NCR Cebu Development Center, Inc. v. Commissioner of Internal Revenue

SPECIAL THIRD DIVISION [C.T.A. CASE NO. 9255. April 4, 2019.] NCR CEBU DEVELOPMENT CENTER, INC. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . DECISION FABON-VICTORINO , J p : This is a Petition for Review 1 filed on February 9, 2016 by NCR Cebu Development Center, Inc. praying for the setting aside of the Final Decision 2 dated January 7, 2016 assessing it for alleged deficiency value-added tax (VAT), final withholding tax (FWT), withholding VAT (WVAT), and miscellaneous taxes aggregately valued at P111,241,154.77 for the year 2010, detailed below: Basic Surcharge Interest Compromise Total VAT P5,636,522.14 P1,409,130.54 P5,321,494.60 P50,000.00 P12,417,147.28 WT-Final 32,026,764.24 8,006,691.06 30,412,264.34 50,000.00 70,495,719.64 WT-VAT 12,810,705.69 3,202,676.42 12,164,905.74 50,000.00 28,228,287.85 Total P50,473,992.07 P12,618,498.02 P47,898,664.68 150,000.00 P111,141,154.771 Others-Miscellaneous 100,000.00 Total P50,473,992.07 P12,618,498.02 P47,898,664.68 P150,000.00 P111,241,154.77 Petitioner NCR Cebu Development Center, Inc. is an organized domestic corporation, with principal office located in e-Office Building, Asiatown, I.T. Park, Apas, Cebu City. 3 It is registered with the Bureau of Internal Revenue (BIR) with Taxpayer Identification No. (TIN) 228-442-028-000 and Certificate of Registration issued on January 7, 2004. 4 Per its Articles of Incorporation, petitioner's primary purpose is "to carry on all or any of the businesses of software and hardware development and services, and the provision of related technical services; to carry on the businesses of computer programmers and consultants, to act as advisers, investigators and consultants in relation to systems of, and mechanical and other aids for all kinds of calculations and measurements in connection with the promotion, arrangement, design, programming, production and compilation of data processing methods and to provide specialized training and preparation in relation to all matters pertaining thereto; to discover and develop new processes and materials and to obtain rights of development and sale in respect thereof; and to perform functions necessary or useful for carrying on the foregoing businesses or any of them or likely to be required by customers or of persons having dealings with the company except as internet service provider." 5 CAIHTE On the other hand, respondent is the Commissioner of the Internal Revenue (CIR) with 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 Bureau of Internal Revenue (BIR). He holds office at the BIR National Office Building, BIR Road, Diliman, Quezon City. On November 4, 2011, petitioner received Letter of Authority (LOA) No. LOA-123-2011-00000034 6 dated October 20, 2011, authorizing the named revenue officers to examine its books of accounts and other accounting records for all internal revenue taxes for the period from January 1, 2010 to December 31, 2010, pursuant to Audit Criteria for Taxable Years (TYs) 2009 and 2010 issued by the BIR Large Taxpayers District Office-Cebu. On October 25, 2013, petitioner's President executed a Waiver of the Defense of Prescription under the Statute of Limitations of the NIRC 7 extending the period to assess and collect taxes until June 30, 2014. 8 On May 9, 2014, petitioner received a Preliminary Assessment Notice (PAN) 9 dated May 6, 2014 with Details of Discrepancies, indicating that after examination, the BIR found deficiency income tax (IT), VAT, withholding tax-final, withholding tax-VAT, withholding tax-expanded, documentary stamp tax (DST), and others-miscellaneous taxes for the year 2010. 10 On May 22, 2014, petitioner, in its Reply, protested the finding of deficiency taxes, interest and compromise penalties as stated in the PAN. 11 On June 23, 2014, petitioner received the Formal Letter of Demand with attached Details of Discrepancies and Assessment Notices (FLD-FAN) 12 dated June 20, 2014 for deficiency IT, VAT, withholding tax-final, withholding tax-VAT, withholding tax-expanded, DST, and others-miscellaneous taxes for the year 2010. 13 On July 23, 2014, petitioner filed its protest disputing the tax assessment indicated in the FLD-FAN. 14 On June 17, 2015, petitioner received the Final Decision on Disputed Assessment (FDDA) 15 issued by OIC-Assistant Commissioner, Large Taxpayers Service, for deficiency IT, VAT, withholding tax-final, withholding tax-VAT, withholding tax-expanded, withholding tax-compensation, DST, and others-miscellaneous taxes for the year 2010. 16 On July 16, 2015, 17 petitioner paid the deficiency assessments for withholding tax-expanded, withholding tax-compensation, DST, and penalty for alleged failure to include the TINs of seven employees in the Alphalist. On the same date, petitioner filed a Request for Reconsideration impugning the FDDA issued by respondent's authorized representative. 18 On January 7, 2016, petitioner received the Final Decision issued by former BIR Commissioner Kim S. Jacinto-Henares for deficiency IT, VAT, withholding tax-final, withholding tax-VAT, and others-miscellaneous taxes. 19 On February 4, 2016, petitioner paid the deficiency assessments for IT 20 and VAT. 21 Thereafter, or on February 9, 2016, petitioner filed the present Petition for Review with the CTA. On April 8, 2016, respondent filed his Answer, 22 contending that the assessment has sufficient basis in fact and in law. Further, petitioner was accorded due process when it was served with the LOA, PAN, FLD, FDDA and the Final Decision by respondent. Moreover, petitioner already paid the amount of P1,026,804.92 on February 4, 2016. Besides, respondent stated that the deficiency taxes were assessed after the audit investigation was conducted. The result of the audit investigation revealed that the expenses allegedly related to a claimed deduction were not directly related to and not necessary in the production/development of software products. Employees can still develop software programs/products without the add-on benefits and not mandatorily required under labor laws. Hence, the corresponding deficiency assessment for IT was assessed against petitioner for such related expenses disallowed as part of the direct costs. DETACa On the VAT assessment, petitioner's act of extending loans to its local affiliates was not among its PEZA registered activities. Per BIR Ruling (DA-053-08) dated January 30, 2008, income derived not from a registered activity of the PEZA company, shall be subject to regular corporate income tax and the PEZA company shall also be liable for 12% VAT. The tax treatment of petitioner pursuant to BIR Ruling (DA-053-08) likewise finds basis under Revenue Regulations (RR) No. 20-2002, which clarified the tax treatment of income earned from