Rieckermann Philippines, Inc. v. Commissioner of Internal Revenue

SECOND DIVISION [C.T.A. CASE NO. 8715. January 15, 2018.] RIECKERMANN PHILIPPINES, INC. , petitioner , vs. COMMISSIONER OF INTERNAL REVENUE , respondent . DECISION CASTAEDA, JR. , J p : THE CASE This is a Petition for Review 1 filed on October 3, 2013 by Rieckermann Philippines, Inc., seeking the reversal and setting aside of the Final Decision dated August 28, 2013, of the Formal Letter of Demand (FLD) dated January 3, 2011, and of the accompanying Assessment Notices, for alleged deficiency income tax, value-added tax (VAT), expanded withholding tax (EWT), and withholding tax on compensation (WTC) in the aggregate amount of P5,707,298.05 for taxable year 2007, broken down as follows: TYPE OF TAX BASIC TAX INTEREST TOTAL Income Tax P1,281,154.24 P718,148.38 P1,999,302.62 VAT 2,197,398.41 1,329,275.53 3,526,673.94 EWT 90,870.79 55,468.53 146,339.32 WTC 21,722.51 13,259.66 34,982.17 P3,591,145.95 P2,116,152.10 P5,707,298.05 THE FACTS Petitioner Rieckermann Philippines, Inc. is a domestic corporation organized and existing under Philippine laws, with address at 89 West Capitol Drive, Kapitolyo, Pasig City. 2 On the other hand, respondent is the duly appointed Commissioner of the Bureau of Internal Revenue (BIR) 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 BIR National Office Building, Agham Road, Diliman, Quezon City. On December 17, 2010, petitioner received the Preliminary Assessment Notice 3 (PAN) dated December 14, 2010. 4 Petitioner filed a Letter of Protest 5 against the PAN on December 29, 2010. On January 7, 2011, petitioner received the FLD 6 dated January 3, 2011 with attached Details of Discrepancies and Assessment Notices. 7 On January 25, 2011, petitioner filed a Letter of Protest 8 to the FLD dated January 20, 2011. 9 On March 16, 2011, petitioner received a Letter 10 from respondent dated February 25, 2011, informing it that the case will be forwarded to Revenue District No. 43-A for appropriate action. 11 On September 11, 2012, petitioner received a Letter 12 dated August 30, 2012, informing it that Revenue Officer Elmer O. Jimenez under Group Supervisor Aurea S. Guevarra recommended the reiteration of the assessments in the FLD. On September 13, 2012, petitioner submitted a Letter 13 dated September 12, 2012, in response to respondent's Letter dated August 30, 2012. On September 3, 2013, petitioner received the Final Decision 14 dated August 28, 2013 signed by Regional Director Jonas DP. Amora which noted the recommendation of the investigating officer for the reiteration of the assessments and demanded petitioner to pay its tax liabilities as contained in the FLD dated January 3, 2011. The August 28, 2013 letter further stated: aScITE "This is our FINAL DECISION . If you disagree, you may appeal this final decision with the Court of Tax Appeals within thirty (30) days from date of receipt hereof, otherwise our [sic] said deficiency tax liabilities shall become final, executory and demandable." Accordingly, petitioner filed the present Petition for Review on October 3, 2013. On December 19, 2013, respondent filed her Answer, 15 interposing the following Special and Affirmative Defenses: " SPECIAL AND AFFIRMATIVE DEFENSES 28. The herein assessment has become final, executory and demandable by reason of the failure of the petitioner to timely file the petition for review pursuant to the provisions of Section 228 of the Tax Code of 1997, as amended." On May 15, 2014, petitioner paid forty percent (40%) of the basic taxes assessed with respect to the deficiency income tax and VAT assessment in the total amount of P1,436,458.38. 16 The Pre-Trial Conference 17 was reset on January 22, 2015. Petitioner's Pre-Trial Brief 18 was filed on October 20, 2014; while the Pre-Trial Brief for the Respondent 19 was filed on October 21, 2014. The parties filed their Joint Stipulation of Facts and Issues 20 on January 22, 2015, which was approved by the Court in the Pre-Trial Order 21 dated February 24, 2015. Petitioner presented Ms. Julieta Zapanta 22 and Mr. George V. Villaruz, the Court-commissioned Independent Certified Public Accountant (ICPA), as witnesses. 23 On June 22, 2015, petitioner filed its Formal Offer of Evidence, 24 offering Exhibits "P-1", "P-2", "P-3", "P-4", "P-5", "P-6", "P-7", "P-8", "P-9", "P-9A", "P-11", "P-12", "P-13", "P-14", "P-15", "P-15a", "P-16", "P-17", "P-18", "P-18b", "P-19", "P-20", "P-20a", "P-22.1" to "P-22.72", "P-22.73" to "P-22.128", "P-22.129" to "P-22.163", "P-22.164" to "P-22.205", "P-22.206" to "P-22.282", "P-22.283" to "P-22.343", "P-23.1" to "P-23.160", "P-23.161" to "P-23.214", "P-23.215" to "P-23.251", "P-24", and "P-24a", as its documentary evidence. Respondent failed to file his comment to petitioner's Formal Offer of Evidence. 25 In the Resolution 26 dated August 13, 2015, the Court admitted Exhibits "P-1", "P-2 ", "P-3", "P-4", "P-5", "P-6", "P-7", "P-8", "P-9", "P-9A", "P-11", "P-12", "P-13", "P-14", "P-15", "P-15a", "P-16", "P-17", "P-18", "P-18b", "P-19", "P-20", "P-20a", "P-22.1" to "P-22.72", "P-22.73" to "P-22.128", "P-22.129" to "P-22.163", "P-22.164" to "P-22.205", "P-22.206" to "P-22.282", "P-22.283" to "P-22.343", "P-23.1" to "P-23.160", "P-23.161" to "P-23.214", "P-23.215" to "P-23.251", "P-24", and "P-24a". Respondent presented Mr. Michael R. Nitafan, 27 Ms. Ma. Lourdes D. Morales, and Mr. Elmer O. Jimenez as his witnesses. 28 Respondent filed his Formal Offer of Evidence 29 on February 11, 2016. On March 4, 2016, respondent submitted an Amended Formal Offer of Evidence 30 in conformity with the re-paginated BIR docket, offering Exhibits "R-1", "R-2", "R-3", "R-4", "R-5", "R-6", "R-7", "R-8", "R-9", "R-10", "R-11", "R-12", "R-13", "R-14", "R-15", "R-16", "R-17", "R-18", "R-19", "R-20", "R-21", "R-22", "R-23", "R-24", "R-25", "R-26", "R-27", "R-28", "R-28-A", "R-29", "R-29-A", "R-30", and "R-30-A", as his documentary evidence. Petitioner filed its Comment to Respondent's Formal Offer of Evidence 31 on March 31, 2016. In the Resolution 32 dated April 25, 2016, the Court admitted Exhibits "R-1", "R-2", "R-3", "R-4", "R-5", "R-6", "R-7", "R-8", "R-9", "R-10", "R-11", "R-12", "R-13", "R-14", "R-15", "R-16", "R-17", "R-18", "R-19", "R-20", "R-21", "R-22", "R-23", "R-24", "R-25", "R-26", "R-27", "R-28", "R-28-A", "R-29", "R-29-A", "R-30", and "R-30-A". On June 13, 2016, petitioner filed its Supplemental Formal Offer of Evidence, 33 offering Exhibits "P-25", "P-26", and "P-28". And in the Resolution 34 dated July 25, 2016, the Court admitted Exhibits "P-25" and "P-26", but denied Exhibit "P-28". Petitioner filed its Motion for Partial Reconsideration 35 on August 9, 2016. The Court admitted Exhibit "P-28" in its Resolution 36 dated November 10, 2016. Petitioner's Memorandum 37 was filed on December 13, 2016; while the Memorandum (For the Respondent) 38 was filed on January 16, 2017. Hence, the instant case was declared submitted for decision. 39 THE ISSUES The parties submitted the following issues for this Court's resolution: 40 I. Whether or not the Petition for Review was timely filed in accordance with Section 228 of the NIRC of 1997. II. Whether or not the Final Decision dated August 28, 2013 is void ab initio for failure to state the facts, the applicable laws, rules and regulations, or jurisprudence on which such decision is based in accordance with Section 3 of Revenue Regulations 12-99. III. Whether or not petitioner is liable for the assessed deficiency income tax for taxable year 2007 amounting to P1,999,302.62. IV. Whether or not petitioner is liable for the assessed deficiency VAT for taxable year 2007 amounting to P3,526,673.94. V. Whether or not petitioner is liable for the assessed deficiency EWT for taxable year 2007 amounting to P146,339.32. HEITAD THE COURT'S RULING The Court shall first determine the timeliness in filing the present Petition for Review in accordance with Section 228 of the National Internal Revenue Code of 1997, as amended. Section 228 of the NIRC of 1997, as amended, provides: "SEC. 228. Protesting of Assessment . When the Commissioner or his duly authorized representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings: Provided, however , That a preassessment notice shall not be required in the following cases: xxx xxx xxx Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final. If the protest is denied in whole or in part , or is not acted upon within one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision , or from the lapse of the one hundred eighty (180)-day period; otherwise, the decision shall become final, executory and demandable ." (Emphasis supplied) In this case, petitioner received the FLD dated January 3, 2011 with the attached Details of Discrepancies and Assessment Notices from the respondent on January 7, 2011. Within thirty (30) days from receipt of the FLD on January 7, 2011, petitioner filed