistance Division for CY 2007 (.

CTA Case No. 9024 Page 12 of 27 Ayala Corporation vs. CIR DECISION P-39-1 to Copy of the Withholding Tax Remittance Returns for P-39-3 Transactions involving Real Property other than Capital Assets including Taxable and Exempt (BIR Form 1606) P-40 Summary of CWT for CYs 2005 and 2007 supported by Original Certificate of Final Tax Withheld (BIR Form No. P-40-1 2306) issued by the Payor allegedly not in Petitioner's name and stamped "Received" by BIR Large Taxpayers Assistance P-41 Division for CY 2007 Copy of the Certificates of Creditable Final Tax Withheld P-42 toP- (BIR Form No. 2306) 42-1 Summary of CWT for CYs 2005 and 2007 allegedly not supported by Original Certificate CWT at source (BIR Form (1/2 to No. 2307) or Withholding Tax Remittance Return for 2/2) transactions involving Real Property other than Capital Asset including Taxable and Exempt (BIR Form No. 1606) P-43 toP- issued by the Payor for CYs 2005 and 2007 43-1 Summary of Rental Income for CY 2005 and its general ledger (1/2 to 2/2) Summary of Directors' Fees for CY 2005 and its general ledger P-44 toP- 44-1 Summary of Other Income for CY 2005 and its general ledger (1/2 to 2/2) Summary of Rental Income for CY 2007 and its general ledger P-45 toP- 45-1 Summary of Directors' Fees for CY 2007 and its general ledger (1/3 to 3/3) Summary of Other Income for CY 2007 and its general ledger P-46 toP- 46-1 Summary of Comparison of Payor's name and Amount of (1/3 to Income Payment between Schedule of CTW at Source and 3/3) Summaries of Rental Income, Director's Fees, Other Income, Proceeds from Sale of Land, net of cost, and P-47 toP- Proceeds from Sale of Other Assets, net of cost, for CYs 47-1 2005 and 2007 Summary of Comparison of Payor's name and Amount of (1/2 to Income Payment between the Summaries of Rental 2/2) Income, Director's Fees, Other Income, Proceeds from Sale P-50 of Land, net of cost, and Proceeds from sale of Other Assets, net of costs and Petitioner's Official Receipts, Credit P-51 Memos and Bank Statements for CYs 2005 and 2007 Copy of the Official Receipts, Bank Credit Memo and Bank P-51-1 to Statements P-51-62 t...

CTA Case No. 9024 Page 13 of 27 Ayala Corporation vs. CIR DECISION P-51-63 to Copy of the Official Receipts, Bank Credit Memo and Bank P-51-242 Statements P-51-144 Copy of Official Receipt No. 56772 Schedule of Computation of Taxable Income for CY 2005 P-52 Schedule of Computation of Taxable Income for CY 2007 P-53 Judicial Affidavit of Maria Susana C. Babies, Petitioner's P-54 Manager/Associate Director, consisting of fifty-three (53) pages and notarized on September 11, 2015 P-54-1 Signature of Maria Susana C. Babies appearing on page 52 of the Judicial Affidavit P-55 Supplemental Judicial Affidavit of Maria Susana C. Babies submitted in the present case consisting of seven (7) pages P-55-1 Signature of Maria Susana C. Babies appearing on page 6 of the Supplemental Judicial Affidavit P-56-1 The First Binder of !CPA Report consisting of twenty-nine (29) pages excluding its annexes and supporting documents P-56-2 Signature of the !CPA appearing on page twenty-nine (29) of the First Folder P-56-3 The Second Folder of !CPA Report consisting of lists and schedules from Exhibit P-17 toP-53 and their sub-markings P-57 Judicial Affidavit of the !CPA Ma. Milagros F. Padernal consisting of 21 pages P-57-1 Signature of the !CPA Ms. Ma. Milagros F. Padernal appearing on page 20 of the Judicial Affidavit On the other hand, during the hearing on May 17, 2016, respondent, through counsel, manifested that he will no longer present evidence. 26 The Court declared the case submitted for decision on February 22, 2017,27 considering the filing of respondent's Memorandum28 on January 13, 2017 and of petitioner's Memorandum29 on February 16, 2017. The parties submitted the following issues for the Court's resolution :30 1. Whether or not petitioner is entitled to the issuance of TCC in the total amount of P128,735,068.63 pertaining to its excess or unutilized CWTs for the CYs 2012 and 2013? 26 Docket, pp. 395-396 27 Docket, p. 546 28 Docket, pp. 504-516 29 Docket, pp. 519-544 30 Pre-Trial Order, docket, p. 281 c