unregistered activities by enterprises registered under the Bases Conversion and Development Act of 1992 and the Philippine Economic Zone Act of 1995. Hence, the subject transaction is subject to VAT. Petitioner was also subjected to FWT on its foreign transactions since it failed to file a tax treaty relief application before availing the benefit of exemption from FWT on the said foreign transactions as required under Revenue Memorandum Order (RMO) No. 1-2000. It is for the same reason that petitioner is liable for deficiency WVAT on its payments of service fees and software license fees for services rendered abroad as well as royalties from property located outside the Philippines. Finally, the imposition of compromise penalty is in order as petitioner failed to register as VAT taxpayer pursuant to Revenue Regulations (RR) 16-2005, as amended by RR No. 3-2012. Petitioner likewise failed as a VAT taxpayer, to file the corresponding VAT returns and to submit the requisite Summary Lists of Sales/Purchases as required under Section 4.114-3 of RR 16-2005. Petitioner is as well liable for compromise penalties for violation of the provision in the Tax Code and Revenue Memorandum Order (RMO) No. 19-2007. On April 22, 2016, petitioner filed a Reply 23 refuting respondent's argumentation in his Answer. On August 26, 2016, a Pre-Trial Order 24 was issued after the parties filed their Joint Stipulation of Facts and Issues 25 on August 3, 2016 punctuating the pre-trial proceeding. In support of its case, petitioner presented its Tax Accountant, Marietta B. Ticagan, 26 and the Independent Certified Public Accountant (ICPA), Atty. Adan T. Delamide. 27 Prabal Mitra, 28 Richard McKenzie, 29 and Ajay Jhamb, 30 were presented as witnesses via their respective written interrogatories/deposition. Witness Marietta B. Ticagan testified 31 that petitioner is part of the NCR group of companies in the Asia Pacific Region, engaged in providing various consumer transaction technologies worldwide. Its ultimate parent company is NCR Corporation, which was incorporated in the United States of America. Allegedly, petitioner was assessed for deficiency VAT on the interest income realized from a loan extended in favor of NCR Philippines. Admittedly, petitioner also granted a loan to NCR Dutch BV, however, it is not engaged in the business of financing or extending loans, nor is such activity incidental to its corporate functions, as indicated in its primary purpose stated in its Articles of Incorporation. The witness explained that petitioner extended a loan to NCR Philippines when it suffered extraordinary financial losses. The loan was not intended to generate income but petitioner charged interest thereon in compliance with the transfer pricing requirements of the BIR, as in fact, the loan and the interest imposed were not supported by a written contract. In view of the foregoing, deficiency VAT should not be imposed. Petitioner was likewise assessed for deficiency FWT and VAT on the alleged ground that it failed to file a tax treaty relief application before paying non-resident foreign entities for services rendered and software license fees. She believed that there was no need for a prior tax treaty relief application because the services and license fees were rendered by non-resident foreign entities and services were performed outside of the Philippines, hence, not subject to tax, and consequently not subject to withholding taxes. The witness further declared that compromise penalties were imposed on petitioner for non-registration for VAT, non-filing of VAT returns, and non-submission of Summary Lists of Sales and Purchases. But petitioner, who was then a VAT-registered taxpayer was advised by Revenue District Office (RDO) No. 81, that before it can qualify as a large taxpayer, it should cancel its VAT Registration. More importantly, as a PEZA-registered corporation whose Income Tax Holiday (ITH) has already expired, petitioner is entitled to the preferential 5% tax rate on its gross income in lieu of other taxes, hence, not liable for VAT, and the reportorial requirements that go with it. aDSIHc The Court-commissioned ICPA, Attorney Adan T. Delamide , testified 32 that he audited petitioner's voluminous documentary evidence pertaining to the present case, and interviewed petitioner's tax accountant, Marietta B. Ticagan. Thereafter, he prepared the ICPA Report containing his findings which was submitted to the Court on December 19, 2016. As to the assessment for deficiency IT, petitioner would no longer contest the same as in fact it already paid the amount of P1,026,804.92, evidenced by BIR (Payment) Form No. 0605, and BIR eFPS confirmation of payment. Petitioner likewise already paid the amount of P12,763,059.87 comprising the assessment for deficiency VAT imposed on the interest income earned from the loan granted to NCR Philippines notwithstanding its stance that it should not be liable for the same. The payment is likewise evidenced by BIR (Payment) Form No. 0605, and BIR eFPS confirmation of payment. As to the assessment for FWVAT and FWT imposed on petitioner's payment of service fees and software license fees, he found that debit notes were issued prior to the said payments, acknowledged through sales invoices wherein both debit notes and sales invoices were issued from abroad by foreign entities. The certifications issued by the Securities and Exchange Commission (SEC) state that the foreign companies are not registered in the Philippines. These debit notes and sales invoices also indicated that the services in relation to the billings and payments made were rendered outside the Philippines. Witness Prabal Mitra , 33 a citizen of India and residing therein, testified 34 through written interrogatories, that he is the Accounting Manager of the NCR group of companies in the Asia Pacific Region, which includes herein petitioner. Petitioner NCR Cebu Development Center, Inc. was registered with the PEZA as an Ecozone Information Technology Enterprise to provide software, mechanical, and electrical engineering services at the Asiatown I.T. Park. He corroborated the testimony of petitioner's previous witness that petitioner granted a loan in favor of NCR Philippines which became the basis for the imposition of deficiency VAT on the interest income earned from the said loan. He believed that the imposition of deficiency VAT was erroneous since petitioner was and is not engaged in the business of financing or extending loans, nor are such activities the primary purpose of petitioner as shown in its Articles of Incorporation. The loan was not covered by a written contract and interest was charged to comply with the transfer pricing requirements of the BIR, with normal income tax properly reported on said interest without VAT