its administrative protest together with the supporting documents on January 25, 2011. On September 11, 2012, petitioner received a Letter from the respondent dated August 30, 2012, informing petitioner of the reiteration of the assessments in the FLD. In response to said Letter, petitioner submitted a Letter on September 13, 2012, explaining that it formally protested the subject assessments in its Letter filed on January 25, 2011 and there was no communication received or meeting set by respondent's examiners until letter dated August 30, 2012. On September 3, 2013, petitioner received the Final Decision dated August 28, 2013 informing petitioner of the reiteration of the assessments due to its failure to submit supporting documents in support of the protest. Accordingly, petitioner was requested to pay the tax liabilities pursuant to FLD dated January 3, 2011. A taxpayer cannot be prejudiced if he chooses to wait for the final decision of the CIR 41 or his authorized representative 42 on the protested assessment. Applying Section 228 of the NIRC of 1997, as amended, the taxpayer adversely affected by the decision of the respondent may appeal to this Court within thirty (30) days from receipt of said decision. Thus, petitioner has a period of thirty (30) days from September 3, 2013, or until October 3, 2013, within which to file its Petition for Review before this Court. Records show that the instant Petition was filed on October 3, 2013. Clearly, the Court has acquired the jurisdiction over the instant case, but only to the extent of the deficiency taxes assessed by respondent within the three (3)-year period prescribed by law. Section 203 of the NIRC of 1997, as amended, specifically provides that respondent has three (3) years to assess and collect an internal revenue taxes, to wit: "SEC. 203. Period of Limitation upon Assessment and Collection . Except as provided in Section 222, internal revenue taxes shall be assessed within three (3) years after this last day prescribed by law for the filing of the return , and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period: Provided , That in a case where a return is filed beyond the period prescribed by law, the three (3)-year period shall be counted from the day the return was filed . For purposes of this Section, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day." (Emphasis supplied) Based on the foregoing provision, internal revenue taxes shall, as a rule, be assessed within three (3) years after the last day prescribed by law for the filing of return, or the actual filing thereof, whichever comes later. In determining the last day for respondent to assess petitioner of deficiency income tax, VAT, EWT and WTC, the Court shall apply Sections 77 (B) and 114 of the NIRC of 1997, as amended, and Section 2.58 of Revenue Regulations (RR) No. 2-98, as amended by RR No. 17-03, to wit: "SEC. 77. Place and Time of Filing and Payment of Quarterly Corporate Income Tax . xxx xxx xxx (B) Time of Filing the Income Tax Return . The corporate quarterly declaration shall be filed within sixty (60) days following the close of each of the first three (3) quarters of the taxable year. The final adjustment return shall be filed on or before the fifteenth (15th) day of April , or on or before the fifteenth (15th) day of the fourth (4th) month following the close of the fiscal year, as the case may be." (Emphasis supplied) ATICcS "SEC. 114. Return and Payment of Value-Added Tax . (A) In General . Every person liable to pay the value-added tax imposed under this Title shall file a quarterly return of the amount of his gross sales or receipts within twenty-five (25) days following the close of each taxable quarter prescribed for each taxpayer: Provided, however , That VAT-registered persons shall pay the value-added tax on a monthly basis." (Emphasis supplied) "Sec. 2.58. RETURNS AND PAYMENT OF TAXES WITHHELD AT SOURCE. (A) Monthly return and payment of taxes withheld at source . xxx xxx xxx (1) WHEN TO FILE (a) For both large and non-large taxpayers, the withholding tax return, whether creditable or final (including final withholding taxes on interest from any currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements) shall be filed and payments should be made, within ten (10) days after the end of each month, except for taxes withheld for the month of December of each year, which shall be filed on or before January 15 of the following year ; x x x." (Emphasis supplied) In the instant case, petitioner received the FLD on January 7, 2011 . That being the case, respondent's right to assess petitioner for deficiency VAT for the first to third quarters of 2007, and for deficiency EWT and WTC for the months of January to November 2007 had already prescribed, as shown below: Tax Return for the Taxable Year 2007 Date of Filing Last Day to File as Required by Law Last Day to Assess I. Income Tax 43 April 15, 2008 April 15, 2008 April 15, 2011 II. Value-Added Tax 44 1st Quarter April 23, 2007 April 25, 2007 April 26, 2010 45 2nd Quarter October 22, 2007 July 25, 2007 October 22, 2010 3rd Quarter October 22, 2007 October 25, 2007 October 25, 2010 4th Quarter February 14, 2008 January 25, 2008 February 14, 2011 III. Expanded Withholding Tax 46 January February 6, 2007 February 12, 2007 47 February 12, 2010 February March 5, 2007 March 12, 2007 48 March 12, 2010 March April 3, 2007 April 10, 2007 April 12, 2010 49 April May 4, 2007 May 10, 2007 May 10, 2010 May June 7, 2007 June 11, 2007 50 June 11, 2010 June July 5, 2007 July 10, 2007 July 12, 2010 51 July August 7, 2007 August 10, 2007 August 10, 2010 August September 5, 2007 September 10, 2007 September 10, 2010 September October 5, 2007 October 10, 2007 October 11, 2010 52 October November 8, 2007 November 12, 2007 53 November 12, 2010 November December 7, 2007 December 10, 2007 December 10, 2010 December January 7, 2008 January 15, 2008 January 17, 2011 54 IV. Withholding Tax on Compensation 55 January February 6, 2007 February 10, 2007 February 10, 2010 February March 5, 2007 March 10, 2007 March 10, 2010 March April 3, 2007 April 10, 2007 April 10, 2010 April May 4, 2007 May 10, 2007 May 10, 2010 May June 7, 2007 June 10, 2007 June 10, 2010 June July 5, 2007 July 10, 2007 July 10, 2010 July August 7, 2007 August 10, 2007 August 10, 2010 August September 5, 2007 September 10, 2007 September 10, 2010 September October 5, 2007 October 10, 2007 October 10, 2007 October November 8, 2007 November 10, 2007 November 10, 2010 November December 7, 2007 December 10, 2007 December 10, 2010 December February 8, 2008 January 15, 2008 February 8, 2011 Accordingly, only the assessments for deficiency income tax, VAT for the fourth quarter of 2007, EWT and WTC for the month of December 2007 were issued within the three-year period allowed by law. Petitioner also contends that the Final Decision dated August 28, 2013 is void ab initio for failure to state the facts, the applicable laws, rules and regulations, or jurisprudence on which such decision is based in accordance with Section 3 of Revenue Regulations No. 12-99. A perusal of the Final Decision dated August 28, 2013 states that the investigating officer of Revenue District Office No. 43A, Pasig City, merely recommended for the reiteration of the assessments issued against petitioner because of its failure to submit documents in support of its protest. In this regard, the decision made reference to petitioner's tax liability as shown in the Final Assessment Notice/Demand Letter No. 043A-254-07 dated January 3, 2011 to be paid immediately by petitioner. A verification of the FLD with Details of Discrepancies shows that it contained the factual and legal bases of the deficiency tax assessments against petitioner. Respondent stated the amounts found due against petitioner and explained each item from where the assessment was derived. Considering that the Final Decision is a mere reiteration of the assessments in the FLD dated January 3, 2011, the reference to the latter is sufficient to inform petitioner of the factual and legal bases of the Final Decision. Moreover, a decision of respondent on a disputed assessment differs from the assessment itself. Hence, the invalidity of one does not necessarily result in the invalidity of the other unless the law or regulations otherwise provide. In the case of Commissioner of Internal Revenue vs. Liquigaz Philippines Corporation , 56 the Supreme Court held that: "To recapitulate, a 'decision' differs from an 'assessment' and failure of the FDDA to state the facts and law on which it is based renders the decision void-but not necessarily the assessment. Tax laws may not be extended by implication beyond the clear import of their language, nor their operation enlarged so as to embrace matters not specifically provided." Therefore, the assessment remains valid notwithstanding the alleged nullity of the Final Decision/FDDA