CTA Case No. 9024 Page 14 of 27 Ayala Corporation vs. CIR DECISION 2. Whether or not petitioner's claim for issuance of TCC in the total amount of P128,735,068.63 is duly substantiated by sufficient evidence showing that the excess or unutilized CWTs were generated in CYs 2012 and 2013? 3. Whether or not petitioner's claim for issuance of TCC was filed within the two-year prescriptive period? 4. Whether or not petitioner's claim for issuance of TCC in the total amount of P128,735,068.63 was carried over to CY 2014? Petitioner's claim for issuance of tax credit certificate finds legal basis in Section 76 of the NIRC of 1997, as amended, which is quoted hereunder for ready reference: "SEC. 76. Final Adjustment Return. - Every corporation liable to tax under Section 27 shall file a final adjustment return covering the total taxable income for the preceding calendar or fiscal year. If the sum of the quarterly tax payments made during the said taxable year is not equal to the total tax due on the entire taxable income of that year, the corporation shall either: (A) Pay the balance of tax still due; or (B) Carry-over the excess credit; or (C) Be credited or refunded with the excess amount paid, as the case may be. In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income taxes paid, the excess amount shown on its final adjustment return may be carried over and credited against the estimated quarterly income tax liabilities 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 tax credit certificate shall be allowed therefor." (

CTA Case No. 9024 Page 15 of 27 Ayala Corporation vs. CIR DECISION Section 2.58.3 of Revenue Regulations (RR) No. 02-9831 should be read in conjunction with the above-quoted provision for it provides the following requisites pertinent to claims for refund or issuance of tax credit certificate for unutilized creditable withholding taxes: 1. The claim for refund must be filed with the Commissioner of Internal Revenue within the two-year prescriptive period from the date of payment of tax, as prescribed under Section 204(C), in relation to Section 229 of the NIRC of 1997, as amended; 2. It must be shown in the return of the recipient that the income payment received was declared as part of the gross income; and 3. The fact of withholding must be established by a copy of a statement duly issued by the payor to the payee showing the amount paid and the amount of the tax withheld therefrom.32 31 SECTION 2.58.3. Claim for Tax Credit or Refund. - XXX (B) Claims for tax credit or refund of any creditable income tax which was deducted and withheld on income payments shall be given due course only when it is shown that the income payment has been declared as part of the gross income and the fact of withholding is established by a copy of the withholding tax statement duly issued by the payor to the payee showing the amount paid and the amount of tax withheld therefrom. Proof of remittance is the responsibility of the withholding agent. (C) Excess Credits- An individual or corporate taxpayer's excess expanded withholding tax credits for the taxable quarter/year shall automatically be allowed as a credit against his income tax due for the taxable quarters/years immediately succeeding the taxable quarters/years in which the excess credit arose, provided he submits with his income tax return, a copy of the first page of his income tax return for the previous taxable period showing the amount of his excess withholding tax credits, and on which return he has not opted for a cash refund or tax credit certificate. (1) If in lieu of the automatic application of his excess credit, the taxpayer wants a cash refund or a tax credit certificate for use in payment of his other national internal revenue tax liabilities, he shall make a written request therefor, within two years after the payment of the tax (Ref. Sees. 204(c) and 229 of the Code), provided however, that if the taxpayer has indicated in his income tax return his option for either a cash refund or a tax credit certificate, such indication shall be considered sufficient for the purpose. Upon filing of his request, the taxpayer's income tax return showing the excess expanded withholding tax credits shall be examined. The excess expanded withholding tax so determined, shall be refunded/credited to the taxpayer. xxx 32 Republic of the Philippines/ represented by the Commissioner of Internal Revenue vs. Team {Phils.) Energy Corporation (formerly Mirant {Phils.) Energy Corporation), G.R. No. 188016, January 14, 2015; United International Pictures AB vs. Commissioner ofInternal Revenue, G.R. No. 168331, October 11, 2012; Citibank N.A. vs. Court of Appeals/ et a/., G.R. No. 107434, October 10, 1997; ACCRA Investments Corporation vs. The Honorable Court ofAppeals/ eta!., G.R. No. 96322, December 20, 1991 t.