charged on the same. The assessment for deficiency FWT and VAT on petitioner's payments to non-resident foreign entities for services rendered and software license fees, on the basis that petitioner failed to file a tax treaty relief before implementing exemption from withholding on the said payments, is likewise erroneous. These payments were for the services rendered by non-resident foreign corporations and the services were performed wholly outside of the Philippines, hence, not taxable and therefore without need to withhold taxes. Similarly witness Ajay Jhamb testifying via written interrogatories, 35 declared that he is the Finance Director of NCR India and residing therein, 36 that by reason of his functions involving accounting and bookkeeping, he is knowledgeable of the various services rendered by NCR India to its internal and external clients. Petitioner is a foreign affiliate of NCR India, both entities being part of the NCR group of companies belonging to the NCR Asia Pacific Group. In 2010, petitioner secured the services of NCR India for bookkeeping and reporting purposes including Information Technology services for which services NCR India collected service fees. The details of the services were summarized through debit notes. No personnel from NCR India came to the Philippines to render such services and no physical work was conducted in the Philippines, hence, all services were performed outside the Philippines. To back up his testimony, the witness executed a Certification on Offshore Services. ETHIDa Witness Richard McKenzie , testified 37 that he is the Finance Vice President and Head of Tax of NCR Corporation, a corporation incorporated in the United States of America, and the parent company of petitioner. In such capacity, he oversees the tax activities across all jurisdictions where NCR has a presence, including the jurisdiction of petitioner. In 2010, petitioner obtained the services of NCR Corporation and by reason thereof, NCR Corporation collected from petitioner. The services involved information technology processing and application services which were all performed in the United States of America. No personnel of NCR Corporation came to the Philippines to render the services, and no physical work was conducted in the country. In other words, all the services rendered were performed outside the Philippines. The witness issued a Certification on Offshore Services and the services performed were summarized in debit notes. On June 20, 2017, petitioner filed Offer of Documentary Evidence, 38 resolved in the Resolution 39 dated August 8, 2017, wherein the Court admitted all of petitioner's documentary exhibits except Exhibits "P-1-b" and "P-3-a". Petitioner filed Tender of Excluded Evidence 40 on December 13, 2017. On the other hand, respondent presented his sole witness, Revenue Officer Angelita A. De Guzman . 41 She testified that she conducted the audit of petitioner for the year 2010 as authorized under Letter of Authority (LOA) No. LOA-123-2011-000000.34 dated October 20, 2011, which was served on petitioner on November 4, 2011. Subsequently, a First Notice, a Second and Final Notice were sent to petitioner for its presentation of its accounting records. Petitioner executed a Waiver of the Defense of Prescription extending the period to assess for the year 2010 until June 30, 2014. After the audit, petitioner was found liable for deficiency taxes, thus, a Preliminary Assessment Notice (PAN) was recommended. The PAN issued on May 6, 2014 was served on petitioner on May 9, 2014, finding petitioner liable for deficiency IT, VAT, FWT, FWVAT, EWT and DST. Since petitioner did not protest the PAN, the issuance of a Final Assessment Notice (FAN) and Formal Letter of Demand (FLD) was recommended. However, it appeared from the record that petitioner filed a Reply to the PAN which was unknown to her when she made her recommendation. On June 20, 2014, the FLD with FAN were issued and served on petitioner on June 23, 2014. Petitioner protested the FLD with the FAN. After review of petitioner's arguments and upon recommendation, a Final Decision on Disputed Assessment (FDDA) was issued on June 15, 2015 and received on June 17, 2015, assessing petitioner for deficiency IT, VAT, FWT, FWVAT, EWT, WTC, and DST. Petitioner moved for the reconsideration of the FDDA but the same was denied in the Letter dated January 7, 2016. In the Resolution 42 dated January 12, 2012, the Court admitted all the documents formally offered by respondent on December 11, 2017. 43 The case was submitted for decision on April 6, 2018. 44 STATEMENT OF THE ISSUE The parties submitted the following issue 45 for the resolution of the Court: Whether petitioner is liable to pay the aggregate amount of One Hundred Twelve Million Two Hundred Thirty-Six Thousand Seven Hundred Seventy Four Pesos and Seventy Four Centavos (P112,236,774.74) for deficiency income tax, VAT, Withholding Tax-Final, Withholding Tax-VAT and Compromise Penalties for taxable year 2010, as well as the corresponding 25% surcharge and 20% deficiency and delinquency interest pursuant to Sections 248 and 249 of the Tax Code. DISCUSSION/RULING Section 228 of the NIRC of 1997, as amended, pertinently provides, thus: 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: cSEDTC xxx xxx xxx The taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void. Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be required to respond to said notice. If the taxpayer fails to respond, the Commissioner or his duly authorized representative shall issue an assessment based on his findings. 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." Clearly under the foregoing provision that a taxpayer has thirty (30) days from receipt of the FAN within which to file its administrative protest. It also has sixty (60) days from the filing of the administrative protest to submit all relevant supporting documents. Section 228 states that if the protest is not acted upon within 180 days from submission of documents, the taxpayer adversely affected by the inaction of the CIR may appeal to the CTA within 30 days from the lapse of the 180-day period. 