because the assessment itself differs from a decision on the disputed assessment subject, of course, to applicable laws, rules and regulations governing the validity of assessments. The Court shall now proceed to determine the merits of the subject assessments. I. DEFICIENCY INCOME TAX P1,999,302.62 As per FLD, respondent assessed petitioner of deficiency income tax for taxable year 2007 in the amount of P1,999,302.62, as computed below: TIADCc Taxable Income per ITR P- Add: Adjustments per investigation Unaccounted Rent P6,999.81 Income Payments not subjected to withholding tax 3,577,339.95 Non-deductible Representation and Entertainment 76,100.92 3,660,440.68 Taxable income per investigation P3,660,440.68 Income tax due thereon P1,281,154.24 Less: Allowable tax credits/payments Payment P27,105.07 Creditable Withholding Tax 64,332.97 Total 91,438.04 Less: Excess MCIT over NIT to be carried over 91,438.04 - Deficiency Income Tax 1,281,154.24 Add: 20% Interest p.a. (04.16.08 to 2.3.11) 718,148.38 TOTAL AMOUNT DUE P1,999,302.62 A. Unaccounted Rent P6,999.81 Respondent's verification disclosed that petitioner's rental payments per alphalist differ from that declared per financial statements (FS), as shown below: 57 Per Alphalist/Returns Per FS Difference Rent P1,006,315.60 P999,315.79 P6,999.81 Unaccounted Rent P6,999.81 Respondent considered the difference as unaccounted source of cash, which led to the inference that part of petitioner's income has not been declared. Thus, respondent assessed petitioner of deficiency income tax on the amount of P6,999.81 pursuant to Section 31 of the NIRC of 1997, as amended. In its protest letters 58 to the PAN and FLD, petitioner explained that the rental expense reported in its FS is the correct one. In the computation of withholding tax on the additional rental of P7,736.84, instead of deducting 5% EWT that is P386.84, petitioner erroneously applied 10% that is P736.84, resulting in an overpayment of P350.00. When the alphalist was prepared at the end of the year, since the total amount of withholding tax paid was P50,315.78, the accountant presumed a rental expense of P1,006,315.60. Be that as it may, the Court finds respondent's assessment unfounded. Mere presumption of income based on unaccounted rent payments which supposedly translate into income is not sufficient to sustain the validity of an assessment. Even if the alleged undeclared payments are to be considered as income, the same will be offset by recording the equivalent expenses. Hence, no taxable income will result from the said transaction. It bears stressing that the three (3) elements in the imposition of income tax are: (1) there must be gain or profit; (2) that the gain or profit is realized or received, actually or constructively; and (3) it is not exempted by law or treaty from income tax. Income tax is assessed on income received from any property, activity or service. 59 Such being the case, in the imposition or assessment of income, tax, it must be clear that there was an income, and such income was received by the taxpayer, not when there is an unaccounted/undeclared rent expense. Furthermore, for income tax purposes, a taxpayer is free to deduct from its gross income a lesser amount, or not to claim any deduction at all. What is prohibited by the income tax law is to claim a deduction beyond the amount authorized therein. 60 Hence, respondent's imposition or assessment of the subject income tax does not hold water, for it simply relies on the fact that there is unaccounted/undeclared rent expense. B. Income Payments Not Subjected to Withholding Tax P3,577,339.95 Pursuant to Section 34 (K) of the NIRC of 1997, as amended, respondent disallowed the following income payments for failure of petitioner to withhold tax as required under Revenue Regulations No. 02-98, as amended: Per FS Per Alphalist Difference Professional fees P701,186.12 P552,540.00 P148,646.12 Payments to contractor/sub-contractor Repairs and maintenance 377,945.11 Transportation & delivery exp. 2,770,206.69 Seminar & training 122,298.03 Salaries & wages 442,144.30 Total payments to contractor/sub-contractor 3,712,594.13 283,900.30 3,428,693.83 Income Payments Not Subjected to Withholding Tax P3,577,339.95 Professional fees. Petitioner explained that the discrepancy of P133,536.12 pertains to payments to Cochingyan and Peralta Law Offices, a general professional partnership (GPP), which is not subject to withholding tax. And, that the remaining pertains to the out-of-pocket expenses of the auditors. Being mere reimbursement of expenses, the same is allegedly not subject to withholding tax. As reported by the Court-commissioned Independent Certified Public Accountant, the discrepancy in professional fees in the amount of P148,646.12 specifically relates to the following suppliers: 61 AIDSTE Name of Supplier Per FS Per Alphalist 62 Difference Cochingyan & Peralta Law Offices P133,236.12 P- P133,236.12 Luis Noli De Castro 110,150.00 88,000.00 22,150.00 Cora Pacheco 457,800.00 457,500.00 300.00 Aboitiz Projects - 3,400.00 (3,400.00) DHL Express - 3,640.00 (3,640.00) Total P701,186.12 P552,540.00 P148,646.12 An examination of the supporting official receipts 63 confirmed that the fees of P133,236.12 were paid to Cochingyan & Peralta Law Offices, a general professional partnership as evidenced by its registration certificate 64 with the Securities and Exchange Commission (SEC). Section 22 (B) of the NIRC of 1997, as amended, defines general professional partnerships (GPPs) as partnerships formed by persons for the sole purpose of exercising their common profession, no part of the income of which is derived from engaging in any trade or business. Corollary thereto, Section 26 of the same NIRC provides that GPP shall not be subject to income tax. Its partners are the ones liable in their individual capacity for the payment of income tax. Consequently, GPPs are exempt from EWT as provided for under Section 2.57.5 of RR No. 02-98, as amended by RR No. 14-02, to wit: "Sec. 2.57.5. Exemption from Withholding . The withholding of creditable withholding tax prescribed in these Regulations shall not apply to income payments made to the following: xxx xxx xxx (B) Persons enjoying exemption from payment of income taxes pursuant to the provisions of any law, general or special, such as but not limited to the following: xxx xxx xxx (4) General professional partnerships." Clearly, the professional fees paid by petitioner to Cochingyan & Peralta Law Offices in the amount of P133,236.12 are not subject to EWT. Based on the schedule of the audit and accounting fees, 65 the payments made to Luis Noli S. De Castro consisted of the following: Date Particulars Amount 1/16/2007 Payment for BIR examination for 2002 P32,750.00 12/31/2007 Professional fee & other charges 12,400.00 12/31/2007 Audit fees & FS preparation 65,000.00 Total P110,150.00 The Statement of Account (SOA) No. 5237 66 dated December 27, 2006 discloses the fee of P32,750.00 for the preparation and gathering of requirements with regard to the BIR examination for the year 2002, to wit: Representation of corporation with BIR P25,000.00 12% VAT 3,000.00 Out-of-pocket since Feb. 2006 4,750.00 Total Billing P32,750.00 On this basis, the ICPA concluded that the VAT of P3,000.00 and out-of-pocket expenses (OPE) of P4,750.00 do not form part of the professional fees and should be excluded from the EWT computation. Thus, the ICPA stated that the total professional fees which were not subjected to EWT amounted to P14,400.00 instead of the assessed amount of P22,150.00, as shown below: 67 Total professional fees per AFS P110,150.00 Less: 12% VAT (3,000.00) Out of pocket expenses (OPE) (4,750.00) Total P102,400.00 Amount of professional fee per 88,000.00 Less: Schedule 4 of BIR Form 1604E Not subjected to 10% EWT P14,400.00 However, with only the SOA at hand, the Court cannot ascertain the actual nature of the expenses billed therein. Petitioner should have submitted the corresponding invoices and official receipts in order to establish that the amounts of P3,000.00 and P4,750,00 actually represent 12% VAT and reimbursement of OPE, respectively. The audit and accounting fees formed part of the professional fees declared in the FS. Without sufficient proof, the Court shall take such declaration as they are. Accordingly, the total fees of P110,150.00 are proper subjects of EWT, as determined by the respondent. Hence, the fees in the amount of P22,150.00, for failure of petitioner to subject the same to EWT, shall be disallowed as deduction from its gross income. The total professional fees paid to Cora Pacheco in the amount of P457,800.00 allegedly include reimbursement of notarial fees of P300.00. With only petty cash voucher 68 at hand, petitioner failed to establish that the income payment of P300.00 is actually reimbursement of notarial fees. Thus, the payment of P300.00 shall be disallowed. Payments to contractor/sub-contractor. The income payments in the amount of P3,428,693.83 which were allegedly not subjected to withholding tax are accounted as follows: AaCTcI Per FS 69 Income Payment Repairs and maintenance P377,945.11 Transportation & delivery expense 2,770,206.69 Seminar & training 122,298.03 Salaries & wages 442,144.30 P3,712,594.13 Per Alphalist 70 DHL Express 71,817.50 Republic Courier 23,835.00 TNT Express Courier 87,486.30 Warren Daugdaug 85,761.50 Galope, Celso 15,000.00 283,900.30 Difference P3,428,693.83 The ICPA noted that of the total repairs and maintenance of P377,945.11, the amount of P79,639.49 relates to security services of Warren Daugdaug, which was properly subjected to EWT as per the alphalist. He further added that the payments of P191,631.15 pertain to purchases of services which should be subjected to 2% EWT, while the remaining amount of P106,674.46 pertains to purchases of goods and other casual purchases which are not subject to EWT since the BIR's Notice for Inclusion as Top 20,000 Private Corporation was received by petitioner only on February 19, 2009; thus, the petitioner is not covered by RR Nos. 17-03 and 12-94, as amended. 