CTA case No. 9024 Page 16 of 27 Ayala Corporation vs. CIR DECISION As to the first requisite, Sections 204(C) and 229 of the NIRC of 1997, as amended, provide for the mandatory prescriptive period within which to file a claim for refund, to wit: "SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. - The Commissioner may - XXX XXX XXX (C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided, however, that a return filed showing an overpayment shall be considered as a written claim for credit or refund." (Emphasis supplied) "SEC. 229. Recovery of Tax Erroneously or Illegally Collected. - No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such L

CfA Case No. 9024 Page 17 of 27 Ayala Corporation vs. CIR DECISION payment appears clearly to have been erroneously paid." (Emphasis supplied) Pursuant to the above provisions and as held in the case of ACCRA Investments Corporation vs. Court ofAppeals'3, the two-year prescriptive period for claiming refund of overpaid income tax or creditable withholding tax commences on the date of filing of the Final Adjustment Return. It is only when the Final Adjustment Return covering the whole year is filed that the taxpayer would know whether a tax is still due or a refund can be claimed based on the adjusted and audited figures. 34 This guiding principle was repeated in the more recent case of Commissioner ofInternal Revenue, eta/. vs. Primetown Property Group, Inc.35, where it was held that the two-year prescriptive period is reckoned from the filing of the Final Adjustment Return. Based on the afore-cited cases, petitioner has two years from the date of filing of the Final Adjustment Return within which to file a claim for refund or issuance of tax credit certificate for its alleged excess creditable withholding taxes both in the administrative and judicial levels. The present claim covers taxable years 2012 and 2013 for which petitioner electronically filed its Annual ITR on April 15, 201336 and on April 10, 201437, respectively. Counting from these dates, the administrative claim which was filed on March 2, 201538 and the Petition for Review which was filed on April 8, 201539 were filed well within the two-year prescriptive period. Thus, petitioner complied with the first requisite. The Court will now proceed to determine petitioner's compliance with the second and third requisites. Section 76 of the NIRC of 1997, as amended, prescribes two options to a taxable corporation whose total quarterly income tax payments in a given taxable year would exceed its total income tax due. The taxpayer may either file a tax refund (either in the form of 33 G.R. No. 96322, December 20, 1991 34 Commissioner ofInternal Revenue vs. TMX Sales Inc., eta!., G.R. No. 83736, January 15, 1992 3s G.R. No. 162155, August 28, 2007 36 Exhibit "P-9-1" 37 Exhibit "P-10-1" 38 Exhibit "P-12-1" 39 Docket, p. 10 t.

CTA Case No. 9024 Page 18 of 27 Ayala Corporation vs. CIR DECISION cash or tax credit certificate) or carry over the excess credit. However, once the carry-over option is taken actually or constructively, it becomes irrevocable for that taxable period.40 The phrase "for that taxable period" merely identifies the excess income tax, subject of the option, by referring to the taxable period when it was acquired by the taxpayer. 41 The claimant-corporation must signify in its annual corporate adjustment return (by marking the option box provided in the BIR form) its intention, whether to request a refund or to claim 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.42 A scrutiny of petitioner's Annual Income Tax Returns for CYs 2012 and 2013 reveals that petitioner had total tax credits in the respective amounts of P123,217,247.63 and P103,722,413.00, consisting of the following: AITR for CY 2012 (Exh. "P-9-1") P25,595,352.64 p 56,862,073.00 Prior Year's Excess Credits other than MCIT 40 759 821.99 Creditable Tax Withheld for the First Three Quarters 66/355,174.63 Creditable Tax Withheld for the Fourth Quarter P123,217,247.63 Total Tax Credits AITR for CY 2013 (Exh. ''P-10-1 ") P29,132,812.00 p 41,342 519.00 Prior Year's Excess Credits other than MCIT 33 247,082.00 Creditable Tax Withheld for the First Three Quarters 62 379,894.00 Creditable Tax Withheld for the Fourth Quarter P103,722,413.00 Total Tax Credits Records reveal that the prior year's excess credits reported in petitioner's 2012 and 2013 Annual ITRs, which originated from the creditable taxes withheld for the years 2005 to 2007, were duly supported by Certificates of Creditable Tax Withheld at Source (BIR Form No. 2307) with certain exceptions found by the Court- 40 Phi/am Asset Management, Inc. vs. Commissioner of Internal Revenue, G.R. Nos. 156637 and 162004, December 14, 2005; Systra Philippines, Inc. vs. Commissioner ofInternal Revenue, G.R. No. 176290, September 21, 2007 41 Commissioner of Internal Revenue vs. Bank of the Philippine Islands, G.R. No. 178490, July 7, 2009 42 Philippine Bank of Communications vs. Commissioner of Internal Revenue, et a/., G.R. No. 112024, January 28, 1999 {