46 Therefore, petitioner had 30 days to appeal respondent's denial of its protest to the CTA. 47 Evidence show that petitioner received the FLD-FAN on June 23, 2014. It had 30 days from receipt of the FLD-FAN or until July 23, 2014 to file a protest. In fine, petitioner timely filed its administrative protest on July 23, 2014. On June 17, 2015, petitioner received the FDDA issued by OIC-Assistant Commissioner, Large Taxpayers Service, for deficiency income tax, VAT, withholding tax-final, withholding tax-VAT, withholding tax-expanded, withholding tax-compensation, DST, and others-miscellaneous taxes for the year 2010. Petitioner moved for a reconsideration on July 16, 2015. AIDSTE On January 7, 2016, petitioner received the Final Decision issued by former BIR Commissioner Jacinto-Henares for deficiency income tax, VAT, withholding tax-final, withholding tax-VAT and others-miscellaneous taxes. Counting 30 days from receipt of respondent's Final Decision on January 7, 2016, petitioner had until February 9, 2016 48 within which to file its Petition for Review with the Court. Therefore, the instant Petition for Review was also seasonably filed on February 9, 2016. On the merits of the case. On June 17, 2015, petitioner received the FDDA, which indicated the following assessments: 49 Coverage of the FDDA Basic Increments Total Income Tax P689,846.38 P604,934.99 P1,294,781.37 VAT 5,636,522.14 6,404,827.49 12,041,349.64 Withholding Tax-Final 32,026,764.24 36,327,988.15 68,354,752.39 Withholding Tax-VAT 12,810,705.69 14,561,195.26 27,371,900.95 Withholding Tax-Expanded 11,740.22 13,363.56 25,103.78 Withholding Tax-Compensation 44,914.44 49,647.76 94,562.20 Documentary Stamp Tax 734.09 1,652.03 2,386.12 Others-Miscellaneous Taxes - 78,500.00 78,500.00 Total P51,221,227.21 P58,042,109.24 P109,184,836.45 On July 16, 2015, petitioner paid the deficiency assessment involving withholding tax-expanded, withholding tax-compensation, DST, and the penalty for alleged failure to include the TINs of seven employees in the Alphalist. On the same date, petitioner filed a Request for Reconsideration to contest respondent's finding pertaining to the unpaid deficiency tax assessments on income tax, VAT, withholding tax-final, withholding tax-VAT, and portion of the miscellaneous taxes. 50 On January 7, 2016, petitioner received respondent's Final Decision, finding petitioner liable to pay the following deficiency taxes and compromise penalties: SDAaTC Basic Surcharge Interest Compromise Total IT P508,147.76 P- P457,472.20 P30,000.00 P995,619.96 VAT 5,636,522.14 1,409,130.54 5,321,494.60 50,000.00 12,417,147.28 WT-Final 32,026,764.24 8,006,691.06 30,412,264.34 50,000.00 70,495,719.64 WT-VAT 12,810,705.69 3,202,676.42 12,164,905.74 50,000.00 28,228,287.85 Total P50,982,139.83 P12,618,498.02 P48,356,136.88 P180,000.00 P112,136,774.73 Others-Miscellaneous 100,000.00 Total P50,982,139.83 P12,618,498.02 P48,356,135.88 P180,000.00 P112,236,774.73 In its Memorandum, 51 petitioner manifested that it will no longer contest respondent's assessment for deficiency income tax and VAT, as in fact it already paid them on February 4, 2016. The deficiency income tax and VAT assessments are deemed extinguished by virtue of petitioner's payment on February 4, 2016. Thus, the Court shall only discuss the remaining deficiency tax assessments, i.e ., withholding tax-final, withholding tax-VAT, and others-miscellaneous taxes. As stated in the Final Decision, 52 respondent found petitioner liable for deficiency withholding tax-final, withholding tax-VAT, and others-miscellaneous taxes, computed as follows: WITHHOLDING TAX-FINAL Service Fees paid by NCR Cebu to the NCR Group P105,220,594.79 Software License Fees 1,535,286.00 Total amount subject to Withholding Tax-Final P106,755,880.79 Basic WT-Final at 30% P32,026,764.24 Add: 25% Surcharge P8,006,691.06 20% Interest (1/16/11-10/15/15) 30,412,264.36 Compromise Penalty 50,000.00 38,468,955.40 TOTAL FINAL TAX DUE P70,495,719.64 WITHHOLDING TAX-VAT Service Fees paid by NCR Cebu to the NCR Group P105,220,594.79 Software License Fees 1,535,286.00 Total 106,755,880.79 12% VAT thereof P12,810,705.69 Add: 25% Surcharge P3,202,676.42 20% Interest (1/16/11-10/15/15) 12,164,905.74 Compromise Penalty 50,000.00 15,417,582.16 TOTAL WV DUE P28,228,287.85 OTHERS-MISCELLANEOUS TAXES Nature of Violation Amt. of suggested Compromise Penalty Non-registration of Value Added Tax type P25,000.00 Non-filing of VAT returns 25,000.00 Non-Submission of Summary Listings-Sales/Purchases 50,000.00 Total Penalties P100,000.00 Respondent assessed Final Withholding Tax on the payment of Service Fees made by petitioner to NCR Group in the amount of P105,220,594.79, as well as, the Software License Fees of P1,535,286.00, on the ground that petitioner failed to file a Tax Treaty Relief Application (TTRA) before the transaction in violation of Revenue Memorandum Order (RMO) Nos. 1-2000 and 72-2010. For this reason, both transactions were subjected to Final Withholding Tax at 30% pursuant to Section 28 (B) (1) of the NIRC of 1997, as amended. The said Service Fees and Software License Fees were likewise subjected by respondent to VAT Withholding on the same ground. Respondent claims that the use of Software License is considered royalties subject to VAT pursuant to Section 7 (B) of RMC No. 44-2005. Service Fees from NCR Group Corp. P105,220,594.79 Petitioner argues that a prior tax treaty relief application is unnecessary since the subject transactions are not taxable, not on the basis of an international treaty, but based on express provisions of the NIRC, as amended. Petitioner further states that only income derived from sources within the Philippines are subject to withholding tax. Thus, compensation for labor or personal services performed outside the Philippines by non-resident foreign corporation shall not be taxable, as in this case pursuant to Sections 22 (I) 53 and 23 (F), 54 in relation to Section 42 (A) (3) and (C) (3). 55 Petitioner claims that the Service Fees it paid to NCR Group were for services rendered abroad thus, should not be subject to Philippine income tax, and consequently, should not be subject to withholding tax. Further, petitioner avers that the service fees were accrued or paid in consideration of the back-office support services performed outside the Philippines, which included general administrative, management, advisory, technical, and professional services, which were made pursuant to the Integrated Service Agreement (ISA) between petitioner and NCR Corporation, the terms of which petitioner also implemented in respect of the other non-resident foreign affiliates. 56 It must be noted at this point that the obligation to comply with a tax treaty must take precedence over the objective of RMO No. 1-2000, 57 and that a prior application for tax treaty relief is not mandatory before a taxpayer may enjoy the relief provided under Philippine tax treaties. 