71 A perusal of the alphalist 72 discloses that the total income payments made to Warren Daugdaug amounted to P85,761.50, which is higher by P6,122.01 than that accounted by the ICPA. Absent the reconciliation of the difference and other documentary evidence, the Court cannot ascertain the accuracy of the ICPA's finding. Nonetheless, said income payment was already subjected to EWT, and does not form part of the assessment. With regard to the remaining claimed repairs and maintenance expense of P298,305.62 (P377,945.11 less P79,639.49), it was established from the supporting official receipts and sales invoices that the amount of P211,515.36 73 represents payments for car repairs, replacement parts, cleaning and various supplies, which do not fall within the purview of income payments to certain contractors subject to 2% EWT under Section 2.57.2 (E) of RR No. 02-98, as amended. Likewise, it was found that the amount of P4,731.51 represents input VAT, thus not subject to EWT. However, with reference to the other repairs and maintenance expense of P82,058.75 (P298,305,62 less P211,515.36 less P4,731.51), the Court is constrained to uphold the assessment on the same since petitioner failed to present supporting invoices and/or official receipts in order for the Court to ascertain the actual nature of such expenses and their appropriate tax implications. Based on the ICPA's review of the account, the transportation and delivery expenses comprised of the following: Gasoline, toll fees and parking P917,261.54 Local travel 79,623.01 International travel 1,763,288.99 Transportation 10,033.15 Total P2,770,206.69 As aptly found by the ICPA, the service fees of Mondial Travel and Tours in the amount of P11,300.50, broken down below, were not subjected to 2% EWT. 74 Exhibit OR No. OR Date Service Fees P-22.227 68943 4/27/2007 P242.00 P-22.227 68943 4/27/2007 1,462.00 P-22.242 70214 7/12/2007 927.00 P-22.244 70676 8/14/2007 908.00 P-22.246 70679 8/14/2007 2,325.00 P-22.252 71980 11/15/2007 1,329.00 P11,310.50 Such income payments qualify under the category of those made to a service contractor covered by the phrase "other business agencies" pursuant to Section 2.57.2 (E) (4) (g) of RR No. 02-98, as amended by RR No. 06-01, which states: "SECTION 2.57.2. Income payment subject to creditable withholding tax and rates prescribed thereon. x x x xxx xxx xxx (E) Income payments to certain contractors On gross payments to the following contractors, whether individual or corporate Two percent (2%) xxx xxx xxx (4) Other contractors xxx xxx xxx (g) Messengerial, janitorial, private detective and/or security agencies, credit and/or collection agencies and other business agencies;" The remaining P2,758,906.19 pertains to various reimbursements of employees which are not subject to EWT such as gasoline and oil, parking and toll fees, meals, hotel accommodations, air tickets and other casual purchases during the employee's business travels locally and abroad. However, only to the extent of P2,532,515.15 was duly supported by receipts and invoices. 75 Thus, the other P226,391.04 shall be disallowed. EcTCAD Anent the expenses related to petitioner's in-house trainings and seminars, a perusal of the Check Voucher No. 5401, as supported by Official Receipt No. 5175 and Billing Statement No. 6702, 76 discloses that the petitioner had paid the amount of P70,000.00 (exclusive of the 12% VAT of P8,400.00) in installments on the following dates to Harry Pound Company for the 2-day in-house training on professional salesmanship: 50% down payment on November 14, 2007 P35,000.00 25% on November 24, 2007 17,500.00 25% on December 1, 2007 17,500.00 Total P70,000.00 Said income payment was not subjected to the 10% or 15% EWT imposed on professional fees under Section 2.57.2 (B) of RR No. 02-98, as amended, to wit: "SECTION 2.57.2. Income Payment Subject to Creditable Withholding Tax and Rates Prescribed Thereon. x x x xxx xxx xxx (B) Professional fees, talent fees, etc. for services of taxable juridical persons. On the gross professional, promotional and talent fees, or any other form of remuneration enumerated in the preceding subparagraph for the services of taxable juridical persons Fifteen percent (15%), if the gross income for the current year exceeds P720,000; and Ten percent (10%), if otherwise;" However, it is to be noted that respondent's disallowance of the amount of P70,000.00 was based on the non-withholding of 2% EWT on income payments to contractor/sub-contractor instead of the 10%/15% EWT on professional fees paid to juridical entities. Considering that the power to assess is lodged in the respondent and is not within the province of this Court, the Court is constrained to limit its findings based on respondent's assessment. Moreover, the ICPA noted that a portion of the expenses pertains to the cash purchases of meals which are not subject to EWT. An examination of the receipts, statement of account and liquidation summary 77 discloses that the income payment to 19 East Bar & Grill Restaurant in the amount of P23,000.00 was made for the food and drinks during petitioner's Christmas Party, which is not subject to EWT. With regard to the remaining amount of P29,298.03, the related income payments cannot be given consideration since the same are supported by photocopy of or unreadable receipts, or not supported at all. 78 The ICPA accounted the salaries and wages as to consist of the following: 79 Pag-ibig contributions P17,500.00 SSS and Medicare contributions 216,337.00 P233,837.00 Medical allowance 179,864.80 Uniform allowance 28,442.50 208,307.30 Total P442,144.30 As correctly verified by the ICPA, the amount of P233,837.00 pertains to the mandatory employer's contributions to the Social Security System (SSS), Philippine Health Insurance Corporation (PhilHealth) and Home Development Mutual Fund (HDMF/Pag-ibig) 80 which are not subject to EWT. Hence, respondent's disallowance on this item is cancelled. The same holds true with regard to the medical allowance of P179,864.80. The various tape receipts, ORs and invoices 81 show that these represent purchases of medicine supplies for the employees, which are not subject to EWT. As to the uniform allowance of P28,442.50, the ICPA found that this represents purchases for clothing materials and labor for employees' uniforms 82 which are not subject to EWT. However, only the amounts of P1,457.50, 83 P843.75 84 and P1,591.25 85 totaling P3,892.50 can be verified through the supporting official receipts and invoice. The remaining amount of P24,550.00, which is merely supported by petty cash vouchers and acknowledgement letters, shall be disallowed. In sum, petitioner failed to subject to withholding tax the following income payments in the total amount of P466,048.32, thus, shall be disallowed as deduction from its gross income: Professional fees Luis Noli De Castro P22,150.00 Cora Pacheco 300.00 P22,450.00 Payments to contractor/sub-contractor Repairs and maintenance P82,058.75 Transportation and delivery expense Service fees of Mondial Travel and Tours P11,300.50 Others not duly supported 226,391.04 237,691.54 Seminars and Trainings 2-Day in-house training P70,000.00 Purchases of meals not duly supported 29,298.03 99,298.03 Salaries and Wages 24,550.00 Uniform allowance Total payments to contractor/sub-contractor P443,598.32 Total Income Payments Not Subjected to Withholding Tax P446,048.32 C. Non-Deductible Representation and Entertainment P76,100.92 Respondent's verification disclosed that petitioner's representation and entertainment per FS has exceeded the statutory limit; therefore, the excess amount, as shown below, was assessed as non-deductible expense, pursuant to RR No. 10-02: 86 