SONY PHILIPPINES INCORPORATED v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES Court of Tax Appeals QUEZON CITY Special Third Division SO NY PHILIPPINES Petitioner, CTA CASE NO. 10302 INCORPORAT ED Members: -versus- RINGPIS-LIBAN, Chairperson, and MODESTO-SAN PEDRO, JJ Promulgated: COMMISSIONER OF ;..(} r .... ~~UG 30 2023~ ;;c::::::::=="" - INTERNAL REVENUE, R espo ndent. X ---------------------------------------------------------------------------------------- X DECISION M ODESTO-SAN PEDRO, J. : The Case Before this Court is a Petition for Review,1 filed on 10 July 2020 by Sony Philippines Incorporated ("Sony" or " petitioner") against respondent Commissioner of Internal Revenue ("CIR" or "respondent"), praying that judgment be rendered ordering respondent to refund a total amount of Fifty- Three Million Sixty Thousand Eight Hundred Fifty-Five Pesos (Php53,060,855.00), representing unutilized creditable withholding taxes ("CWT") for the fisca l year ending 31 March 2018 ("FY20 18"). The Parties Petitioner Sony Philippines Incorporated is a corporation duly organized and existing under the laws of the Philippines, with principal office address at 12th Floor Inoza Tower, 40th Street, Bonifacio G lobal City, Taguig City. It is primari ly engaged in sell ing, marketing, manufacturing, procuring, and providing repair services for certain products bearing the trademark / "Sony".2 It is registered with the Bureau of Internal Revenue, under RegulaV 1 Docket Vol. 1-3, pp. I0- 1424, with ann exes. Ex hibit " P-2'', Certificate of Filing Amended Articles of Incorporation, Docket Vol. 4, pp. 174 7-1 760.

DECISION CTA CASE NO. 10302 Large Taxpayer Division I (Revenue District Officer [RDO] No. 116), with Taxpayer Identification No. 005-338-777-000.3 On the other hand, respondent is the Commissioner of the Bureau of Internal Revenue ("BIR"), vested under appropriate laws with authority to carry out all the functions, duties and responsibilities of his office, including, inter alia, the power to decide, approve and grant claims for refund or tax credit of internal revenue taxes. He may be served with summons and other Court processes at the BIR National Office Building, Agham Road, Diliman, Quezon City.4 The Facts On 13 July 2018, petitioner filed with the BIR, through Electronic Filing and Payment System (eFPS), its Annual Income Tax Return (AITR).5 The same AITR was later amended on 27 July 2018.6 In its original and amended AITR, petitioner reported a gross income of Php1,085,547,654 and net taxable income of Php126,328,753. Consequently, petitioner reported a Regular Corporate Income Tax (RCIT) liability ofPhp37,898,626 for FY2018.7 Petitioner also had income tax credits in the total amount of Php312,804,837 consisting of prior year's excess credits in the amount of Php259,743,982 and CWT accumulated during the four quarters ofFY2018 in the aggregate amount ofPhp53,060,855.8 After deducting its RCIT liability against income tax credits for FY20 18, petitioner reported a tax overpayment ofPhp274,906,211, computed as follows: Total Gross Income I ,085,54 7,654 Less: Itemized Deductions (959,218,901) Net Taxable Income 126,328,753 RCIT Due (30%) 37,898,626 Less: Tax Credits/Payments/ Exhibit '"P-3'', Certificate of Registration, id., p. 1761. 4 Par. 5, Parties, Petition for Review, Docket Vol. I, pp. 8-9. 5 Exhibit '"P-6", Annual income Tax Return filed on 13 July 2018, Docket Vol. 4, pp. 1766-1773. 6 Exhibit '"P-7", Amended Annual Income Tax Return filed on 27 July 2018, id., pp. 1774-1781. 7 !d. 8 /d.

DECISION CTA CASE NO. 10302 Prior Year's Excess Credits (259,743,982) (312,804,83 7) CWT withheld for Q 1 to Q3 of FY2018 (41,819,679) CWT withheld for Q4 of FY20 18 (11,241,176) Tax Overpayment (274,906,211) Petitioner emphasizes that it expressly indicated on the face of the original and amended AITRs its intent to refund the amount of Php53,060,855, representing the excess and unutilized CWT for FY2018. Petitioner further raises that it did not carry over the said excess and unutilized CWT credits in the quarterll and annual 10 ITRs for FY2019. On 8 July 2020, petitioner filed an administrative claim for refund before the BIR in relation to its excess and unutilized CWT for FY20 18, which was not acted upon by the BIR. 11 With the two (2)-year prescriptive period under Section 204 (C) and 229 of the National Internal Revenue Code of 1997, as amended ("Tax Code"), as amended, nearing its end, and considering that petitioner had yet to receive respondent's approval or denial of its administrative claim for refund, petitioner filed the instant Petition for Review12 on 10 July 2020, which was raffled to the Third Division of this Court. On 16 November 2020, respondent filed his Answer,13 interposing certain special and affirmative defenses, and praying for the denial of the instant Petition for Review for lack of merit. He then transmitted the BIR Records of the case, consisting of 248 pages contained in one (1) folder, on 5 February 2021. 14 On 21 May 2021, petitioner also submitted a Motion for Commissioning of Independent Certified Public Accountant (ICPA),'5 Mr. Joseph Cedric V. Calica, which the Court granted during the hearing held on 14 July 202l.Y 9 Exhibits "P-15'' to "P-17'", Quarterly Income Tax Returns for FY2019, Docket Vol. 4, pp. 1815-1822. 10 Exhibit "P-9", Annual Income Tax Return for FY2019, id, pp. 1782-1789. 11 Par. II, Statement of Material Facts and Proceedings, Petition for Review, Docket Vol. I, p. II; Exhibit "P-I 0", Letter to BIR dated 8 July 2020, Docket Vol. 4, pp. 1790-1797; Exhibit "P-11 ",Application for Tax Credits/Refund or BIR Form No. 1914, Docket, Vol. 4, p. 1798. 12 Supra note 1. 13 See Answer, Docket Vol. 3, pp. 1440-1449. 14 See Compliance dated 5 February 2021, id, pp.l457-1458. 15 See Motion for Commissioning of Independent Certified Public Accountant (ICPA), Docket Vol. 4. pp. 1532-1554, with annexes. 16 See Order dated 14 July 2021, id, pp. 1583-1585.