58 As to whether these transactions are subject to withholding tax, the First Division of the Court has eloquently discussed this matter as follows: In general, a non-resident foreign corporation is liable for gross income tax on income derived from all sources within the Philippines. Section 28 (B) (1) of the NIRC of 1997, as amended, provides: acEHCD SEC. 28. Rates of Income Tax on Foreign Corporations . xxx xxx xxx (B) Tax on Nonresident Foreign Corporation . (1) In General . Except as otherwise provided in this Code, a foreign corporation not engaged in trade or business in the Philippines shall pay a tax equal to thirty-five percent (35%) of the gross income received during each taxable year from all sources within the Philippines, such as interests, dividends, rents, royalties, salaries, premiums (except reinsurance premiums), annuities, emoluments or other fixed determinable annual, periodic or casual gains, profits and income, and capital gains, except capital gains subject to tax under subparagraphs 5(c): Provided , That effective January 1, 2009, the rate of income tax shall be thirty percent (30%). On the other hand, to be liable for VAT, a non-resident foreign corporation should render service in the Philippines. Sections 105 and 108(A) of the NIRC of 1997, as amended, state: SEC. 105. Persons Liable . Any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports shall be subject to the value-added tax (VAT) imposed in Sections 106 to 108 of this Code. xxx xxx xxx The rule of regularity, to the contrary notwithstanding, services as defined in this Code rendered in the Philippines by nonresident foreign persons shall be considered as being rendered in the course of trade or business. xxx xxx xxx SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties . (A) Rate and Base of Tax . x x x The phrase 'sale or exchange of services' means the performance of all kinds of services in the Philippines for others for a fee, remuneration or consideration, x x x xxx xxx xxx Based on above-mentioned provisions of the NIRC, in order for petitioner not to be subject to FWT, it must prove that MidAmerican Energy Holdings Company is (1) a foreign corporation not engaged in business in the Philippines; and (2) its source of income came from outside of the Philippines. On the other hand, in order for petitioner not to be subject to WVAT, it must prove that MidAmerican Energy Holdings Company is (1) a non-resident foreign corporation; and (b) it rendered services outside of the Philippines. " 59 (Emphasis supplied) As consistently ruled by this Court in a number of cases, 60 to be considered as non-resident foreign corporation doing business outside the Philippines, such must be proven by presenting, for each corporation involved, at the very least, both Securities and Exchange Commission (SEC) Certification of Non-Registration and proof of incorporation or registration, and that there is no other indication which would disqualify said entity in being classified as a non-resident foreign corporation. According to petitioner, the non-resident foreign affiliates to whom it paid service fees in the total amount of P105,220,594.79 are the following: SDHTEC 1. NCR Corporation; 2. NCR (Beijing) Financial Equipment System Company Limited; 3. NCR Korea Ltd.; 4. NCR Corporation India Pvt Ltd.; 5. NCR Malaysia Sdn. Bhd.; 6. NCR Singapore Pte. Ltd.; 7. NCR Australia Pty. Limited; 8. NCR Asia Pacific Pte. Ltd.; 9. NCR Thailand Ltd.; and 10. NCR Japan Ltd. Petitioner claims that NCR Corporation is the ultimate parent company of NCR Cebu. The other entities are petitioner's non-resident foreign affiliates belonging to the NCR APAC Group. 61 To prove that the above-named entities are not registered corporations/partnerships in the Philippines and were incorporated/organized/domiciled abroad, petitioner presented in evidence the SEC Certifications of Non-Registration of Company, 62 as well as the copies of Certificates of Registration of each company. 63 Except for "NCR (Beijing) Financial Equipment System Company Limited," where the SEC Certification provided by petitioner pertains to "NCR Beijing Sales and Management," 64 the rest of its foreign affiliated companies are considered as non-resident foreign corporations not engaged in business in the Philippines, to wit: Name of Company SEC Certification of Non-Registration of Company Certificate of Registration NCR Corporation Exhibit "P-3" Exhibit "P-4" NCR (Beijing) Financial Equipment System Company Limited NONE Exhibit "P-4-A" NCR Korea Ltd. Exhibit "P-3-b" Exhibit "P-4-B" NCR Corporation India Pvt. Ltd. Exhibit "P-3-c" Exhibit "P-4-C" NCR Malaysia Sdn. Bhd. Exhibit "P-3-d" Exhibit "P-4-D" NCR Singapore Pte. Ltd. Exhibit "P-3-e" Exhibit "P-4-E" NCR Australia Pty. Limited Exhibit "P-3-f" Exhibit "P-4-F" NCR Asia Pacific Pte. Ltd. Exhibit "P-3-g" Exhibit "P-4-G" NCR Thailand Ltd. Exhibit "P-3-h" Exhibit "P-4-H" NCR Japan Ltd. Exhibit "P-3-i" Exhibit "P-4-I" Further, it was ruled that "source of income" relates to the property, activity or service that produced the income. With respect to rendition of labor or personal service, it is the place where the labor or service was performed that determines the source of income. 65 AScHCD In the present case, the source of income of NCR Group are the general administrative, management, advisory, technical, and professional services that were provided to petitioner. In other words, it is paramount to determine where such services were performed. Petitioner presented the ISA 66 it entered into with NCR Corporation to purportedly prove the nature of the services performed by its foreign affiliates and that the same were performed outside the Philippines. In defining the service to be rendered, Section 1.1 of the said agreement provides that "[t]he Service Provider ('referring to NCR Group'), as directed and requested by the Service Recipient, agrees that it shall render the Services, that are specified and described in 'Appendix A' which is attached hereto, to the Service Recipient." However, upon examination of the said "Appendix A", nothing is contained therein except the name and address of petitioner, i.e ., "eBloc 1 Tower, Cebu IT Park, Apas, Lahug, Cebu City, Philippines." Nonetheless, the Certifications on Offshore Services 67 executed by the Tax Director, Manager, or other authorized representative of petitioner's foreign affiliates provide a clearer view of the nature of services provided to the latter. Also, as stated in their certifications "no physical work was conducted in the Philippines, as all the services rendered by the Corporation or its employees and representatives, as summarized in Appendix A attached hereto, were performed outside the Philippines and are not effectively connected to a permanent establishment in the Philippines." A scrutiny of the appendices or annexes attached in each certifications shows that the same refer to the "2010 ISA Cost Contribution-Service Provider Documentation" which indicated the detailed description of the nature of the services that a particular NCR entity may perform to its affiliated company, such as Global IT Services Data and Application Servers, Workgroup Services, Applications, Human Resources Service Delivery Centers, Technology Support, Compensation