HSAcaE Representation and entertainment per FS P210,066.53 Statutory limit (P26,793,121.65 x 1/2%) 133,965.61 Non-Deductible Representation and Entertainment P76,100.92 Petitioner asserts that it derives income from both sales of goods and services. Based on its FS, petitioner reported revenues of P26,793,121,65 for the taxable year 2007, broken down as follows: 87 Sales P5,259,337.43 Commission income 20,398,704.67 Technical service income 897,742.26 Installation income 135,000.00 Interest income 147,407.62 Gain (loss) on forex (45,070.33) Total P26,793,121.65 Section 5 of RR No. 10-02 sets the ceiling on entertainment, amusement and recreation expense, to wit: " SECTION 5. CEILING ON ENTERTAINMENT, AMUSEMENT, AND RECREATION EXPANSE. There shall be allowed a deduction from gross income for entertainment, amusement and recreation expense, as defined in Section 2 of these Regulations, in an amount equivalent to the actual entertainment, amusement and recreation expense paid or incurred within the taxable year by the taxpayer, but in no case shall such deduction exceed 0.50 percent (%) of net sales ( i.e. , gross sales less sales returns/allowances and sales discounts) for taxpayers engaged in sale of goods or properties; or 1.00 percent (%) of net revenue ( i.e. , gross revenue less discounts) for taxpayers engaged in sale of services, including exercise of profession and use or lease of properties. However, if the taxpayer is deriving income from both sale of goods/properties and services, the allowable entertainment, amusement and recreation expense shall in all cases be determined based on an apportionment formula taking into consideration the percentage of the net sales/net revenue to the total net sales/net revenue, but which in no case shall exceed the maximum percentage ceiling provided in these Regulations. Apportionment Formula: Net sales/net revenue Total Net sales and net revenue x Actual Expense Illustration: ERA Corporation is engaged in the sale of goods and services with net sales/net revenue of P200,000 and P100,000 respectively. The actual entertainment, amusement and recreation expense for the second semester of 2000 totaled to P3,000. Net sales/ Net revenue (1) Ent., Amusement & Recreation Expense (EAR) based on Apportionment Formula* (2) Max. Percentage Ceiling of EAR Expense** (3) Allowable Amt to be claimed as EAR Expense (whichever is lower of col. 2 and 3) (4) Sale of Goods P200,000 P2,000 P1,000 P1,000 Sale of Services 100,000 1,000 1,000 1,000 Total P300,000 P3,000 P2,000 P2,000 *Apportionment Formula Sale of Goods (P200,000/P300,000) x P3,000 Sale of Services (P100,000/P300,000) x P3,000 **Maximum Percentage Ceiling Sale of Goods (P200,000 x 0.50%) Sale of Services (P100,000 x 1%) In the above illustration, ERA Corporation can only claim a total of P2,000 as entertainment, amusement and recreation expense." At the outset, it should be noted that the interest income is neither sale of goods nor of services; it is a passive income. The Bureau of Internal Revenue defines passive income by stating what it is not, to wit: "if the income is generated in the active pursuit and performance of the corporation's primary purposes, the same is not passive income." 88 Stated differently, if the income is not generated in the active pursuit and performance of the corporation's primary purposes, the same is a passive income. Hence, petitioner's interest income of P147,407.62 which was derived not in the active pursuit of petitioner's primary purposes 89 shall be excluded for purposes of determining the ceiling. Guided by the afore-cited provision, petitioner, as correctly determined by the ICPA, can only claim a total of P194,970.25 as representation and entertainment expense, computed as follows: 90 Revenues per FS Apportionment Formula of Representation and Entertainment Maximum Percentage of Ceiling of Representation and Entertainment Allowable Amount to be Claimed as Expense Sale of goods P5,259,337.43 P41,392.97 0.50% P26,296.69 P26,296.69 Commission income 20,398,704.67 160,545.49 1% 203,987.05 160,545.49 Technical service income 897,742.26 7,065.57 1% 8,977.42 7,065.57 Installation income 135,000.00 1,062.50 1% 1,350.00 1,062.50 Total P26,690,784.36 P210,066.53 P240,611.16 P194,970.25 Consequently, petitioner's remaining claimed representation and entertainment expense of P15,096.28 (P210,066.53 less P194,970.25) shall be disallowed as deduction from its taxable gross income. HESIcT D. Excess MCIT over NIT P91,438.04 Following the computation per FLD, respondent disallowed the excess MCIT over NIT, amounting to P91,438.04, without indicating therein the basis for the disallowance in the Details of Discrepancies. Despite petitioner's failure to refute the same, the Court finds it improper to uphold an assessment which is already void on its face. Section 228 of the NIRC of 1997, as amended, provides that the taxpayer shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void. Notwithstanding the foregoing conclusions, petitioner still incurred a net loss for taxable year 2007 in the amount of P1,094,032.88, as computed below: Taxable income/(loss) per ITR P(1,575,177.49) Add: Adjustments Income payments not subjected to withholding tax Professional fees P22,450.00 Payments to contractors/sub-contractors 443,598.32 466,048.32 Non-deductible representation and entertainment 15,096.29 Adjusted Taxable Income/(Loss) P(1,094,032.88) That being the case, petitioner shall be liable to two percent (2%) minimum corporate income tax (MCIT) on its gross income pursuant to Section 27 (E) of the NIRC of 1997, as amended. "Gross income" for purposes of computing the MCIT shall mean gross sales less sales returns, discounts and allowances and cost of goods sold. On the other hand, "cost of goods sold" shall include all business expenses directly incurred to produce the merchandise to bring them to their present location and use. In relation thereto, the adjusted total gross income, taken into consideration all the audit findings, has to be determined. A perusal of the Notes to FS discloses that the professional fees and seminars and trainings do not form part of the cost of sales, but of the selling and administrative expenses. Moreover, since the Court cannot identify what portion of the repairs and maintenance and the salaries and wages relate to cost of sales and to selling and administrative expenses, the adjustments relating to such, together with the transportation and delivery expense, shall be added to the gross income. Thus, petitioner is liable for deficiency income tax in the amount of P6,886.01, as computed below: Total Gross Income per ITR P4,719,309.78 Less: Interest Income 147,407.78 Gross Income from Operations P4,571,902.00 Add: Income payments to contractors/sub-contractors P443,598.32 Less: Seminars and trainings 99,298.03 344,300.29 Adjusted Gross Income from Operations P4,916,202.29 MCIT due (2%) P98,324.05 Less: Allowable tax credits/payments Payment P27,105.07 Creditable withholding tax 64,332.97 91,438.04 Deficiency Income Tax P6,886.01 II. DEFICIENCY VALUE-ADDED TAX P3,526,673.94 Respondent assessed petitioner of deficiency VAT in the amount of P3,526,673.94, computed as follows: Taxable sales/receipts per VAT returns P5,740,009.05 Add: Adjustments per investigation Sales/receipts not subjected to VAT P12,604,709.53 Unaccounted rent 6,999.81 12,611,709.34 Receipts/income subject to 12% VAT per investigation P18,351,718.39 Output tax due thereon (12%) P2,202,206.21 Less: Tax credits/payments Prior year's excess credit P1,007,121.37 Input tax claimed for the year 159,151.89 Payments 4,807.80 Total 1,171,081.06 Less: Unsupported prior year's excess credit 1,007,121.37 Disallowed input tax 159,151.89 4,807.80 Deficiency value-added tax 2,197,398.41 Add: 20% Interest p.a. (01.26.08 to 2.3.11) 1,329,275.53 TOTAL AMOUNT DUE P3,526,673.94 A. Sales/Receipts Not Subjected to VAT P12,604,709.53 Respondent's audit disclosed that part of petitioner's sales/receipts in the amount of P12,604,709.53, as computed below, had not been subjected to VAT pursuant to Sections 106 and 108 of the NIRC of 1997, as amended: 91 Sales per FS P26,690,784.64 Add: Collection of accounts receivable 12,604,709.75 Total sales per FS P39,295,494.39 Less: Zero-rated sales 20,823,171.93 Exempt sales 127,603.88 Taxable sales/receipts per FS P18,344,718.58 Less: Taxable sales/receipts per VAT return 5,740,009.05 Sales/Receipts Not Subjected to VAT P12,604,709.53 The Court cancels the assessment. Under our VAT law, while both sale of goods or properties and sale of services and use or lease of properties are taxable at the rate of 12% or 0%, the same however, differ in terms of their taxable base. For the sale of goods or properties under Section 106 of the NIRC of 1997, as amended, the VAT is imposed upon the gross selling price , i.e. , the VAT accrues "upon consummation of sale" regardless of whether or not the consideration therefor was actually received. It is for this reason that Section 113 (A) of the NIRC of 1997, as amended, requires that the sale of goods or properties be supported by a VAT invoice. caITAC In the case of sale of services and use or lease of properties under Section 108 (A) of the NIRC of 1997, as amended, the VAT is based on gross receipts , i.e. , the VAT accrues upon actual or constructive receipt of the consideration irrespective of whether or not the services has been rendered. Thus, Section 113 (A) of the NIRC of 1997, as amended, prescribes that the sale of services and use or lease of properties be supported by a VAT official receipt. A perusal of petitioner's FS discloses that petitioner derived its revenues for the years 2007 and 2006 on both sales of goods and sales of services. 