DECISIOI\ CTA CASE NO. 10302 Petitioner and respondent filed their Pre-Trial Briefs on 21 May 2021 17 and 9 July 2021,18 respectively. Afterwards, the parties posted their Joint Stipulation of Facts and Issues19 on 21 October 2021, which the Court admitted and approved in its Resolution,20 dated 16 November 2021. Thus, on 2 December 2021, the Pre-Trial Order was rendered.21 During trial, petitioner presented the following witnesses who provided their direct testimonies through their respective judicial affidavits: (I) Mr. Neal C. Perez, Director of petitioner's Corporate Planning, Finance and Compliance Division;22 (2) Mr. Jan Russel Aquino, the former Tax Compliance Officer of Petitioner's Legal and Finance and Compliance Divisions;23 (3) Atty. Maria Regina A. Ruiz, the petitioner's Corporate Secretary;24 and (4) Mr. Edward D. Rogue!, a Partner in the Tax and Compliance Division ofPunongbayan & Araullo accounting firm. 25 On 27 October 2021, petitioner posted the judicial affidavit26 of ICPA Calica with attached ICPA ReportP Soft copies of the Report and corresponding attachments were submitted to the Court on 19 November 2022. 28 Petitioner formally offered its documentary evidence on 17 March 2022.29 Respondent, meanwhile, filed his Comment30 on 21 March 2022, where he also manifested that he would no longer present any witnesses. Then, in a Resolution,31 dated 21 April 2022, the Court admitted petitioner's formally offered documentary evidence except Exhibits "P-12", "P-13", "P- i1d4e"n't"ifPie-d1.8"T' h"eP-e1x9c"lu' d"Ped-2e0x"h' iabnidts "P-21" for failure to have these documents were thereafter allowed to be attached as part of the records of the case as per Resolution dated 5 August 2022,32 after a ~?tion t~Tender Excluded Documentary Evidence33 was filed by the petttwnerr 17 See Petitioner's Pre-Trial Brief, id, pp. I555- I566. 18 See Respondent's Pre-Trial Brief, id, pp. 1575-1577. 19 See Joint Stipulation of Facts and Issues, id, pp. 1609-1615. 20 See Resolution dated I6 November 2021, id., p. I679. 21 See Pre-Trial Order, id., pp. 1684-1689. " Exhibit "P-I 139", Judicial Affidavit in Lieu of Direct Testimony of Neal C. Perez, id., pp. 1467-1474. " Exhibit "P-1141", Judicial Affidavit in Lieu of Direct Testimony of Jan Russel Aquino, id., pp. 1475- 1485. 24 Exhibit "P-I 138", Judicial Affidavit in Lieu of Direct Testimony of Atty. Maria Regina A. Ruiz, id, pp. 1486-1493. 25 Exhibit "P-1140", Judicial Affidavit in Lieu of Direct Testimony of Mr. Edward D. Rogue!, id., pp. 1494-1503. 26 Exhibit "P-I 142", Judicial Affidavit of duly appointed Independent Certified Public Accountant, Joseph Cedric V. Calica, id., pp. 1624-1644. 27 Exhibit "P-1172".!CPA Report, id., pp. 1645-1657. 28 See Submission dated 19 November 2021, id p. 1680. 29 See Formal Offer of Evidence, id, pp. 1704-1729. 30 See Comment (on Petitioner's Formal Offer of Evidence with Manifestation), id., pp. 2065-2067. 31 See Resolution dated 21 April 2022, Docket Vol. 5, pp. 2072-2073. 32 See Resolution dated 5 August 2022, id., pp. 21 I7-2119. 33 See Motion (to Tender Excluded Documentary Evidence), id, pp. 2089-2092.

DECISION CTA CASE NO.l0302 Thereafter, upon noting the Memoranda filed by petitioner and respondent on 9 June 202234 and 30 May 2022,35 respectively, the instant case was submitted for decision on 23 August 2022. The Issue The sole issue for this Court's resolution is: WHETHER PETITIONER IS ENTITLED TO A REFUND OF ITS ALLEGED UNUTILIZED CREDITABLE WITHHOLDING TAXES FOR FY2018 IN THE TOTAL AMOUNT OF PHP53,060,855.36 Arguments of the Parties Petitioner's Arguments37 Petitioner argues that it is entitled to the claimed refund due to its compliance with all the necessary elements. Specifically, petitioner raises that: I) The claim for refund was filed within the two (2)-year prescriptive period prescribed under the Tax Code; 2) The income payment where the taxes were withheld were included as part of the gross income declared in the FY20 18 AITR; 3) The fact of withholding is substantiated by BIR Form No. 2307 issued by the income payor to Petitioner; 4) Petitioner elected to refund the excess creditable withholding tax in the FY20 18 AITR; and 5) The amount claimed for refund was not carried over or applied to the succeeding year. Respondent's Counter-Arguments38 On the other hand, respondent counter-argues that petitioner failed to exhaust administrative remedies before elevating the case to the Court; thus, the case should be dismissed for prematurity or lack of cause of action. Respondent also claims that petitioner is not entitled to the claim for refund ofCWT due to the latter's failure to prove by clear and preponderance of evidence its right to the claim. Specifically, respondent raises that petitione~ 34 See Petitioner's Memorandum, id., pp. 2094-2107. 35 See Respondent's Memorandum, id., pp. 2074-2086. 36 See Pre-Trial Order, Docket Vol. 4, p. 1685. 37 Supra note 34. 18 Supra note 35.