CTA Case No. 9024 Page 19 of 27 Ayala Corporation vs. CIR DECISION commissioned Independent CPA firm, Uy Singson Abella & Co., through its Partner, Ms. Ma. Milagros F. Padernal, as shown below: 200543 p 14,080,672.00 Prior year's excess credits Creditable taxes withheld for the year 39,557,208.00 Total tax credits Less: Tax due 53,637,880.00 Amount claimed for issuance of TCC44 5,612,835.72 CWTs with exceptions found by !CPA (from prior year's excess credits)45 39,557,208.00 Amount allowable for carry over to 2006 4,066,120.00 2006 p 4,401,_716.28 Prior year's allowable excess credits Creditable taxes withheld for the year p 4,401,716.28 Total tax credits Less: Tax due 34,133,265.00 CWTs with exceptions found by ICPA46 38,534,981.28 Amount allowable for carry over to 2007 9,478,115.96 200747 Prior year's allowable excess credits - Creditable taxes withheld for the year p 29,056,865.32 Total tax credits Less: Tax due --- CWTs with exceptions found by ICPA48 i Amount allowable for carry over to 2008 p 29,056,865.32 200849 33,769,015.00 Prior year's allowable excess credits 62,825,880.32 Creditable taxes withheld for the year 10,269,099.44 Total tax credits 189,484.31 Less: Tax due p 52,367,296.57 Amount claimed for issuance of TCC50 Amount allowable for carry over to 2009 p 52,367,296.57 44,288,865.00 200951 96,656,161.57 Prior year's allowable excess credits 8,908,985.78 Creditable taxes withheld for the year 44,288,865.00 43 Exhibit "P-3-5" p 43,458,310.79 44 CTA Case No. 7754, March 16, 2011 45 Exhibit "P-13-7", p. 6 p 43,458,310.79 46 Exhibit "P-15-2", p. 13 57,921,704.00 47 Exhibit "P-4-1" 48 Exhibit "P-56-1", pp. 16-17 49 Exhibit "P-5-1" 50 CTA Case No. 8262, November 11, 2013 51 Exhibit "P-6-1" t:

CTA Case No. 9024 Page 20 of 27 Ayala Corporation vs. CIR DECISION Total tax credits 101,380,014.79 Less: Tax due 11,306,546.70 Amount claimed for issuance of TCC52 57,921,704.00 Amount allowable for carry over to 2010 p 32,151,764.09 2 0 1 0 53 p 32,151,764.09 Prior year's allowable excess credits Creditable taxes withheld for the year 67,374,728.00 Total tax credits Less: Tax due 99,526,492.09 Amount claimed for issuance of TCC54 11,879,600.62 Amount allowable for carry over to 2011 67,374,728.00 p 20,272,163.47 2 0 1 1 55 ! Prior year's allowable excess credits p 20,272,163.47 I 59,728,412.40 ! Creditable taxes withheld for the year 39,557,208.00 1 119,557,783.87 I Other credits- 2005 CWTs disallowed by this Court56 7 ,222, 902.33 Total tax credits 59,728,412.40 Less: Tax due 198,320.96 Amount claimed for issuance of TCC57 52,408,148.18 CWTs with exceptions found by ICPA (from 2005 CWTs)58 Amount allowable for carry over to 2012 p Petitioner's Minimum Corporate Income Tax (MCIT) due for the years 2012 and 2013 in the respective amounts of P15,519,554.22 and P8,046,836.00, totaling P23,566,390.22, can be fully offset against the allowable prior year's excess credits of P52,408,148.18 from CY 2012, leaving the balance of allowable prior year's excess credits at the end of CY 2013 in the amount of P28,841,757.96. Considering that only the prior year's excess credits were carried over to the subsequent quarters/years, the unutilized CWT for CYs 2012 and 2013 in the respective amounts of P66,355,174.63 and P62,379,894.00, totaling P128,735,068.63, for which petitioner opted to be issued a tax credit certificate59, may be refunded pursuant to Section 76 of the NIRC of 1997, as amended. 52 CTA Case No. 8262, November 11, 2013 53 Exhibit "P-7-1" 54 CTA Case No. 8629, March 11, 2016 55 Exhibit "P-8-5" 56 CTA Case No. 7754, March 16, 2011 57 CTA Case No. 8629, March 11, 2016 58 Exhibit "P-56-1", pp. 16-17 59 Exhibits "P-9-7", "P-10-7", and "P-12-1" c.