92 Hence, it was erroneous on the part of respondent to determine petitioner's total VAT liability for taxable year 2007 by merely computing for petitioner's total collections of accounts receivable during the year 2007 without taking into consideration what part of the collections may pertain to sales of goods from prior years. Also, respondent's computation failed to account for that part of petitioner's 2007 sales of goods that may had been uncollected as of the end of 2007 but are reportable in 2007. Nevertheless, it was established that petitioner's revenues from sales of goods and sales of services per FS for the years 2007 and 2006 were also reported in its Quarterly VAT Returns for the said years except for a minimal discrepancy of P.60 and P7,001.00 for the years 2007 and 2006, respectively, as illustrated below: Revenues per FS 93 2007 2006 Sales P5,259,337.43 P23,374,637.51 Commission Income 20,398,704.57 17,198,061.79 Technical Service Income 897,742.26 1,109,481.34 Installation Income 135,000.00 129,459.19 Total P26,690,784.26 P41,811,639.83 Sales/Receipts per VAT Returns 94 2007 2006 1st Quarter P3,876,092.88 P1,480,169.88 2nd Quarter 4,875,057.61 1,334,049.78 3rd Quarter 9,229,567.33 3,942,210.13 4th Quarter 8,710,067.04 35,062,211.04 P26,690,784.86 P41,818,640.83 Sales per FS is higher (lower) than sales per VAT Returns P(0.60 ) P(7,001.00 ) B. Unaccounted Rent P6,999.81 The unaccounted rent was also assessed for deficiency VAT, pursuant to Sections 106 and 108 of the NIRC of 1997, as amended. As held earlier, mere presumption of income based on unaccounted rent payments which supposedly translate into income is not sufficient to sustain the validity of an assessment. In the same token, no deficiency VAT assessment should arise from the unaccounted/undeclared rent expense. Under Section 108 of the NIRC of 1997, as amended, VAT is assessed on the gross receipts derived from the sale or exchange of services, including the use or lease of properties. In assessing deficiency VAT, it must be proved that the taxpayer was or ought to be paid in consideration for a sale, and not when said taxpayer disburses cash for the use or lease of properties. Thus, there is no basis to impose deficiency VAT merely on the basis of alleged unaccounted/undeclared rent expense. C. Unsupported Prior Year's Excess Credit P1,007,121.37 Respondent disallowed the prior year's excess tax credit for failure of petitioner to substantiate the same with documentary evidence, pursuant to Section 2.58.3 of RR No. 02-98, Revenue Memorandum Order (RMO) No. 53-98, as amended, and RR No. 09-98, as amended, in relation to Sections 52, 56, and 76 of the NIRC of 1997, as amended. As verified by the ICPA, the prior year's excess tax credits were duly reported and reflected in petitioner's VAT returns, as follows: 95 Excess input tax credits as of December 31, 2004, carried over in January 2005 VAT return P453,045.98 Excess input tax credits for 2005, carried over in January 2006 VAT return P517,420.23 Excess input tax credits for 2006, carried over in January 2007 VAT return P1,007,121.37 Even so, petitioner failed to substantiate the prior year's excess tax credits. Without the corresponding VAT invoices or official receipts, the said prior year's excess credits cannot be applied against petitioner's 2007 output VAT liability pursuant to Section 110 (A) (1) in relation to Section 110 (B) of the NIRC of 1997, as amended, which states: "SEC. 110. Tax Credits. A. Creditable Input Tax. (1) Any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section 113 hereof on the following transactions shall be creditable against the output tax : xxx xxx xxx (B) Excess Output or Input Tax . If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the VAT-registered person. If the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarters. x x x" (Emphasis supplied) ICHDca Accordingly, the disallowance is proper, but only to the extent of the unprescribed portion that is, relating to the fourth quarter of 2007. A scrutiny of the VAT returns reveals that the prior year's excess tax credits, totaling to P553,723.09, had already been applied against the output VAT for the first three quarters of taxable year 2007; as such, the same can no longer be disallowed. Therefore, only tax credits in the amount of P453,398.28 shall be disallowed, as computed below: Prior year's excess tax credits P1,007,121.37 Output VAT for the: 1st Quarter P25,689.60 2nd Quarter 28,518.60 3rd Quarter 499,514.89 553,723.09 Total Disallowed Prior Year's Excess Tax Credits P453,398.28 D. Disallowed Input Tax P159,151.89 Respondent disallowed petitioner's reported input tax for taxable year 2007 for alleged failure of petitioner to substantiate with valid documentary evidence, pursuant to Section 110 of the NIRC of 1997, as amended. Since prescription had set in, only the reported input VAT for the fourth quarter of 2007 in the amount of P13,681.47 may be disallowed by the respondent. However, considering that the declared input VAT for the first three quarters of 2007 in the amount of P145,470.42 (P159,151.89 less P13,681.47) formed part of the P603,676.50 96 input tax carried over from previous quarter reflected in petitioner's VAT return for the fourth quarter of 2007, the same may be assessed by respondent. An examination of petitioner's supporting documents discloses that the reported input taxes for the fourth quarter of 2007 in the amount of P13,681.47 shall be entirely disallowed for failure to comply with the substantiation requirements under Section 113 (A) and (B) of the NIRC of 1997, as amended and Section 4.113-1 (A) and (B) of RR No. 16-05, as amended: Exhibit Document No. Date Supplier Disallowed Input VAT Input VAT on purchases of services supported by documents other than VAT official receipts "P-23.204" 3117102207945 21-Oct-07 Meralco P2,409.50 "P-23.205" 09-Oct-07 Central CATV, Inc. 214.18 "P-23.206" 148 21-Oct-07 Globe Telecom 265.99 ''P-23.206" 44 21-Oct-07 Globe Telecom 267.86 "P-23.206" 44 21-Oct-07 Globe Telecom 213.71 "P-23.206" 44 21-Oct-07 Globe Telecom 90.15 ''P-23.206" 44 21-Oct-07 Globe Telecom 114.85 "P-23.206" 26 21-Oct-07 Globe Telecom 85.71 "P-23.206" 26 21-Oct-07 Globe Telecom 92.91 "P-23.206" 39 21-Oct-07 Globe Telecom 230.78 "P-23.206" 17 21-Oct-07 Globe Telecom 128.57 "P-23.206" 49 21-Oct-07 Globe Telecom 126.32 "P-23.206" 21 21-Oct-07 Globe Telecom 85.82 "P-23.206" 21 21-Oct-07 Globe Telecom 85.71 "P-23.206" 39 21-Oct-07 Globe Telecom 85.71 "P-23.207" 3117112218641 21-Nov-07 Meralco 2,052.63 "P-23.208" 09-Nov-07 Central CATV, Inc. 61.97 "P-23.209" 09-Nov-07 Central CATV, Inc. 214.18 "P-23.210" 58003150418 12-Oct-07 PLDT 151.08 "P-23.210" 58003133656 12-Oct-07 PLDT 1,062.25 ''P-23.210" 58003148616 12-Oct-07 PLDT 201.31 "P-23.210" 58003150419 12-Oct-07 PLDT 151.08 "P-23.212" - 09-Dec-07 Central CATV, Inc. 61.97 "P-23.213" - 09-Dec-07 Central CATV, Inc. 214.18 Input VAT on purchases of services supported by VAT official receipts but the VAT was not separately indicated "P-23.203" 34652 8-Oct-07 Globe Telecom 247.03 "P-23.203" 34652 8-Oct-07 Globe Telecom 267.86 "P-23.203" 34652 8-Oct-07 Globe Telecom 182.12 "P-23.203" 34652 8-Oct-07 Globe Telecom 85.71 "P-23.203" 34652 8-Oct-07 Globe Telecom 127.13 "P-23.203" 34652 8-Oct-07 Globe Telecom 85.71 "P-23.203" 34652 8-Oct-07 Globe Telecom 92.50 "P-23.203'' 34652 8-Oct-07 Globe Telecom 324.35 "P-23.203'' 34652 8-Oct-07 Globe Telecom 85.71 "P-23.203" 34652 8-Oct-07 Globe Telecom 128.57 "P-23.203" 34652 8-Oct-07 Globe Telecom 101.75 "P-23.203" 34652 8-Oct-07 Globe Telecom 98.00 "P-23.203" 34652 8-Oct-07 Globe Telecom 85.71 "P-23.211" 38429 10-Dec-07 Globe Telecom 237.48 "P-23.211" 38429 10-Dec-07 Globe Telecom 267.86 "P-23.211" 38429 10-Dec-07 Globe Telecom 155.59 "P-23.211" 38429 10-Dec-07 Globe Telecom 92.54 "P-23.211" 38429 10-Dec-07 Globe Telecom 104.45 "P-23.211" 38429 10-Dec-07 Globe Telecom 96.02 "P-23.211" 38429 10-Dec-07 Globe Telecom 85.71 "P-23.211" 38429 10-Dec-07 Globe Telecom 128.57 "P-23.211" 38429 10-Dec-07 Globe Telecom 128.57 "P-23.211" 38429 