DECISIO>; CTA CASE NO. 10302 did not provide supporting documents to show that income from which the CWT is claimed was declared in the AITR. Respondent also emphasizes that petitioner failed to comply with Revenue Memorandum Order ("RMO'') No. 53-9839 and Revenue Regulations ("RR'') No. 2-2006.40 Lastly, respondent asserts that petitioner should have presented evidence to prove actual remittance of the withholding taxes to the BIR. The Ruling of the Court We deny the instant Petition for Review. Section 76 ofthe Tax Code enumerates the options given to a taxpayer in the event that the sum of the quarterly tax payments during the taxable year is not equal to the total tax due on the entire taxable income for the year, to wit: "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 the tax still due; or (B) Carry-over the excess credit; or (C) Be credited or refunded with the excess amount paid, as the case may be. In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income taxes paid, the excess amount shown on its final adjustment return may be carried over and credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable years. Once the option to carry-over and apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years has been made, such option shall be considered irrevocable for that taxable period and no application for cash refund or issuance of a tax credit certificate shall be allowed therefor." (Emphasis supplied.) Based on the foregoing, when a corporation overpays its income tax liability, as shown on its final adjustment return, it has the option to either (I) carry over and apply the overpayment as tax credits against the income tax/ 39 SUBJECT: Checklist of Documents to be Submitted by a Taxpayer upon Audit of his Tax Liabilities as well as of the Mandatory Reporting Requirements to be Prepared by a Revenue Officer, all of which Comprise a Complete Tax Docket, issued 25 June 1998. 40 SUBJECT: Mandatory Attachments of the Summary Alphalist of Withholding Agents of Income Payments Subjected to Tax Withheld at Source (SA WT) to Tax Returns with Claimed Tax Credits due to Creditable Tax Withheld At Source and of the Monthly Alphalist of Payees (MAP) Whose Income Received Have Been Subjected to Withholding Tax to the Withholding Tax Remittance Return Filed by the Withholding Agent/Payor of Income Payments, issued 5 January 2006.

DECISION CTA CASE NO. 10302 liabilities of the succeeding taxable years; or (2) apply for a cash refund or issuance of a tax credit certificate within the prescribed period.4I Such overpayment of income is usually occasioned by the over-withholding of taxes on the income payments to the corporate taxpayer.42 In exercising its option, the corporation must signifY in its AITR, by marking the option box provided in the BIR Form, its intention to either carry- over the excess credits or claim a refund.43 These remedies are in the alternative, and the choice of one precludes the other.44 Moreover, once the carry-over option is taken actually or constructively, it becomes irrevocable for the taxable period.45 The phrase "for the taxable period" refers to the taxable year when the excess income, subject of the option, was acquired by the taxpayer.46 A perusal of petitioner's original47 and amended AITR48 for FY20 18 shows that it had total tax credits of Php312,804,837.00, broken down as follows: Prior Year's Excess Credits Other 41,819,679.00 Php259,743,982.00 Than MCIT 11,241,176.00 Add: Creditable Taxes Withheld- 53,060,855.00 FY2018 Php312,804,837 .00 Creditable Tax Withheld from Previous Quarter/s per BIR Form No. 2307 Creditable Tax Withheld per BIR Form No. 2307 for the 4'h Quarter TOTAL TAX CREDITS Petitioner utilized its "prior year's excess credits" for FY2018 in the amount ofPhp259,743,982.00 to pay for its income tax liability for the same period in the amount ofPhp37,898,626. Hence, the resulting overpayment in the amount of Php274,906,211 as shown in both the original and amended / o V AITR comprises of the balance of the "prior year's excess credit" 41 University Physicians Services, Inc.- Management, Inc. vs. Commissioner of Internal Revenue, G.R. No. 205955, 7 March 2018. 42 /d. 43 Winebrenner & Inigo Insurance Brokers, Inc. vs. Commissioner of Internal Revenue, G.R. No. 206526, 28 January 2015, citing Philippine Bank of Communications vs. Commissioner of Internal Revenue, G.R. No. 112024, 28 January 1999. 44 Republic of the Philippines vs. Team (Phils.) Energy Corporation (formerly Mirant (Phils.) Energy Corporation), G.R. No. 188016, 14 January 2015, citing Philam Asset Management, Inc. vs. Commissioner of Internal Revenue, G.R. Nos 156637 & 162004, 14 December 2005. 45 Axia Power Holdings Philippines Corporation vs. Commissioner of Internal Revenue, G.R. No. 230847, 14 October 2020, citing Asiaworld Properties Philippine Corporation vs. Commissioner of Internal Revenue, G.R. No. 171766,29 July 2010. 46 Commissioner of Internal Revenue vs. Bank of the Philippine Islands, G.R. No. 178490, 7 July 2009. 47 Supra note 5. 48 Supra note 6.