CTA Case No. 9024 Page 21 of 27 Ayala Corporation vs. CIR DECISION However, as earlier mentioned, petitioner must likewise comply with Section 2.58.3(8) of RR No. 2-98, which also requires that: "SECTION 2.58.3. Claim for Tax Credit or Refund- XXX XXX XXX (B) Claims for tax credit or refund of any creditable income tax which was deducted and withheld on income payments shall be given due course only when it is shown that the income payment has been declared as part of the gross income and the fact of withholding is established by a copy of the withholding tax statement duly issued by the payor to the payee showing the amount paid and the amount of tax withheld therefrom." (Emphasis supplied) Petitioner submitted the Schedule of Creditable Taxes Withheld60 for the years 2012 and 2013 and the related Certificates of Creditable Tax Withheld at Source (BIR Form No. 2307).61 Upon verification of these documents, the Independent CPA provided a summary of petitioner's claimed creditable withholding taxes for CYs 2012 and 2013 in the respective amounts of P66,355,174.63 and P62,379,894.38, detailed as follows: 62 Exhibit BIR Form No. 2307 2012 2013 Total 6~042,460.95 p 62,168,828.45 p 128,211,289.40 "P-20" Supported with original BIR Form No. 2307 in the Petitioner's name 201,000.00 181,500.00 382,500.00 and included in the Alpha list p 150,561.28 9,878.00 160,439.28 stamped "Received" by BIR's Large Taxpayers Assistance Division "P-21" Supported with original BIR Form No. 2307 not in the Petitioner's name and included in the Alphalist stamped "Received" by BIR's Large Taxp_a_yers Assistance Division "P-22" Not supported Tax base, exchange rates and (38,847.60) 19,687.93 (19,159.67) . rounding-off differences p 312,713.68 p 211,065.93 p 523,779.61 p 66,355,174.63 p 62,379,894.3_~- - p 128,735,069.01 ----- 60 Exhibit "P-19" 61 Exhibits "P-20-1" to "P-20-519" and "P-21-1" to "P-21-9" 62 Exhibit "P-56-1", p. 9 t.

CTA Case No. 9024 Page 22 of 27 Ayala Corporation vs. CIR DECISION The above claims that are supported by BIR Forms No. 2307 not in the petitioner's name (marked as Exhibit "P-21''), and not supported by BIR Forms No. 2307 (marked as Exhibit "P-22''), including the exchange rates and rounding-off differences, amounting to P312,713.68 in CY 2012 and P211,065.93 in CY 2013, or a total amount of P523,779.61, require a downward adjustment to the petitioner's claim. Further, it has been noted that the following claims supported with original BIR Forms No. 2307 in the name of petitioner with related income tax withheld amounting to P72,919.20 in 2012 were dated outside the period of claim, hence, shall constitute an additional disallowance on petitioner's claim: Period Amount of Amount of Covered Exhibit No. Payor Income Payment Taxes Withheld 2012 BPI Globe Banko Inc. Bank of the Philippine Islands Directors' Fees Integrated Microelectronics, Inc. Stream International Global "P-20-121" to Services Philippines "P-20-122" December 2011 p 13/tOOO.OO p 2~700.00 Other Income p 1 562 460.00 p 31 249.20 135 000.00 20,250.00 "P-20-173" December 2011 27 000.00 540.00 "P-20-199" December 2011 p 1,724,460.00 p 52,039.20 January to "P-20-228" March 2011 Others - Various Accounts Stream International Global p 9,000.00 p 180.00 July to Services Philippines 72,919.20 Total- 2012 "P-20-243" September 2011 p 1,871,460.00 p Indeed, petitioner was able to satisfy the second requirement and established the fact of withholding for CYs 2012 and 2013 only in the respective amounts of P65,969,541.75 and P62,168,828.45, or in the sum of P128,138,370.20, as computed below: 2012 2013 Total I Supported with original BIR Form No. 2307 I in the Petitioner's name and included in the Alphalist stamped "Received" by BIR's Large p 66,042 460.95 p 62 168,828.45 p 128,211,289.40 Taxpayers Assistance Division 72 919.20 Less: CWTs dated outside the period of claim - 72 919.20 p 65,969,541.75 p 62,168,828.45 p 128,138,370.20 Anent the third requisite of proving that the income upon which the subject taxes were withheld was included and reported in its t