10-Dec-07 Globe Telecom 101.92 "P-23.211" 38429 10-Dec-07 Globe Telecom 85.71 "P-23.211" 38429 10-Dec-07 Globe Telecom 85.71 "P-23.211" 38429 10-Dec-07 Globe Telecom 85.71 "P-23.214" 000088782 10-Dec-07 PLDT 1,080.93 "P-23.214" 000088783 10-Dec-07 PLDT 151.08 "P-23.214" 000088784 10-Dec-07 PLDT 151.08 No supporting document offered - - 09-Oct-07 Central CATV, Inc. 61.97 Total P13,681.47 Similarly, out of the P145,470.42 input VAT carried over from the first three quarters of 2007, the amount of P80,508.98 shall also be disallowed for failure to meet the substantiation requirements under the aforementioned VAT law and regulations: Exhibit Document No. Date Supplier Disallowed Input VAT Input VAT on purchases of services supported by documents other than VAT official receipts "P-23.105" 138 21-Dec-06 Globe P251.04 "P-23.105" 34 30-Dec-06 Globe 267.86 "P-23.105" 34 30-Dec-06 Globe 130.71 "P-23.105" 34 30-Dec-06 Globe 112.71 "P-23.105" 34 30-Dec-06 Globe 132.84 "P-23.105" 16 5-Jan-07 Globe 85.71 "P-23.105" 16 5-Jan-07 Globe 85.71 "P-23.105" 29 10-Jan-07 Globe 257.85 "P-23.105" 29 10-Jan-07 Globe 90.86 "P-23.105" 7 5-Jan-07 Globe 128.57 "P-23.105" 39 10-Jan-07 Globe 94.10 "P-23.105" 11 10-Jan-07 Globe 85.71 "P-23.105'" 11 10-Jan-07 Globe 85.71 "P-23.108" - 9-Jan-07 Central CATV, Inc. 63.21 "P-23.109" - 9-Jan-07 Central CATV, Inc. 214.18 "P-23.112" 58002559488 7-Jan-07 PLDT 1,128.78 "P-23.119" 3117012708988 1-Feb-07 MERALCO 1,771.03 "P-23.122" 58002632408 7-Feb-07 PLDT 151.47 "P-23.122" 58002632409 7-Feb-07 PLDT 151.47 "P-23.124" 02464 26-Jan-07 Clarion Service Center 99.39 "P-23.130" 4430 28-Feb-07 Alsons Insurance Corp. 1,561.87 "P-23.131" 4432 28-Feb-07 Alsons Insurance Corp. 1,324.05 "P-23.132" 4431 28-Feb-07 Alsons Insurance Corp. 2,652.10 "P-23.140" 3117022759951 22-Feb-07 Meralco 2,019.03 "P-23.142" 30886755 7-Mar-07 PLDT 195.40 "P-23.142" 58002670911 7-Mar-07 PLDT 1,156.36 "P-23.156" 03-Mar-07 Central CATV, Inc. 214.18 "P-23.157" 03-Mar-07 Central CATV, Inc. 63.21 "P-23.161" 58002742822 28-Mar-07 PLDT 163.69 "P-23.161" 58002742821 28-Mar-07 PLDT 148.69 "P-23.162" - 29-Mar-07 PLDT 1,077.03 "P-23.165" 58002687594 7-Mar-07 PLDT 150.08 "P-23.165" 58002687595 7-Mar-07 PLDT 150.08 "P-23.169" 58002630546 7-Feb-07 PLDT 206.07 "P-23.170" 58002576790 7-Jan-07 PLDT 151.47 "P-23.170" 58002576791 7-Jan-07 PLDT 151.47 "P-23.171" 58002781689 12-Apr-07 PLDT 1,309.90 "P-23.171" 58002798388 12-Apr-07 PLDT 148.69 "P-23.171" 58002798389 12-Apr-07 PLDT 148.69 "P-23.172" 58002726125 12-Mar-07 PLDT 1,116.06 "P-23.172" 58002741028 12-Mar-07 PLDT 175.99 "P-23.176" 311016000340 23-Apr-07 MERALCO 2,147.15 "P-23.178" - 9-Jun-07 Central CATV, Inc. 214.18 "P-23.180" 3303627320 12-Jun-07 Manila Water 180.82 "P-23.181" - 9-Apr-07 Sky Cable 214.18 "P-23.182" - 9-May-07 Sky Cable 61.97 "P-23.183" - 20-Jun-07 MERALCO 2,201.32 "P-23.184" 58002854229 7-Jun-07 PLDT 147.29 "P-23.184" 58002837531 7-Jun-07 PLDT 1,125.08 "P-23.184" 58002854228 7-Jun-07 PLDT 147.29 "P-23.186" 58002910362 12-Jun-07 PLDT 145.62 "P-23.186" 58002893613 12-Jun-07 PLDT 1,139.52 "P-23.186" 58002910361 12-Jun-07 PLDT 145.62 "P-23.187" - 9-May-07 Sky Cable 214.18 "P-23.190" 3117072206663 30-Jul-07 Meralco 2,848.75 "P-23.191" 12661 17-Jul-07 Central CATV, Inc. 214.18 "P-23.193" 58002966734 12-Jul-07 PLDT 145.62 "P-23.193" 58002964939 12-Jul-07 PLDT 184.93 "P-23.193" 58002966736 12-Jul-07 PLDT 145.62 "P-23.193" 58002949985 12-Jul-07 PLDT 1,124.44 "P-23.194" 3117082209015 30-Aug-07 Meralco 2,463.92 "P-23.195" - 9-Aug-07 Central CATV, Inc. 61.97 "P-23.196" - 30-Aug-07 Central CATV, Inc. 214.18 "P-23.198" 58003023269 12-Aug-07 PLDT 145.62 "P-23.198" 58003023270 12-Aug-07 PLDT 145.62 "P-23.198" 58003021473 12-Aug-07 PLDT 177.14 "P-23.199" 58003087403 12-Sep-07 PLDT 157.96 "P-23.199" 58003085606 12-Sep-07 PLDT 183.08 "P-23.199" 58003070654 12-Sep-07 PLDT 1,377.73 "P-23.199" 58003087402 12-Sep-07 PLDT 157.96 "P-23.200" 3117092213818 29-Sep-07 Meralco 2,539.72 "P-23.201" 13202 24-Sep-07 Central CATV, Inc. 61.97 "P-23.202" 13202 24-Sep-07 Central CATV, Inc. 214.18 Input VAT on purchases of goods supported by documents other than VAT sales invoices "P-23.149" 29685 21-Mar-07 Electrical & Equipment Sale 1,570.98 "P-23.168" 8977 25-Apr-07 Poss School & Office Supply 343.39 "P-23.145" 19455 28-Feb-07 Calistoga Purified Water 128.58 "P-23.106" 052396 21-Dec-06 Isuzu Automotive Dealership, Inc. 608.17 "P-23.106" 052396 21-Dec-06 Isuzu Automotive Dealership, Inc. 409.08 "P-23.111" 81248 9-Feb-07 Dan Daryll Phils. 441.43 "P-23.121" 77700 16-Feb-07 Dan Daryll Phils. Ent. 401.79 "P-23.125" 18651 16-Feb-07 Villmann Computer System 2,892.86 "P-23.116" 008781 19-Feb-07 Poss School & Office Supply 177.11 Input VAT on purchases of goods/services supported by VAT invoices/official receipts but the VAT not separately indicated "P-23.106" 15094 3-Jan-07 Diwal-SLT 2 Select & Gas Station 107.14 "P-23.106" 0457127 5-Jan-07 UPS Delbros International 260.57 "P-23.106" 443466 28-Nov-06 PNCC Skyway Corporation 214.29 "P-23.106" 04698 4-Jan-07 Calistoga Purified Water 102.86 "P-23.106" 19999 9-Jan-07 Theresa & Ivansons Gasoline Station 321.43 "P-23.110" 231731 7-Feb-07 Republic Courier Services 506.40 "P-23.115" 000041161 16-Jan-07 PLDT 445.71 "P-23.117" 16113 29-Jan-07 Made M Printing 360.00 "P-23.123" 20373 6-Feb-07 Globe Telecom 307.76 "P-23.123" 20373 6-Feb-07 Globe Telecom 267.86 "P-23.123" 20373 6-Feb-07 Globe Telecom 130.66 "P-23.123" 20373 6-Feb-07 Globe Telecom 85.71 "P-23.123" 20373 6-Feb-07 Globe Telecom 86.97 "P-23.123" 20373 6-Feb-07 Globe Telecom 97.89 "P-23.123" 20373 6-Feb-07 Globe Telecom 85.71 "P-23.123" 20373 6-Feb-07 Globe Telecom 128.57 "P-23.123" 20373 6-Feb-07 Globe Telecom 91.68 "P-23.123" 20373 6-Feb-07 Globe Telecom 128.57 "P-23.123" 20373 6-Feb-07 Globe Telecom 101.04 "P-23.123" 20373 6-Feb-07 Globe Telecom 85.71 "P-23.123" 20373 6-Feb-07 Globe Telecom 85.71 "P-23.124" 463144 25-Jan-07 PNCC Skyway Corporation 321.43 "P-23.126" 081278 13-Feb-07 Airfreight 2100, Inc. 355.93 "P-23.127" 11094 01-Feb-07 Dan Daryll Phils. Ent. 441.43 "P-23.128" 232486 1-Mar-07 Republic Courier Service 379.20 "P-23.139" 94589 27-Feb-07 North Star International Trav 1,118.00 "P-23.141" 2989 5-Mar-07 Concrete Ventures Group, Inc. 1,714.29 "P-23.145" 497305 02-Mar-07 PNCC Skyway 321.43 "P-23.152" 1159 23-Mar-07 JSM Tire Center 942.86 "P-23.153" 686 13-Mar-07 Automarine Handlers, Inc. 2,734.82 "P-23.154" 112525 12-Mar-07 Dan Daryll Phil. Enterprises 409.82 "P-23.155" 478843 23-Apr-07 TNT Express Worldwide 272.10 "P-23.197" 15821386 6-Sep-07 Globe Telecom 286.91 "P-23.197" 15821386 6-Sep-07 Globe Telecom 290.22 "P-23.197" 15821386 6-Sep-07 Globe Telecom 169.59 "P-23.197" 15821386 6-Sep-07 Globe Telecom 85.71 "P-23.197" 15821386 6-Sep-07 Globe Telecom 147.16 "P-23.197" 15821388 6-Sep-07 Globe Telecom 107.81 "P-23.197" 15821388 6-Sep-07 Globe Telecom 85.71 "P-23.197" 15821388 6-Sep-07 Globe Telecom 373.56 "P-23.197" 15821386 6-Sep-07 Globe Telecom 85.71 "P-23.197" 15821387 6-Sep-07 Globe Telecom 128.57 "P-23.197" 15821387 6-Sep-07 Globe Telecom 165.23 "P-23.197" 15821387 6-Sep-07 Globe Telecom 85.71 "P-23.197" 15821387 6-Sep-07 Globe Telecom 97.95 Input VAT on purchase of goods supported by sales invoice dated outside the taxable year 2007 "P-23.164" 946/947 29-Dec-06 Lacoste Botique 750.00 Input VAT supported by unreadable documents - - - Chevron Services Philippines 214.29 - - - M. Yamat Motorist Center Shell 267.86 - - - Total Gas Station 160.71 No supporting document offered Meralco 2,291.51 - - - Meralco 2,191.13 - - - Sky Cable 61.97 Unaccounted difference Input VAT per return vs. Input VAT per schedule Per return Per schedule 1st Quarter 97,504.25 95,267.58 2,236.67 2nd Quarter 27,905.41 19,144.74 8,760.67 3rd Quarter 20,060.76 18,905.20 1,155.56 Total P80,508.98 In sum, petitioner is liable for basic deficiency VAT for the fourth quarter of 2007 in the amount of P65,308.76, computed as follows: TCAScE Output VAT due per VAT return P135,078.00 Less: Tax credits/payments Input tax carried-over from previous quarter from prior year 2006 P453,398.28 from 3rd quarter of 2007 150,278.22 603,676.50 Current Input Tax 13,681.47 Total P617,357.97 Less: Disallowances Input tax carried-over from prev. qtr. from prior year 2006 P453,398.28 from 3rd quarter of 2007 80,508.98 Current Input Tax 13,681.47 517,588.73 Net Creditable Tax Credits/Payments P69,769.24 Basic Deficiency VAT P65,308.76 III. DEFICIENCY EXPANDED WITHHOLDING TAX P146,339.32 Respondent assessed petitioner of deficiency EWT in the amount of P146,339.32, as computed below: Professional fee P148,646.12 15% P22,296.92 Payments to contractor/sub-contractor 3,428,693.83 2% 68,573.88 Deficiency withholding tax P90,870.79 Add: 20% Interest p.a. (01.16.08 to 2.3.11) 55,468.53 Total Amount Due P146,339.32 As held earlier, petitioner failed to subject to 15% and 2% EWT, the amounts of P22,450.00 and P443,598.32 representing professional fees