DECISION CTA CASE NO. 10302 Php221,845,35649 and the accumulated CWT during FY2018 in the amount ofPhp53,060,855.00. Moreover, the FY2018 original and amended AITR duly show that petitioner marked the box corresponding to the option "To be refunded" clearly manifesting its intention to claim a refund of its excess CWTs for the period. Further, as can be gleaned from its AITR for the subsequent period (FY2019),50 petitioner reflected only the amount ofPhp221 ,845,356 as "prior year's excess credits". Thus, the excess CWTs for FY2018 in the amount of Php53,060,855.00 were not carried over in the succeeding taxable period and, therefore, may be the subject of a claim for refund or issuance of a tax credit certificate under Section 76 ofthe Tax Code. However, as emphasized by this Court in several cases, the refund of excess/unutilized CWT is dependent on the taxpayer-claimant's compliance with the following three (3) basic requirements: I. The claim for refund was filed within the two (2)-year prescriptive period as provided under Section 204 (C) in relation to Section 229 ofthe Tax Code; 2. The fact of withholding is established by a copy of a statement duly issued by the payor (withholding agent) to the payee, showing the amount paid and the amount of tax withheld therefrom; and 3. The income upon which the taxes were withheld were included in the return ofthe recipient, i.e., declared as part ofthe gross income.51 We shall now proceed with the determination of petitioner's compliance with the foregoing requisites for claiming a refund of excess CWTs. First requisite: The claim for refund was filed within the two (2)-year prescriptive period The prescriptive periods for the filing of refund claim in the administrative and judicial levels are covered by Section 204 (C) in rel9fion to Section 229 ofthe Tax Code. These provisions respectively state/ 49 Prior year's excess credits of Php259,743,982 less income tax due of Php3 7,898,626. 50 Supra note I0. 51 Commissioner of internal Revenue vs. Philippine Bank of Communications, G.R. No. 211348,23 February 2022; Rhombus Energy Inc. vs. Commissioner of Internal Revenue, G.R. No. 206362, I August 20 18; Winebrenner & Itiigo Insurance Brokers, Inc. vs. Commissioner of Internal Revenue, G.R. No. 206526, 28 January 2015; Republic of the Philippines vs. Team (Phils.) Energy Corporation (formerly Mirant (Phils.) Energy Corporation), G.R. No. 188016, 14 January 2015.

DECISION CTA CASE NO. 10302 "SEC. 204. Authority of the Commissioner to Compromise. Abate and Refund or Credit Taxes.~ XXX (C) Credit or refund of 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. XXX 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 foregoing, it is clear that taxpayer-claimant must first file an administrative claim with the CIR within two (2) years from the date of payment of tax. The subsequent judicial claim must likewise be filed within the two (2)-year reglementary period. The timeliness of the filing of the claim is mandatory and jurisdictional. Thus, the Court cannot take cognizance of a judicial claim for refund filed either prematurely or out of time.52 Moreover, it is well-settled that the reglementary period commences to run on the date of filing of the Final Adjustment Return or AITR/ 52 Commissioner of Internal Revenue vs. San Miguel Corporation, G.R. No. 180740, II November 2019.

DECISIOI\ CTA CASE NO. 10302 In the case at bar, petitioner originally filed its FY20 18 AITR53 on 13 July 2018. Thus, counting two (2) years therefrom, petitioner had until13 July 2020 to file both its administrative and judicial claims. It appearing that petitioner's administrative claim54 was filed on 8 July 2020, while the judicial claim via the instant Petition for Review55 was filed on 10 July 2020, it is clear that both claims for refund were timely filed. Second requisite: The fact of withholding is established by certificates of withholding tax Section 2.58.3 (B) ofRR No. 2-98, as amended, provides: "(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." (Emphasis supplied.) Gleaning from the foregoing, the fact of withholding is established by a copy of the withholding tax statement duly issued by the withholding agent to the payee, showing the amount paid and the amount of tax withheld therefrom. Respondent, however, asserts that the same withholding tax statements should not suffice, and that the fact of actual remittance to the BIR must be proven. The Court disagrees with the respondent. The proof of actual remittance of taxes withheld is not indispensable in claims for refund or the issuance of tax credit certificates covering excess and unutilized CWT. Indeed, it is the withholding agent, not the taxpayer- claimant, who has the responsibility to prove actual remittance of withheld taxes to the BIR~ 53 Supra note 5. 54 Supra note II. 55 Supra note I.

OECISIO~ CTA CASE NO. 10302 The foregoing was categorically held in the case of Commissioner of Internal Revenue vs. Ayala Corporation,56 wherein the Supreme Court, citing Commissioner of Internal Revenue vs. Philippine National Ban~7 and Philippine Airlines, Inc. vs. Commissioner of Internal Revenue ("PAL case''),58 ruled: "As correctly ruled by the CTA En Bane, proof of actual remittance is not necessary for respondent's claim for refund of excess or unutilized creditable withholding tax (CWT) to prosper. Notably, '[i]t is the payor-withholding agent, and not the payee-refund claimant such as respondent, who is vested with the responsibility of withholding and remitting income taxes.' In establishing its entitlement to a claim for refund for CWT, respondent need only prove the fact that taxes were actually withheld through the presentation of the certificates of withholding issued by the corresponding withholding agents, as it did so in this case. It is settled that 'the CTA's findings can only be disturbed on appeal if they are not supported by substantial evidence, or there is a showing of gross error or abuse on the part of the Tax Court,' which does not obtain in this case. Hence, the instant petition must be denied." (Emphasis supplied; citations omitted.) Moreover, in the PAL case, the Supreme Court clarified that in case of non-remittance, the action should be against the withholding agent and not the income payee/refund claimant: "When a particular income is subject to a final withholding tax, it means that a withholding agent will withhold the tax due from the income earned to remit it to the Bureau oflntemal Revenue. Thus, the liability for remitting the tax is on the withholding agent: XXX Clearly, the withholding agent is the payor liable for the tax, and any deficiency in its amount shall be collected from it. Should the Bureau of Internal Revenue find that the taxes were not properly remitted, its action is against the withholding agent, and not against the taxpayer." (Emphasis supplied; citations omitted.) Any such non-remittance should thus not be a ground for the disallowance of the income payee's refund application. Meanwhile, to prove its compliance with the second requirement, petitioner submitted Certificate of Creditable Tax Withheld at Source (BIR Forms No. 2307) issued by its various payors and a schedule of CWT for FY2018. In his Report,59 ICPA Calica summarized his findings as follows/ 56 G.R. No. 256539 (Notice), 28 July 2021. 57 G.R. No. 180290,29 September2014. 58 G.R. Nos. 206079-80 & 206309, 17 January 2018. 59 Exhibit "P-1172", ICPA Report, pp. 1645-1657.