CTA Case No. 9024 Page 23 of 27 Ayala Corporation vs. CIR DECISION Annual Income Tax Returns for CYs 2012 and 2013, petitioner presented Schedule of Creditable Taxes Withheld63, Summaries64 of Rental Income, Directors' Fees, Other Income, Proceeds from Sale of Land and Others - Various Accounts for CYs 2012 and 2013 and the corresponding general ledgers (GLs)65 for CYs 2012 and 2013, Schedule66 of Comparison of Payor's Name and Amount of Income Payment Between Schedule of Creditable Tax Withheld At Source and Summaries of Rental Income, Directors' Fees, Other Income, Proceeds from Sale - Land and Others-Various Accounts, Schedule67 of Comparison of Payors' Name and Amount of Income Payment Between Summaries of Rental Income, Directors' Fees, Other Income, Proceeds from Sale - Land And Others-Various Accounts, petitioner's official receipts, bank credit memo and bank statements68, and Schedules of Computation of Taxable Income for CYs 201269 and 201370 � The amounts of Rental Income, Directors' Fees, Other Income, Proceeds from Sale of Land and Others - Various Accounts With Income Taxes Withheld per general ledgers of CYs 2012 and 2013 were accordingly traced to those reflected in the petitioner-prepared Schedules of Computation of Taxable Income for CYs 2012 and 2013, except for some rounding-off differences, as follows: Particulars Exhibit Per General Per Schedule of Exhibit 2012 No. Ledger Computation of No. Difference* Rental income Taxable Income Directors fees (Income With Other income Tax Withheld) Proceeds from sale of land "P-23" p 116,171,623.76 p 116,171 624.00 p (0.24) Others- various "P-24" 41 825,250.00 41,825 250.00 - Total "P-25" 374,711 236.00 374 711,236.03 0.03 "P-26" 56,799,842.87 56,799,843.00 (0.13) "P-27" 0.44 32,305,694.44 32,305 694.00 p 621,813,647.10 p 621,813,647.00 "P-34" 2013 "P-28" p 117'935,306.82 p 117,935,307.00 p (0.18) Rental income "P-29" 39,236,366.00 39 236,366.00 - Directors fees "P-30" 384,944,840.00 Other income 384,944,839.95 (0.05) 63 Exhibit "P-19" 64 Exhibits "P-23" to "P-31" 65 Exhibits "P-23-1" to "P-31-2" 66 Exhibit "P-32" 67 Exhibit "P-33" 68 Exhibits "P-33-1" to "P-33-627" 69 Exhibit "P-34" 70 Exhibit "P-35" L.

CTA Case No. 9024 Page 24 of 27 Ayala Corporation vs. CIR DECISION Others- various I "P-31" Total *Due to rounding-off Furthermore, the amounts of gross revenue and selected cost and expense accounts reflected in the taxable income column of the petitioner-prepared Schedule of Computation of Taxable Income for CYs 2012 and 2013 tally with the total amounts of sales/revenues/fees, and non-operating and other income and selected deductible costs and expenses accounts reflected in the Annual Income Tax Returns for CYs 2012 and 2013 duly stamped "Received" by the BIR as follows: Exhibit 2012 Exhibit 2013 No. No. Gross revenue reflected in the taxable income column per "P-34" p 1,038,824,829.00 "P-35" p 699,023,543.00 Schedule of Computation of Taxable Income Gross revenue reflected in the Annual Income Tax Return duly "P-9-1" 1,038,824,828.79 "P-10-1" 699,023,543.00 stam_Qed "Received" by the BIR Rounding-off difference p 0.21 p - Costs and expenses reflected in "P-34" p 4,181,429,250.00 "P-35" p 4,398,033,040.00 the taxable income column per "P-9-1" Schedule of Computation of 4,181,429,250.00 "P-10-1" 4,398,033,040.00 Taxable Income Costs and expenses reflected in p - p - the Annual Income Tax Return duly stamped "Received" by the BIR Difference However, there were income payments per the Summary of Certificate of Creditable Taxes Withheld Supported by Original Certificate of Creditable Tax Withheld at Source (BIR Form No. 2307) Issued by the Payor in the Petitioner's Name for CYs 2012 and 201371 that cannot be traced or differed with the income amounts indicated in the Summaries72 of Rental Income, Directors' Fees, Other Income, Proceeds from Sale- Land and Others-Various Accounts. Some items with discrepancy were accounted for by petitioner but failed to submit proof (i.e., journal entries traced to subsidiary and general ledgers) to support such; while other discrepancies remained unaccounted. As such, this Court cannot ascertain whether said income payments 71 Exhibit "P-20" 72 Exhibits "P-23" to "P-31" t..