Benefits, Human Resources Global HR Regional Service Delivery Management and Support, Asia Pacific Account to Reporting Team and Associate Service Team, Compensation and Benefits, and Treasury Functions and Operations for Asia Pacific, Japan and Eastern Europe Regions. HESIcT Petitioner also presented the Schedule of Service Fees 68 showing the name of the alleged service provider and the corresponding service fees paid thereto, to wit: Month FML-CSUB Service Fees/Allocated Charges PhP US$ 201001 6768-9620 ISA CHARGE TRUE-UP 1,567,451.24 33,596.64 201004 6768-9620 ISA CHARGE ADJ 2009 3,584,227.68 80,780.43 201004 6768-9620 ISA CHARGE Q1 2010 21,760,285.04 490,427.88 201004 6768-9620 GSL-INDIA Q1 2010 576,880.99 13,001.60 201007 6768-9620 ISA CHARGE Q2 2010 22,953,791.78 494,001.76 201007 6768-9620 GSL-INDIA Q2 2010 874,276.15 18,815.80 201010 6768-9620 ISA CHARGE Q3 2010 23,836,349.52 554,011.61 201010 6768-9620 GSL-INDIA Q3 2010 907,074.99 21,082.51 201012 6768-9620 ISA CHARGE Q4 2010 ASIAN CORRECTION (45,470.35) (1,038.61) 201012 6768-9620 ISA CHARGE Q4 2010 28,380,791.28 648,259.28 201012 6768-9620 GSL-INDIA Q4 2010 824,936.47 18,842.77 Total P105,220,594.79 $2,371,781.67 To corroborate the foregoing, petitioner presented the Debit Notes 69 which states that the "Services were rendered within the country location of the servicing NCR entities. Please see supporting details." The Court noticed that these Debit Notes were issued by Global ISA Pool and NCR Global Solutions Limited, which are not among those affiliated companies to which the P105,220,594.79 service fees were paid. Despite such fact, however, the "supporting details" attached thereto clearly provide a list of NCR entities with the corresponding countries where the services were rendered. The data in the schedule of service fees and the supporting details attached to the Debit Notes may be summarized as follows: Amount Budget Description Budget ID Country where the service was rendered Service Provider Invoice No. 1001000004 dated 23-Jan-10 issued by Global ISA Pool $27,734.84 ITS Applications Development and Support I201 United States NCR Corporation 5,861.80 Workgroup Services I208 United States NCR Corporation $33,596.64 Invoice No. 1001000013 dated 22-Apr-10 issued by Global ISA Pool ($53,454.25) ITS Applications Development and Support-Gurgaon I202 India NCR Corporation India Pvt. Ltd.-Gurgaon India Facility (STPI) 65,094.30 ITS Applications Development and Support-Gurgaon 69,140.38 ITS Applications Development and Support-Gurgaon $80,780.43 Invoice No. 1001000003 dated 22-Apr-10 issued by Global ISA Pool and Invoice No. 1004000001 dated 23-Apr-10 issued by NCR Global Solutions Limited $4,248.51 APAC & CEE RTC (Treasury) D701 Singapore Asia Pacific Region Office 1,753.32 HR C&B G704 United States NCR Corporation Singapore NCR Singapore Pte. Ltd. 25,058.93 HR Shared Service Centers G705 United States NCR Corporation 41,162.53 HR Region/Service Centers APAC G706 China NCR Beijing Sales and Marketing 10,216.78 Korea NCR Korea Ltd. Malaysia NCR Malaysia Sdn. Bhd. Singapore NCR Singapore Pte. Ltd. Australia NCR Australia Pty. Limited Thailand NCR Thailand Ltd. 219,718.57 ITS Applications Development & Support I201 United States NCR Corporation 38,368.84 ITS Applications Development & Support-Gurgaon I202 India NCR Corporation India Pvt. Ltd.-Gurgaon India Facility (STPI) 47,109.96 ITS Workgroup Services I203 United States NCR Corporation (8,554.36) GNS Data Circuits I209 United States NCR Corporation 105,660.28 Global Processing-Data Servers I210 United States NCR Corporation 15,901.32 Information Security I211 United States NCR Corporation 2,784.81 ITS Help Desk India I205 India NCR Corporation India Pvt. Ltd. $503,429.49 Invoice No. 1001000004 dated 23-Jul-10 issued by Global ISA Pool and Invoice No. 1004000001 dated 15-Jul-10 issued by NCR Global Solutions Limited $4,459.81 APAC & CEE RTC (TREASURY) D701 Singapore Asia Pacific Region Office 1,740.49 HR C&B G704 United States NCR Corporation Singapore NCR Singapore Pte. Ltd. 24,658.18 HR Shared Service Centers G705 United States NCR Corporation 40,716.03; 15,195.35 HR Region/Service Centers APAC G706 China NCR Beijing Sales and Marketing Korea NCR Korea Ltd. Malaysia NCR Malaysia Sdn. Bhd. Singapore NCR Singapore Pte. Ltd. Australia NCR Australia Pty. Limited Thailand NCR Thailand Ltd. 211,895.10 ITS Applications Development & Support I201 United States NCR Corporation 44,516.74 ITS Applications Development & Support-Gurgaon I202 India NCR Corporation India Pvt. Ltd.-Gurgaon India Facility (STPI) 52,460.22 ITS Workgroup Services I203 United States NCR Corporation 3,620.46 ITS Help Desk India I205 India NCR Corporation India Pvt. Ltd. (10,526.84) GNS Data Circuits I209 United States NCR Corporation 103,050.77 Global Processing-Data Servers I210 United States NCR Corporation 21,031.25 Information Security I211 United States NCR Corporation $512,817.56 Invoice No. 1001000001 dated 28-Oct-10 issued by Global ISA Pool and Invoice No. 1004000001 dated 28-Oct-10 issued by NCR Global Solutions Limited $956.05 APAC & CEE RTC (TREASURY) D701 Singapore Asia Pacific Region Office 12,418.26; 12,621.74 2010 FSSC APAC-FIN G703 India NCR Corporation India Pvt. Ltd. Japan NCR Japan Ltd. 3,424.04 HR C&B G704 United States NCR Corporation Singapore Asia Pacific Region Office 28,942.18 HR Shared Service Center G705 United States NCR Corporation 46,222.03; 5,151.10 HR Region/Service Centers APAC G706 China NCR Beijing Sales and Marketing Korea NCR Korea Ltd. Malaysia NCR Malaysia Sdn. Bhd. Singapore NCR Singapore Pte. Ltd. Australia NCR Australia Pty. Limited Thailand NCR Thailand Ltd. 226,220.70 ITS Applications Development & Support I201 United States NCR Corporation 40,982.20 ITS Applications Development & Support-Gurgaon I202 India NCR Corporation India Pvt. Ltd.-Gurgaon India Facility (STPI) 54,175.68 ITS Workgroup Services I203 United States NCR Corporation 3,309.66 ITS Help Desk India I205 India NCR Corporation India Pvt. Ltd. (5,492.89) GNS Data Circuits I209 United States NCR Corporation 120,146.37 Global Processing-Data Servers I210 United States NCR Corporation 26,017.00 Information Security I211 United States NCR Corporation $575,094.12 Invoice Nos. 1001000001 dated 28-Oct-10 and 30-Dec-10 issued by Global ISA Pool and Invoice No. 1004000001 dated 29-Dec-10 issued by NCR Global Solutions Limited $1,479.79 APAC & CEE RTC (TREASURY) D701 Singapore Asia Pacific Region Office (7,888.52) 2010 FSSC APAC-FIN G703 India NCR Corporation India Pvt. Ltd. 7,817.07 Japan NCR Japan Ltd. 7,724.60 HR C&B G704 United States NCR Corporation Singapore Asia Pacific Region Office 28,431.69 HR Shared Service Center G705 United States NCR Corporation 62,246.30; 7,533.25 HR Region/Service Centers APAC G706 China NCR Beijing Sales and Marketing Korea NCR Korea Ltd. Malaysia NCR Malaysia Sdn. Bhd. Singapore NCR Singapore Pte. Ltd. Australia NCR Australia Pty. Limited Thailand NCR Thailand Ltd. 250,762.24 ITS Applications Development & Support I201 United States NCR Corporation 87,956.08 ITS Applications Development & Support-Gurgaon I202 India NCR Corporation India Pvt. Ltd.