DECISION Php 53,060,855.00 CTA CASE NO. 10302 Total Amount of Claim for Refund (1) Total Amount of Creditable Income Taxes 53,061,269.46 withheld per Summary Alphalist of Withholding Tax at Source (SAWT) Discrepancies in the amount of claim vs. amount (414.46) per SAWT Less: Exceptions noted on Creditable Withholding Taxes per BIR Form No. 2307 (a) With incorrect or incomplete 840,642.23 address60 (b) Not in the period covered by 2,693.19 the claim61 (c) No BIR Form No. 2307 11,348,255.32 submitted62 Total amount of exceptions noted (2) 12,191,590.73 Total Amount of Unutilized Creditable Income Taxes Withheld Valid For Claim (Per ICPA) ([1]-[2]) Php 40,869,264.60 We take note of the !CPA's findings that out of the total claim for refund of Php53,060,855.00, only the amount of Php40,869,264.60 was properly supported by BIR Form No. 2307. Upon further verification, however, the Court finds that CWTs amounting to Php5,452,000.56 should be also disallowed on the grounds stated in the table below: Exhibit Payor's Name Amount Tax Number of Income Withheld Pavment Unreadable TIN 2,185,613.34 218,561,333.33 P-1144-A-6 ABENSON 1 ... VENTURES INC Incomolete Address 60 Exhibit "P-1145-A", USB flash drive submitted by ICPA Calica on 19 November 2021. 61 Exhibit "P-1145-B", id. " Exhibit "P-1145-C", id.

DECISION CTA CASE NO. 10302 P-1144-A-67 AUTOMATIC 8,195,821.59 81,958.22 APPLIANCES INC P-1144-A-68 AUTOMATIC 12,469,145.76 124,691.46 APPLIANCES INC P-1144-A-69 AUTOMATIC 67,012.12 670.12 APPLIANCES INC P-1144-A-70 AUTOMATIC 12,925,554.78 129,255.54 APPLIANCES INC P-1144-A-72 AUTOMATIC 9,051,367.32 90,513.68 APPLIANCES INC P-1144-A-75 AUTOMATIC 279,909.90 2,799.10 APPLIANCES INC P-1144-A-86 AXN NETWORKS 26,107.35 261.07 PHILIPPINES INC P-1144-A-279 DIGI KADEN INC 1,553,624.01 15,536.23 P-1144-A-280 DIGI KADEN INC 185,260.34 1,852.60 P-1144-A-282 DIGI KADEN INC 305,917.68 3,059.17 P-1144-A-282 DIGI KADEN INC 396,354.70 3,963.56 P-1144-A-283 DIGI KADEN INC 482,947.48 4,829.47 P-1144-A-284 DIGI KADEN INC 570,429.38 5,704.28 P-1144-A-285 DIGI KADEN INC 667,660.35 6,676.60 P-1144-A-28 DIGI KADEN INC 123,047.21 1,230.46 P-1144-A-287 DIGI KADEN INC 123,493.65 1,234.93 P-1144-A-288 DIGI KADEN INC 206,596.22 2,065.96 P-1144-A-289 DIGI KADEN INC 207,951.13 2,079.52 P-1144-A-290 DIGI KADEN INC 248,207.92 2,482.06 P-1144-A-291 DIGI KADEN INC 341,358.50 3,413.59 P-1144-A-292 DIGI KADEN INC 390,548.58 3,905.49 P-1144-A-293 DIGI KADEN INC 440,276.17 4,402.76 P-1144-A-294 DIGI KADEN INC 441,448.57 4,414.49 P-1144-A-295 DIGI KADEN INC 445,955.54 4,459.56 P-1144-A-296 DIGI KADEN INC 579,529.09 5,795.29 P-1144-A-297 DIGI KADEN INC 599,493.63 5,994.94 P-1144-A-298 DIGI KADEN INC P-1144-A-299 DIGI KADEN INC I ,268,498.12 12,684.99 P-1144-A-300 DIGI KADEN INC 31,560.57 315.61 P-1144-A-301 DIGI KADEN INC 55,504.11 555.04 P-1144-A-302 DIGI KADEN INC 88,105.46 881.05 P-1144-A-303 DIGI KADEN INC 113,920.71 P-1144-A-304 DIGI KADEN INC 156,756.19 1,139.21 P-1144-A-305 DIGI KADEN INC 185,276.88 1,567.57 P-1144-A-306 DIGI KADEN INC I ,852.76 P-1144-A-307 DIGI KADEN INC 202,515.13 2,025.15 P-1144-A-308 DIGI KADEN INC 255,281.94 2,552.83 P-1144-A-309 DIGI KADEN INC 261,947.65 2,619.47 P-1144-A-310 DIGI KADEN INC 377,012.08 3,770.12 P-1144-A-311 DIGI KADEN INC 440,390.13 4,403.90 P-1144-A-312 . J)IGI KADEN INC 806,074.90 8,060.76 928,458.25 9,284.58 12,495.59 124.96 ~