and payments to contractor/sub-contractor, respectively. However, since respondent's right to assess petitioner of deficiency EWT for the months of January to November 2007 had already prescribed, petitioner shall be liable only for the basic deficiency EWT of P10,963.26, computed as follows: Income Payment EWT Rate EWT Due Professional fees P22,450.00 15% P3,367.50 Payments to contractor/sub-contractor P443,598.32 Less: Prescribed portion Mondial Tours and Travel 11,310.50 Harry Pound Company 52,500.00 Unprescribed payments to contractor/subcontractor P379,787.82 2% 7,595.76 Basic Deficiency EWT P10,963.26 IV. DEFICIENCY WITHHOLDING TAX ON COMPENSATION P34,982.17 Respondent's verification disclosed that petitioner failed to remit WTC for the year. Thus, petitioner was assessed of deficiency WTC pursuant to Section 151 of the NIRC of 1997, as amended: Tax due per alphalist of employees P2,602,015.08 Less: Remittances 2,580,292.57 Deficiency withholding tax on compensation P21,722.51 Add: 20% Interest p.a. (01.16.08 to 2.3.11) 13,259.66 Total Amount Due P34,982.17 Clearly, petitioner has under-remittance of basic WTC in the amount of P21,722.51, as shown below: Tax due per Schedule 7.3 P2,494,381.64 Tax due per Schedule 7.1 107,633.44 Total P2,602,015.08 Less: Remittances per BIR Form No. 1604-CF 2,580,292.57 Deficiency Withholding Tax on Compensation P21,722.51 WHEREFORE , premises considered, the Petition for Review is PARTIALLY GRANTED . The assessments issued by respondent against petitioner for calendar year 2007 covering deficiency income tax, value-added tax, expanded withholding tax and withholding tax on compensation are PARTIALLY UPHELD . Accordingly, petitioner is ORDERED TO PAY the amount of ONE HUNDRED THIRTY-ONE THOUSAND ONE HUNDRED PESOS AND SIXTY-SEVEN CENTAVOS (P131,100.67) , inclusive of the twenty-five percent (25%) surcharge imposed under Section 248 (A) (3) of the NIRC of 1997, as amended, computed as follows: Tax Type Basic 25% Surcharge Total Income Tax P6,886.01 P1,721.50 P8,607.51 Value-Added Tax 65,308.76 16,327.19 81,635.95 Expanded Withholding Tax 10,963.26 2,740.81 13,704.07 Withholding Tax on Compensation 21,722.51 5,430.63 27,153.14 Total P104,880.54 P26,220.13 P131,100.67 In addition, petitioner is ORDERED TO PAY : (a) Deficiency interest at the rate of twenty percent (20%) per annum on the basic deficiency income tax, value-added tax, expanded withholding tax and withholding tax on compensation computed from the dates indicated below until full payment thereof pursuant to Section 249 (B) of the NIRC of 1997, as amended: cTDaEH Tax Type Basic Tax Deficiency Interest Computed From Income Tax P6,886.01 April 15, 2008 Value-Added Tax 65,308.76 January 25, 2008 Expanded Withholding Tax 10,963.26 January 15, 2008 Withholding Tax on Compensation P21,722.51 January 15, 2008 (b) Delinquency interest at the rate of 20% per annum on the total amount of P131,100.67, and on the 20% deficiency interest which have accrued as afore-stated in (a), computed from September 3, 2013 until full payment thereof pursuant to Section 249 (C) of the NIRC of 1997, as amended. However, the following partial payments made by petitioner shall have to be deducted in the final settlement of the above deficiency taxes including surcharge, deficiency interest and delinquency interest: Tax Type Basic Tax Interest Total Income Tax P512,461.70 P512,461.70 97 Value-Added Tax 878,959.36 878,959.36 98 Withholding Tax on Compensation 21,722.51 P13,259.66 34,982.17 99 Total P1,413,143.57 P13,259.66 P1,426,403.23 SO ORDERED. (SGD.) JUANITO C. CASTAEDA, JR. Associate Justice Caesar A. Casanova and Catherine T. Manahan, JJ. , concur. Footnotes 1. Docket, Vol. I, pp. 17-29. 2. Par. 1, Joint Stipulation of Facts and Issues (JSFI), Docket, Vol. I, p. 156. 3. Exhibit "P-1", Docket, Vol. I, pp. 250-253. 4. Par. 3, JSFI, Docket, Vol. I, p. 156. 5. Exhibit "P-2", Docket, Vol. I, pp. 254-256. 6. Exhibit "P-3", Docket, Vol. I, pp. 277-284. 7. Par. 4, JSFI, Docket, Vol. I, p. 157. 8. Exhibit "P-4", Docket, Vol. I, pp. 285-288. 9. Par. 5, JSFI, Docket, Vol. I, p. 157. 10. Exhibit "P-5", Docket, Vol. I, p. 289. 11. Par. 6, JSFI, Docket, Vol. I, p. 157. 12. Exhibit "P-6", Docket, Vol. I, p. 290. 13. Exhibit "P-7", Docket, Vol. I, p. 291. 14. Exhibit "P-8", Docket, Vol. I, p. 292. 15. Docket, Vol. I, pp. 63-70. 16. Par. 7, JSFI, Docket, Vol. I, p. 157. 17. Minutes of the hearing on October 23, 2014 and January 22, 2015, Docket, Vol. I, pp. 133 and 155. 18. Docket, Vol. I, pp. 106-115. 19. Docket, Vol. I, pp. 128-132. 20. Docket, Vol. I, pp. 156-158. 21. Docket, Vol. I, pp. 190-198. 22. Minutes of the hearing on February 25, 2015, Docket, Vol. I, p. 199. 23. Minutes of the hearing on June 3, 2015, Docket, Vol. I, p. 231. 24. Docket, Vol. I, pp. 235-249. 25. Records Verification dated July 13, 2015, Docket, Vol. I, p. 444. 26. Docket, Vol. I, pp. 447-448. 27. Minutes of the hearing on October 5, 2015, Docket, Vol. II, p. 478. 28. Minutes of the hearing on January 27, 2016, Docket, Vol. II, p. 542. 29. Docket, Vol. II, pp. 543-552. 30. Docket, Vol. II, pp. 556-566. 31. Docket, Vol. II, pp. 578-582. 32. Docket, Vol. II, pp. 592-593. 33. Docket, Vol. II, pp. 611-613. 34. Docket, Vol. II, pp. 627-628. 35. Docket, Vol. II, pp. 629-633. 36. Docket, Vol. II, pp. 649-650. 37. Docket, Vol. II, pp. 651-677. 38. Docket, Vol. II, pp. 681-687. 39. Resolution dated January 20, 2017, Docket, Vol. II, p. 688. 40. JSFI, Docket, Vol. I, pp. 157-158. 41. Lascona Land Co., Inc. vs. Commissioner of Internal Revenue , G.R. No. 171251, March 5, 2012. 42. Philippine Amusement and Gaming Corporation vs. Bureau of Internal Revenue, et al ., G.R. No. 208731, January 27, 2016. 43. BIR Records, p. 654. 44. Exhibits "P-23-217", "P-23-220", "P-23-223", and "P-23-226", Folder No. 9; BIR Records, pp. 724, 727, 730 and 734-735. 45. April 25, 2010 fell on a Sunday. 46. BIR Records, pp. 683-660. 47. February 10, 2007 fell on a Saturday. 48. March 10, 2007 fell on a Saturday. 49. April 10, 2010 fell on a Saturday. 50. June 10, 2007 fell on a Sunday. 51. July 10, 2010 fell on a Saturday. 52. October 10, 2010 fell on a Sunday. 53. November 10, 2007 fell on a Saturday. 54. January 15, 2011 fell on a Saturday. 55. BIR Records, pp. 685-710. 56. G.R. No. 215534 and G.R. No. 215557, April 18, 2016. 57. Exhibit "P-3", Details of Discrepancies, I.a, Docket, Vol. I, p. 279. 58. Exhibits "P-2" and "P-4", Docket, Vol. I, pp. 254 and 285. 59. Commissioner of Internal Revenue vs. The Court of Appeals, et al ., G.R. No. 108576, January 20, 1999. 60. The Commissioner of Internal Revenue vs. Phoenix Assurance Co. Ltd ., G.R. No. L-19727, May 20, 1965. 61. Exhibit "P-24", Annex B2.1. 62. BIR Records, p. 684. 63. Exhibit "P-9-A", Docket, Vol. I, pp. 294-302; Exhibits "P-22-2" to "P-22-10", Folder No. 1. 64. Exhibit "P-22.11", Folder No. 1. 65. Exhibit "P-24", Annex B2.1.2. 66. Exhibit "P-22-12", Folder No. 1. 67. Exhibit "P-24", Findings and Observations, 2.1.III, p. 7. 68. Exhibit "P-22-39", Folder No. 1. 69. Exhibit "P-3", Details of Discrepancies, I.b, Docket, Vol. I, p. 279. 70. BIR Records, p. 684. 71. Exhibit "P-24", Findings and Observations, 2.2, p. 8. 72. BIR Records, p. 684. 73. Exhibit "P-24", Annex B2.2.1. 74. Exhibit "P-24", p. 9. 75. Ibid . 76. Exhibit "P-22-287", Folder No. 6. 77. Exhibit "P-22.289", Folder No. 6. 78. Exhibit "P-24", Findings and Observations, 2.4, p. 10. 79. Exhibit "P-24", Findings and Observations, 2.5, p. 10. 80. Exhibits "P-22.291" to "P-22.318" as summarized in Exhibit "P-24", Annexes B2.5.1 and B2.5.2. 81. Exhibits "P-22.319" to "P22.335" as summarized in Exhibit "P-24", Annex B2.5.3. 82. Exhibit "P-24", Annex B2.5.4. 83. Exhibit "P-22.336". 84. Exhibit "P-22.337". 85. Exhibit "P-22.342". 86. Exhibit "P-3", Details of Discrepancies, I.c, Docket, Vol. I, p. 279. 87. Exhibit "P-19", Docket, Vol. I, pp. 418 and 425. 88. Chamber of Real Estate and Builders Associations, Inc. vs. The Hon. Executive Secretary Alberto Romulo, The Hon. Acting Secretary of Finance Juanita D. Amatong, and The Hon. Commissioner of Internal Revenue Guillermo Parayno, Jr ., G.R. No. 160756, March 9, 2010, citing BIR Ruling No. DA-501-2004, September 24, 2004. 89. BIR Records, pp. 149-159. 90. Exhibit "P-24", Findings and Observations, A.3.1, p. 12. 91. Exhibit "P-3", Details of Discrepancies, II.a, Docket, Vol. I, p. 279. 92. Exhibit "P-19", Notes to Financial Statements, Note 10, Docket, Vol. I, p. 425. 93. Exhibits "P-23.229", "P-23.232", "P-23.235", "P-23.238", "P-23.217", "P-23.220", "P-23.223", and "P-23.226". 94. BIR Records, pp. 724, 727, 730 and 734-735. 95. Exhibit "P-24", p. 14. 96. The sum of the excess credits from prior year 2006 of P453,398.28 and from the first three quarters of 2007 of P145,470.42 ("P-23.238", "P-23.217", "P-23.220", and "P-23.223"). 97. Par. 7, JSFI, Docket, Vol. I, p. 157. 98. Ibid . 99. Exhibit "P-28", Docket, Vol. II, p. 618.