-Gurgaon India Facility (STPI) 50,005.18 ITS Workgroup Services I203 United States NCR Corporation 3,492.45 ITS Help Desk India I205 India NCR Corporation India Pvt. Ltd. (7,800.14) GNS Data Circuits I209 United States NCR Corporation 111,964.66 Global Processing-Data Servers I210 United States NCR Corporation 24,948.18 Information Security I211 United States NCR Corporation 23,197.39 ITS Application-ERP I212 United States NCR Corporation 15,231.85 ITS Field Operations I213 United States NCR Corporation (1,038.61) Asian Correction Part 2 CORR2 $666,063.44 $2,371,781.67 Consequently, petitioner was able to prove that the service fees in the amount of P105,220,594.79 were paid to non-resident foreign corporations not engaged in business in the Philippines for services rendered outside the Philippines. Thus, respondent's assessment subjecting petitioner to deficiency withholding tax-final and withholding tax-VAT on the Service Fees paid to NCR Group must necessarily be cancelled. caITAC Software License Fees P1,535,286.00 Similar to the Service Fees paid to NCR Group, petitioner submits that the Software License Fees, being income derived from sources outside the Philippines, should not be subject to Philippine income tax and consequently, should not be subject to final tax in the Philippines. Petitioner maintains that royalties from property located in the Philippines or from any interest in such property are considered as income from sources within the Philippines and thus, will be subject to Philippine income tax and consequently, final tax. Conversely, royalties from property located without the Philippines or from any interest in such property including royalties for the use of or for the privilege of using without the Philippines, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises and other like properties are considered as income from sources outside the Philippines, thus, should not be subject to Philippine income tax and final tax. Petitioner hinges its contentions on the provisions of the NIRC of 1997, as amended, particularly, Section 42 (A) (4) and (C) (4) 70 in relation to Section 23 (F). Petitioner claims that said software license fees relate to services rendered by the following foreign entities: (a) TechSource Systems Pte. Ltd., (b) Insight Direct USA, Inc., and (c) MKS Systems Limited. Further, these license fees were accrued or paid in consideration of the use of accounting software acquired from the said enumerated foreign entities; and that the fees arose from the lease and use of their properties outside the Philippines. Petitioner alleges that it was provided the installation package to enable the installation and implementation of the software by downloading it; that software license fees also included costs for the support services related to the software, including charges for the license maintenance and server maintenance; and that maintenance charges included the provision of software updates, periodic fixes and error corrections for the software products. 71 Moreover, petitioner asserts that the software support services were performed by said foreign entities in the countries where they were located; and that they did not send any personnel in the Philippines to provide support services to petitioner in 2010. 72 The Court is not persuaded. As earlier discussed, for petitioner not to be subjected to withholding tax, it must prove that the service providers are (1) foreign corporations not engaged in business in the Philippines, and (2) its source of income came from outside of the Philippines. However, other than the Schedule of the Software License Fees 73 and the corresponding Invoices 74 issued by Techsource Systems Pte. Ltd., Insight Direct USA, Inc., and MKS System Limited, as well as the Judicial Affidavit 75 of petitioner's Tax Accountant, Marietta B. Ticagan and the Judicial Affidavit of the Accounting Manager of the NCR APAC Group, Prabal Mitra, no other evidence was provided by petitioner to prove that the entities which rendered the services were foreign corporations not engaged in business in the Philippines and that the services were indeed performed outside the Philippines. Thus, respondent's assessment subjecting the software license fees to withholding tax must be upheld. Accordingly, petitioner is liable to pay the basic deficiency withholding tax-final and withholding tax-VAT in the amounts of P460,585.80 and P184,234.32, respectively, as determined below: Withholding Tax-Final Withholding Tax-VAT Software License Fees P1,535,286.00 P1,535,286.00 x Rate 30% 12% Basic Tax Due P460,585.80 P184,234.32 Others-Miscellaneous Taxes P100,000.00 Respondent imposed compromise penalty amounting to P100,000.00 against petitioner for its failure to file the returns/attachments required by law or regulation, pursuant to Section 255 of the NIRC of 1997, as amended, as determined using the schedule of suggested compromise penalties prescribed under RMO No. 19-2007, detailed as follows: ICHDca Nature of Violation Amount Violated Provision Amount of suggested compromise penalty No registration of VAT type P25,000.00 Sec. 236 (G) NIRC P25,000.00 Non-filing of VAT Returns 25,000.00 Sec. 114 NIRC 25,000.00 Non-submission of Summary Listings-Sales/Purchases P50,000.00 RR 16-2005 Sec. 4.114-3(1) 50,000.00 Total Penalties P100,000.00 Such imposition cannot be sustained. Per RMO No. 01-90, compromise penalties are only amounts suggested in settlement of criminal liability, and may not be imposed or exacted on the taxpayer in the event that a taxpayer refuses to pay the same. It is well-settled that the Court cannot compel a taxpayer to pay the compromise penalty because by its very nature, it implies a mutual agreement between the parties in respect to the thing or subject matter that is so compromised, and the choice of paying or not paying it distinctly belongs to the taxpayer. 76 Absent a showing that herein petitioner consented to the compromise penalty, its imposition should be deleted. The imposition of the compromise penalty without the taxpayer's conformity is illegal and unauthorized. 