DECISION CTA CASE NO. 10302 P-1144-A-313 DIGI KADEN INC 24,811.71 248.12 67,278.93 672.78 P-1144-A-314 DIGI KADEN INC 73,296.30 732.96 79,561.43 795.62 P-1144-A-315 DIGI KADEN INC 85,929.69 859.29 95,181.90 951.82 P-1144-A-316 DIGI KADEN INC 106,431.83 1,064.34 201,463.54 2,014.63 P-1144-A-317 DIGI KADEN INC 213,617.81 2,136.18 232,274.88 2,322.74 P-1144-A-318 DIGI KADEN INC 264,270.05 2,642.70 270,494.26 2,704.93 P-1144-A-319 DIGI KADEN INC 303,589.91 3,035.90 305,888.79 3,058.89 P-1144-A-320 DIGI KADEN INC 308,623.74 3,086.23 347,267.73 3,472.68 P-1144-A-321 DIGI KADEN INC 351,989.46 3,519.90 365,478.99 3,654.79 P-1144-A-322 DIGI KADEN INC 399,378.14 3,993.79 660,607.42 6,606.07 P-1144-A-323 DIGI KADEN INC 891,008.21 8,910.08 1,362,580.62 13,625.80 P-1144-A-324 DIGI KADEN INC 199,175.87 1,991.76 614,664.73 6,146.65 P-1144-A-325 DIGI KADEN INC 191,942.05 1,919.42 452,037.74 4,520.39 P-1144-A-326 DIGI KADEN INC 369,524.57 3,695.26 444,062.65 4,440.63 P-1144-A-327 DIGI KADEN INC 419,279.94 4,192.80 305,625.46 3,056.26 P-1144-A-328 DIGI KADEN INC 80,941.86 809.41 85,787.87 857.88 P-1144-A-329 DIGI KADEN INC 84,716.47 847.16 725,140.25 7,251.40 P-1144-A-330 DIGI KADEN INC 627,107.14 6,271.06 165,578.14 1,655.78 P-1144-A-331 DIGI KADEN INC 198,917.59 I ,989.18 122,436.54 1,224.36 P-1144-A-332 DIGI KADEN INC 969,609.31 9,696.09 312,836.06 3,128.37 P-1144-A-333 DIGI KADEN INC 527,171.86 5,271.73 168,423.96 1,684.24 P-1144-A-334 DIGI KADEN INC 144,859.00 I ,448.59 770,062.15 7,700.64 P-1144-A-335 DIGI KADEN INC 48,401.10 484.02 236,076.29 P-1144-A-336 DIGI KADEN INC 314,504.78 v 2,360.75 P-1144-A-337 DIGI KADEN INC 3,145.04 P-1144-A-338 DIGI KADEN INC P-1144-A-339 DIGI KADEN INC P-1144-A-340 DIGI KADEN INC P-1144-A-341 DIGI KADEN INC P-1144-A-342 DIGI KADEN INC P-1144-A-343 DIGI KADEN INC P-1144-A-344 DIGI KADEN INC P-1144-A-345 DIGI KADEN INC P-1144-A-346 DIGI KADEN INC P-1144-A-347 DIGI KADEN INC P-1144-A-348 DIGI KADEN INC P-1144-A-349 DIGI KADEN INC P-1144-A-350 DIGI KADEN INC P-1144-A-351 DIGI KADEN INC P-1144-A-352 DIGI KADEN INC P-1144-A-353 DIGI KADEN INC P-1144-A-354 DIGI KADEN INC P-1144-A-355 DIGI KADEN INC P-1144-A-356 DIGI KADEN INC P-1144-A-357 DIGI KADEN INC P-1144-A-358 DIGI KADEN INC - P-- 11- 44- -A--- 35- 9 - - cPIGI KADEN INC

DECISION CTA CASE NO. 10302 P-1 I44-A-360 DIGI KADEN INC 607,010.72 6,070.12 / P-1144-A-361 DIGI KADEN INC 257,760.98 2,577.60 P-1 I 44-A-362 DIGI KADEN INC 278,8I 8.03 2,788.18 P-1144-A-363 DIGI KADEN INC 598,457.81 5,984.58 P-1144-A-364 DIGI KADEN INC 103,817.71 1,038.18 P-1144-A-365 DIGI KADEN INC 109,241.68 1,092.42 P-1144-A-366 DIGI KADEN INC 846,636.73 8,466.36 P-1144-A-367 DIGI KADEN INC 351,353.25 3,5I3.54 P-1144-A-368 DIGI KADEN INC P-1144-A-369 DIGI KADEN INC 5,621.85 56.22 P-1144-A-370 DIGI KADEN INC 550,031.63 5,500.32 P-1144-A-371 DIGI KADEN INC P-I 144-A-372 DIGI KADEN INC 18,902.80 189.03 P-1144-A-373 DIGI KADEN INC I4I,405.83 1,414.06 P-I 144-A-374 DIGI KADEN INC 112,314.38 1,123.15 P-I 144-A-375 DIGI KADEN INC 428,405.48 4,284.05 P-I 144-A-376 DIGI KADEN INC 498,319.39 4,983.19 P-1144-A-377 DIGI KADEN INC 59,4I4.3I P-1144-A-378 DIGI KADEN INC 115,298.21 594.15 P-1144-A-379 DIGI KADEN INC 381,512.77 1,152.98 P-1144-A-380 DIGI KADEN INC 143,096.90 3,815.12 P-1144-A-381 DIGI KADEN INC 35,290.34 1,430.97 P-1144-A-382 DIGI KADEN INC 347,680.82 P-1144-A-383 DIGI KADEN INC 340,455.83 359.20 P-I 144-A-384 DIGI KADEN INC 457,797.54 3,476.81 P-1144-A-385 DIGI KADEN INC 363,226.19 3,404.56 P-1144-A-386 DIGI KADEN INC 595,948.21 4,577.97 P-1144-A-387 DIGI KADEN INC 5 I 1,527.83 3,632.25 P-1 I 44-A-388 DIGI KADEN INC 298,986.75 5,959.48 P-1 I44-A-389 DIGI KADEN INC 214,989.24 5,115.29 P-1144-A-390 DIGI KADEN INC I49,176.80 2,989.87 P-1144-A-391 DIGI KADEN INC 77,227.91 2,149.89 P-1144-A-392 DIGI KADEN INC 152,084.84 I ,491. 76 P-1144-A-393 DIGI KADEN INC 24,749.92 P-1144-A-394 DIGI KADEN INC 327,922.21 772.28 P-1144-A-395 DIGI KADEN INC 638,096.18 1,520.85 P-1144-A-396 DIGI KADEN INC 51,775.42 P-1144-A-397 DIGI KADEN INC 13,544.00 247.50 P-1144-A-398 DIGI KADEN INC 609,547.22 3,279.23 P-1144-A-399 DIGI KADEN INC 226,744.36 6,380.98 P-1144-A-400 DIGI KADEN INC 355,449.29 P-1144-A-401 DIGI KADEN INC 415,506.19 517.76 P-1144-A-403 DIGI KADEN INC 306,907.71 135.44 P-1144-A-404 DIGI KADEN INC 690,420.36 6,095.45 P-1144-A-405 DIGI KADEN INC 26,586.59 2,267.43 P-1144-A-406 DIGI KADEN INC 137,956.63 3,554.50 P-1144-A-407 DIGI KADEN INC 53,308.85 4,155.06 441,108.59 3,069.08 73,346.76 6,904.20 265.87 1,379.57 533.09 v 4,411.09 733.47