CTA Case No. 9024 Page 25 of 27 Ayala Corporation vs. CIR DECISION pertain to one and the same transactions; hence, the related creditable withholding taxes in the amount of P46,414,695. 77 shall be disallowed, detailed as follows: Period Amount of Income Amount of Taxes Covered Exh. No. Payor Payment Withheld 2012 1st Quarter Rental Income 1st Quarter Honda Cars Makati, Inc. p 5 554,880.50 p 277 744.03 1st Quarter Honda Cars Makati Inc. "P-20-11" Honda Cars Makati Inc. 1 380 070.32 69,003.52 "P-20-12" Isuzu Automotive Dealership, Inc. "P-20-14" - Alabang Branch 4 358 590.98 217,929.55 Isuzu Cebu, Inc. - Mandaue "P-20-32" December 2012 Branch 1 675,772.80 83 788.64 Integrated Microelectronics Inc. "P-20-36" 4th Quarter 974 459.20 48,722.96 "P-20-40" June 2012 Subtotal 1 000.00 20 000.00 Ayala Land Inc. p 13 963 773.80 p 698188.70 Directors' Fees Bank of the Philippine Islands "P-20-60" to 1st to 4th Bank of the Philippine Islands BPI Family Savinqs Bank Inc. "P-20-95" Quarter Dataone Asia (Philippines) Inc. p 9 500,000.00 p 1 425.000.00 Other income Globe Telecoms Inc. "P-20-174" May 2012 Inteqrated Microelectronics Inc. p 22 400.00 p 448.00 Integreon Managed Solutions "P-20-176" to (Philippines) Inc. Liveit Investments Limited - "P-20-178" 4th Quarter Philippine Regional Operating 36 581 296.78 3 721 625.94 Headquarters 3 003 307.94 60 066.16 "P-20-180" December 2012 Manila Water Company 100,000.00 2 000.00 Manila Water Company "P-20-184" August 2012 Stream International Global Services Philippines "P-20-187" to 2nd to 4th Subtotal "P-20-189" Quarter 37 284 052.87 5 452 146.40 Amaia Land Corp. "P-20-193" to 2nd to 4th Honda Cars Alabang "P-20-198" Quarter 17 428 648.88 2 614,135.91 Honda Cars Makati Inc. "P-20-200" to 1st and 3rd Honda Cars Pasig (A Branch of Honda Cars Makati Inc.) "P-20-201" Quarter 167 533.30 312.50 Subtotal "P-20-203" May 2012 Total-2012 3 200.00 64.00 "P-20-207" 2nd Quarter 28,171 420.36 4,225,713.05 "P-20-212" December 2012 27,077 458.47 4,061/618.77 "P-20-227" 1st Quarter 25 000.00 500.00 p 149 864,318.60 p 20 138 630.73 Proceeds from Sale of Land "P-20-244" December 2012 p 126.785.270.00 p 7.607.116.20 Others - Various Accounts "P-20-5" to 2nd to 4th "P-20-7" Quarter p 554 481.76 p 11,089.64 "P-20-14" and "P-20-238" to 1st to 4th "P-20-242" Quarter 695 313.69 13,906.27 "P-20-18" to 2nd to 4th "P-20-20" Quarter 472 586.99 9 451.73 p 1,722,382.44 p 34447.64 I' 301,835. 744.84 I' 29,903,383.27 2013 1st Quarter I Honda Cars Alabang p 9,392,972.13 p 469,648.61 Rental Income l "P-20-251" t