DECISION CTA CASE NO. 10302 P-1144-A-408 DIGI KADEN INC 232,018.93 2,320.19 P-1144-A-409 DIGI KADEN INC 58,995.90 589.96 P-1144-A-410 DIGI KADEN INC P-1144-A-411 DIGI KADEN INC 399,198.58 3,991.99 P-1144-A-412 DIGI KADEN INC 365,905.59 3,659.06 P-1144-A-413 DIGI KADEN INC 611,205.32 6,112.06 P-1144-A-414 DIGI KADEN INC 244,144.46 2,441.45 P-1144-A-415 DIGI KADEN INC 327,800.14 3,278.00 P-1144-A-416 DIGI KADEN INC 637,198.81 6,371.98 P-1144-A-417 DIGI KADEN INC 131,907.83 1,319.07 P-1I44-A-418 DIGI KADEN INC 741,854.51 7,418.54 P-1144-A-419 DIGI KADEN INC 150,226.88 I ,502.28 P-I 144-A-420 DIGI KADEN INC 266,214.22 2,662.14 P-II44-A-421 DIGI KADEN INC 1,003,620.7 I I 0,036.19 P-II44-A-422 DIGI KADEN INC 565,359.75 5,653.59 P-I 144-A-423 DIGI KADEN INC 538,138.08 5,381.38 P-I 144-A-424 DIGI KADEN INC 331,363.84 3,313.63 P-I144-A-425 DIGI KADEN INC 555,506.25 5,555.05 P-II44-A-426 DIGI KADEN INC 98,754.37 987.54 P-1144-A-427 DIGI KADEN INC 383,247.72 3,832.47 P-II44-A-428 DIGI KADEN INC 950,313.53 9,503.14 P-II44-A-429 DIGI KADEN INC 384,525.12 3,845.24 P-1144-A-430 DIGI KADEN INC 572,576.79 5,725. 78 P-1144-A-431 DIGI KADEN INC 647,861.75 6,478.6I P-II44-A-432 DIGI KADEN INC 383,697.06 3,836.98 P-I I44-A-433 DIGI KADEN INC 22,652.08 226.53 P-1144-A-434 DIGI KADEN INC 520,561.04 5,205.60 P-1 I44-A-436 DIGI KADEN INC I ,024,540.59 10,245.40 P-1144-A-437 DIGI KADEN INC 323,664.72 3,236.64 P-Il44-A-438 DIGI KADEN INC 476,975.43 4,769.75 P-1144-A-439 DIGI KADEN INC 51 I ,54l.I7 5,Il5.40 P-II44-A-440 DIGI KADEN INC 46,575.00 465.75 P-1144-A-441 DIGI KADEN INC I,740,390.23 17,403.90 P-Il44-A-442 DIGI KADEN INC 835,150.87 8,35I.50 P-1144-A-443 DIGI KADEN INC I4I,098.07 1,410.98 P-1144-A-444 DIGI KADEN INC 689,171.59 6,891.72 P-1144-A-445 DIGI KADEN INC 438,483.42 4,384.83 P-1144-A-446 DIGI KADEN INC 1,166,873.67 II ,668. 73 P-I 144-A-594 LYCEUM OF THE 6I5,968.70 6,159.68 PHIL UNIVERSITY 52,231.47 522.31 INC P-II44-A-74I RJ APPLIANCE 5,806,837.00 58,068.37 INC P-II44-A-721 RL APPLIANCE 4,655,172.38 46,551.72 INC P-II44-A-822 STAR APPLIANCE 12,322,098.48 I23,220.99 CENTER INC Incorrect Address ~

DECISION CTA CASE NO.I0302 P-1144-A-85 AVID SALES 112,138,815.00 1,121,388.15 P-1144-A-778 22,510,299.50 225,103.00 CORPORATION SOLID ELECTRONICS P-1144-A-778 CORPORATION 369,619.50 7,392.39 SOLID ELECTRONICS P-1144-A-780 CORPORATION 28,869,488.00 288,694.88 SOLID ELECTRONICS P-1144-A-780 CORPORATION I,075,056.00 21,501.12 SOLID ELECTRONICS P-1144-A-782 CORPORATION 15,60 I, 187.00 156,011.87 SOLID ELECTRONICS P-1144-A-782 CORPORATION I,598,996.50 31,979.93 SOLID ELECTRONICS P-1144-A-784 CORPORATION 13,327,953.00 133,279.53 SOLID ELECTRONICS CORPORATION Incorrect TIN P-1144-A-724 RL APPLIANCE 487,883.99 4,878.84 INC TOTAL 542,155,762.31 5,452,000.56 up to Hence, petitioner was able to satisfy the second requirement but only the extent ofPhp35,417,263.71 computed as follows: Amount of CWT Claimed Php 53,060,855.00 Less: Disallowances 12, 191 ,5 90.73 5,452,000.56 Per ICPA Php 35,417,263.71 / Per Court's further verification TOTAL AMOUNT OF CWTS WITH PROPER BIR FORM 2307

DECISION CTA CASE NO. 10302 Third requisite: Petitioner failed to prove that the income from which taxes were withheld were declared part of the gross income Anent the third requirement, petitioner must prove that the income payments from which the substantiated CWTs were withheld were declared part of its gross income. With this, it becomes necessary to trace the revenues recorded in the general ledger book to ascertain that the related income was duly reported as revenues for FY20 18. In his Report, ICPA Calica concluded that the income payments received by petitioner from its transactions subject to withholding tax were completely and correctly declared as part of gross income of the Company in the audited financial statements (AFS) and AITR for FY2018. He described the procedures performed to arrive at such conclusion as follows: "3. Examination of Petitioner's Income Upon which the Taxes were Withheld a) We tied up the amount of income upon which the taxes were withheld and declared in the return of the taxpayer for the fiscal year ended March 31, 2018 with the Company's annual sales in the audited financial statements and AITR (see Exhibits "P-1144, "P-1152", and "P-1153"). b) We ascertained that the income upon which the taxes were withheld were included as part of the gross income, properly recorded in the Company's books of accounts, in relation to the sales found in the AJTR and audited financial statements (see Exhibits "P-1152" to "P-1153")." (Emphasis supplied.) The Court, however, emphasizes that it is not bound by the findings of the ICPA, as provided under Section 3, Rule 13 ofthe of the Revised Rules ofthe Court ofTax Appeals ("RRCTA '')63 which states: '"Sec. 3. Findings of independent CPA- The submission by the independent CPA of pre-marked documentary exhibits shall be subject to verification and comparison with the original documents, the availability of which shall be the primary responsibility of the party processing such documents and, secondarily, by the independent CPA. The findings and conclusions ofthe independent CPA may be challenged by the parties and shall not be conclusive upon the Court, which may, in whole o~ part, adopt such findings and conclusions subject to verification.)/ 63 A.M. No. 05-11-07-CTA, 22 November 2005.

DECISION CTA CASE NO. 10302 Based on the foregoing, the ICPA's findings are not conclusive upon the Court as the same are subject to its verification, to determine its accuracy, veracity and merit.64 The Court may either adopt or reject the ICPA Report, wholly or partially, depending on the outcome of its own independent verification.65 It is essential for the petitioner to present evidence to support its compliance with the requirements of the law in order to pursue its claim for credit or refund. Upon review of the Report, the Court observes that while ICPA Calica categorically finds for the proper recording of income in the Company's books, there was no mention of the tracing of such income in the general ledger books of petitioner, or of determining the actual itemized composition ofthe sales reported in the AITR and AFS. Instead, ICPA Calica merely made a general statement that he tied up the amount of income and ascertained that the income were indeed reported. Further, while there was a reference to Exhibits "P-1144", "P-1152", and "P-1153" (i.e. Schedule of Creditable Income Tax Withheld, Amended AITR, and AFS, respectively), there was no mention of petitioner's submission of any general ledger account under which the reported sales were recorded. Instead, only the General Ledger Transaction Listing under GL Number 49600 or Exhibit "P-1146" was examined by ICPA Calica. This lists petitioner's creditable withholding taxes but not the corresponding sales. ICPA Calica reported that he traced the unutilized creditable income tax withheld per schedule of total creditable withholding tax for the year to the general ledger, to verifY whether these have been charged to petitioner's appropriate asset account. Again, it appears that only the asset account was traced by ICPA Calica, and not the revenue recorded by petitioner. The Court has also independently examined the records and found that no general ledger or any similar document was presented by petitioner to aid Us in tracing the sales to the corresponding books and returns. We cannot even use Exhibit P-1144-A for such purpose as the amounts under columns "Amount of Income Payments" and "Amount of Income Payments Per Certificate of Creditable Tax Withheld at Source (BIR Form 2307)" do not match. Thus, We are unable to verifY the veracity of petitioner's claim on having duly reported the sales corresponding to the subject withholding taxeV' 64 9TMaDakreeccnheam2k0ab1eC8ro;2rA0p2oe2craotmionPhPihliiplippipnienseInBcr.anvc. hCvo.mCmoimssmioinsseiroonferInotefrInnatel rRnaelveRneuvee,nCue.T, .GA..RE. BNoC.a2se11N5o8.92, 41524, 65 Procter & Gamble Asia Pte. Ltd., v. Commissioner of Internal Revenue, C.T.A CEB November 202 I. Case No. 2301, 24

DECISION CTA CASE NO. 10302 It now bears emphasis that tax refund claims, like the instant case, are considered derogations of the State's power of taxation; thus, like tax exemptions, they are strictly construed against the taxpayer and liberally in favor of the State.66 Accordingly, the taxpayer-claimant has the burden of proving its entitlement to the applied refund. In this case, the Court finds that petitioner failed to prove that the income from which the taxes were withheld were declared part of the gross income reported by petitioner in its books and returns. Accordingly, the instant claim for refund must fail. WHEREFORE, premises considered, the Petition for Review 1s DENIED for lack of merit. SO ORDERED. I CONCUR: ~- -4J......_ ~ \.......__ MA. BELEN M. RINGPIS-LIBAN Associate Justice ATTESTATION I attest that the conclusion in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. ~-~ -PL_ MA. BELEN M. RINGPIS-LIBAN Associate Justice Chairperson 66 Philippine National Bank vs. Commissioner of Internal Revenue, G.R. Nos. 242647 & 243814. 15 March 2022.

DECISION CIA CASE NO. 10302 CERTIFICATION Pursuant to Article VIII, Section 13 ofthe Constitution and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.