CTA Case No. 9024 Page 26 of 27 Ayala Corporation vs. CIR DECISION Exh. No. Period Pavor Amount of Income Amount of Taxes I "P-20-254" Covered Honda Cars Global City Pa_yment Withheld "P-20-255" August 2013 Honda cars Makati Inc. 2 563 056.02 128 152.80 "P-20-257" to 1st Quarter 7 089 043.00 354 452.15 "P-20-258" and Honda Cars Makati Inc. "P-20-260" 3rd Quarter 14 787 192.58 739 359.64 "P-20-261" to Honda Cars Makati Inc. "P-20-262" and 4th Quarter Isuzu Cebu Inc. - Mandaue Branch 11 825 274.18 591 263.70 "P-20-264" 1st Quarter "P-20-279" Subtotal 1 324 898.20 66 244.91 ALFM Peso Bond Fund Inc. p 46 982 436.11 p 2,349121.81 ALFM Dollar Bond Fund Inc. Directors' Fees 3rd Quarter p 30,000.00 p 4 500,00 1 "P-20-293" 3rd Quarter Subtotal "P-20-301" 10 000.00 1 500.00 Bank of the Philippine Islands BPI Family Savings Bank Inc. p 40000.00 p 6000.00 Other Income 2nd and 4th Globe Telecom Inc. p 30 629,127.19 p 4 317 582.54 "P-20-442" to Quarter Honda Cars Makati Inc. HR Mall, Inc. 3 534,260.42 70 685.21 "P-20-446" December 2013 Integrated Microelectronics Inc. "P-20-447" 2nd and 4th 36 479 054.00 5 444,465.15 "P-20-456" and Quarter Integrated Microelectronics Inc. 219 780.00 4,395.60 "P-20-458" 4th Quarter "P-20-460" Subtotal 8 190 449.00 1 228 567.35 "P-20-465" December 2013 134 465.00 20 319.75 "P-20-470" 1st Quarter BPI Rental Corporation "P-20-473" and 16 076 176.00 2 411,426.40 "P-20-475" 4th Quarter Honda Cars Alabang Honda Cars Makati Inc. p 95.263311.61 p 13 497.442.00 Honda Cars Pasig (A Branch of Others - Various Accounts Honda Cars Makati Inc.) "P-20-509" 1st Quarter Subtotal 3,150 000.00 630,000.00 Total-2013 "P-20-251" to 1st to 2nd Grand Total - 2012 and 2013 "P-20-252" Quarter 306 459.13 6 129.19 "P-20-512" to 1st to 4th "P-20-519" Quarter 882 367.49 17_1_647.36 "P-20-265" to 1st to 2nd "P-20-266" Quarter 248 606.92 4 972.14 p 4 587. 433.54 p 658748.69 p 146,873,181.26 p 16,511,312.50 p 448,708,926.10 p 46,414 695.77 Accordingly, and in compliance with the third requisite, out of the total amount of P128, 138,370.20 creditable withholding taxes which was properly supported with BIR Forms No. 2307, only the amount of P81,723,674.43 creditable withholding tax shall be granted, considering that this is the amount which corresponds to the income payments which were verified to have been included in petitioner's taxable gross income per its Annual Income Tax Returns for CYs 2012 and 2013, thus: CY 2012 CY 2013 TOTAL Claimed Creditable Withholding Taxes p 65,969,541.75 p 62,168,828.45 p 128,138,370.20 with valid BIR Forms No. 2307 4

erA Case No. 9024 Page 27 of 27 Ayala Corporation vs. CIR DECISION Less: CWT, the related income 29,903,383.27 16,511,312.50 46,414,695.77 payments of which per Schedule of Creditable Taxes Withheld differ with the income payments reflected in the Summaries of Rental Income, Directors' Fees, Other Income, Proceeds from Sale - Land and Others-Various Accounts Refundable Excess CWT p 36,066,158.48 p 45,657,515.95 p 81,723,674.43 WHEREFORE, premises considered, the instant Petition for Review is hereby PARTIALLY GRANTED. Accordingly, respondent is ORDERED TO ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the reduced amount of P81,723,674.43, representing petitioner's excess or unutilized creditable withholding taxes for calendar years 2012 and 2013. SO ORDERED. c;u; N. M~- ~~ CIELITO N. MINDARO-GRULLA Associate Justice WE CONCUR: Presiding Justice ERL~P.UY 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. Presiding Justice Chairperson, 1st Division