77 Since there is nothing in the records which shows that petitioner agreed to pay the compromise penalty, the amount of suggested compromise penalties of P100,000.00 cannot be sustained. WHEREFORE , premises considered, the instant Petition for Review is PARTIALLY GRANTED . Accordingly, the assessment for miscellaneous taxes (compromise penalty) is CANCELLED and SET ASIDE . On the other hand, the deficiency withholding tax-final and withholding tax-VAT are AFFIRMED but with MODIFICATION . Accordingly, petitioner is ORDERED TO PAY respondent the amount of P2,280,882.09 , representing basic deficiency withholding tax-final and withholding tax-VAT and the twenty-five percent (25%) surcharge, twenty percent (20%) deficiency interest and 20% delinquency interest imposed on the deficiency withholding tax-final and withholding tax-VAT under Sections 248 (A) (3) and 249 (B) and (C) of the NIRC of 1997, as amended, respectively, computed until December 31, 2017, as determined below: FWT FVAT TOTAL Basic P460,585.80 P184,234.32 P644,820.12 Surcharge (25%) 115,146.45 46,058.58 161,205.03 Deficiency Interest (20%) until January 7, 2016 78 FWT-1/11/2011 to 1/7/2016 (P460,585.80 x 20% x 1,822 days/365 days) 459,828.67 459,828.67 FWVAT-1/10/2011 to 1/7/2016 (P184,234.32 x 20% x 1,823 days/365 days) 184,032.42 184,032.42 Total Amount Due, January 7, 2016 P1,035,560.92 P414,325.32 P1,449,886.24 20% Deficiency Interest from January 8, 2016 until December 31, 2017 FWT-1/8/2016 to 12/31/2016 (P460,585.80 x 20% x 724 days/365 days) 182,720.07 182,720.07 FWVAT-1/8/2016 to 12/31/2016 (P184,234.32 x 20% x 724 days/365 days) 73,088.03 73,088.03 20% Delinquency Interest from January 8, 2016 until December 31, 2017 FWT-1/8/2016 to 12/31/2017 (P1,035,560.92 x 20% x 724 days/365 days) 410,819.79 410,819.79 FWVAT-1/8/2016 to 12/31/2017 (P414,325.32 x 20% x 724 days/365 days) 164,367.96 164,367.96 Total P1,629,100.78 P651,781.31 P2,280,882.09 In addition, petitioner is ORDERED TO PAY delinquency interest at the rate of twelve percent (12%) on the total amount due of P1,449,886.24 as of January 7, 2016, as determined above, computed from January 1, 2018 until full payment thereof, pursuant to Section 249 (C) of the NIRC of 1997, as amended by Republic Act No. 10963, also known as Tax Reform for Acceleration and Inclusion (TRAIN) and as implemented by Revenue Regulations No. 21-2018. SO ORDERED. TCAScE (SGD.) ESPERANZA R. FABON-VICTORINO Associate Justice Ma. Belen M. Ringpis-Liban, J. , concurs. Footnotes 1. Docket, Vol. 1, pp. 10-34. 2. Exhibit "R-15", BIR Records, pp. 881-882. 3. Exhibit "P-2", Docket, Vol. 9, p. 4130. 4. Exhibit "P-14", Docket, Vol. 10, p. 4554. 5. Exhibit "P-2", Docket, Vol. 9, p. 4119. 6. Exhibit "R-1", BIR Records, p. 223. 7. Exhibit "R-5", BIR Records, p. 299. 8. Par. 4, Joint Stipulation of Facts and Issues (JSFI), Docket, Vol. 6, p. 2683. 9. Exhibit "R-8", BIR Records, pp. 380-387. 10. Par. 5, JSFI, Docket, Vol. 6, p. 2683. 11. Par. 6, JSFI, Docket, Vol. 6, p. 2683. 12. Exhibits "R-10" and "R-11" and sub-markings, BIR Records, pp. 403-410 and 396-402, respectively. 13. Par. 7, JSFI, Docket, Vol. 6, p. 2683. 14. Par. 8, JSFI, Docket, Vol. 6, p. 2684. 15. Exhibit "R-13", BIR Records, pp. 688-700. 16. Par. 9, JSFI, Docket, Vol. 6, p. 2684. 17. Par. 11, JSFI, Docket, Vol. 6, p. 2684. 18. Par. 10, JSFI, Docket, Vol. 6, p. 2684. 19. Par. 12, JSFI, Docket, Vol. 6, p. 2684. 20. Par. 13, JSFI, Docket, Vol. 6, p. 2685. 21. Par. 14, JSFI, Docket, Vol. 6, p. 2685. 22. Docket, Vol. 1, pp. 386-403. 23. Docket, Vol. 1, pp. 416-425. 24. Docket, Vol. 6, pp. 2713-2722. 25. Docket, Vol. 6, pp. 2682-2696. 26. Minutes of the hearing dated January 17, 2017, Docket, Vol. 6, p. 2966. 27. Minutes of the hearing dated April 3, 2017, Docket, Vol. 7, p. 3453. 28. Docket, Vol. 6, pp. 2882-2886 and Exhibits "P-16" to "P-16-d", Docket, Vols. 7 and 8, pp. 3459-3480 and 3552-3570. 29. Docket, Vol. 6, pp. 2882-2886 and Exhibits "P-21" to "P-21-d", Docket, Vol. 8, pp. 3956-3971. 30. Docket, Vol. 6, pp. 2882-2886 and Exhibits "P-20" to "P-20-d", Docket, Vols. 7 and 8, pp. 3481-3508. 31. Judicial Affidavit dated July 14, 2016, Docket Vol. 4, pp. 1890-1907. 32. Judicial Affidavit dated March 27, 2017, Docket Vol. 7, pp. 3431-3441. 33. Judicial Affidavit dated July 14, 2016, Docket Vol. 8, pp. 3552-3570. 34. Without cross-interrogatories from respondent. 35. Judicial Affidavit dated July 14, 2016, Docket Vol. 8, pp. 3501-3508. 36. Without cross-interrogatories from respondent. 37. Judicial Affidavit dated July 27, 2016, Docket Vol. 6, pp. 2730-2736. 38. Docket, Vol. 9, pp. 4101-4112. 39. Docket, Vol. 10, pp. 4568-4569. 40. Docket, Vol. 10, pp. 4610-4614. 41. Minutes of the hearing dated December 4, 2017, Docket, Vol. 10, p. 4600; Judicial Affidavit dated July 12, 2016, Docket, Vol. 1, pp. 431-441. 42. Docket, Vol. 10, pp. 4625-4626. 43. Docket, Vol. 10, pp. 4602-4609. 44. Resolution dated April 6, 2018, Docket, Vol. 10, p. 4671. 45. JSFI, Docket, Vol. 6, p. 2685. 46. Commissioner of Internal Revenue vs. First Express Pawnshop , G.R. Nos. 172045-46, June 16, 2009. 47. Fishwealth Canning Corporation vs. Commissioner of Internal Revenue , G.R. No. 179343, January 21, 2010. 48. February 6 and 7 fell on a Saturday and Sunday and February 8, 2016 was declared a special non-working day (Chinese New Year), Proclamation No. 1105, August 20, 2015. 49. Par. 9, JSFI, Docket, Vol. 6, p. 2684; BIR Records, pp. 688-700. 50. Page 2 of the Request for Reconsideration, Annex A of the Petition for Review, Docket, Vol. 1, p. 202; Par. 10, JSFI, Docket, Vol. 6, p. 2684. 51. Docket, Vol. 10, pp. 4647-4648. 52. Exhibit "R-15", BIR Records, p. 881. 53. SEC. 22. Definitions . When used in this Title: xxx xxx xxx (I) The term 'nonresident foreign corporation' applies to a foreign corporation not engaged in trade or business within the Philippines. 54. SEC. 23. General Principles of Income Taxation in the Philippines . Except when otherwise provided in this Code: xxx xxx xxx (F) A foreign corporation, whether engaged or not in trade or business in the Philippines, is taxable only on income derived from sources within the Philippines. 55. SEC. 42. Income from Sources within the Philippines . (A) Gross Income from Sources within the Philippines . The following items of gross income shall be treated as gross income from sources within the Philippines: xxx xxx xxx (3) Services . Compensation for labor or personal services performed in the Philippines; xxx xxx xxx (C) Gross Income from Sources without the Philippines . The following items of gross income shall be treated as income from sources without the Philippines: xxx xxx xxx (3) Compensation for labor or personal services performed without the Philippines; x x x 56. Exhibit "P-19", Judicial Affidavit of Marietta B. Ticagan, Q32 & A32, Docket, Vol. 4, pp. 1898-1899; Exhibit "P-16-d", Judicial Affidavit of Mr. Prabal Mitra, Q32 and A32, Docket, Vol. 8, p. 3560. 57. Deutsche Bank AG Manila Branch vs. Commissioner of Internal Revenue , G.R. No. 188550, August 19, 2013. 58. CBK Power Company Limited vs. Commissioner of Internal Revenue , G.R. Nos. 193383-84 and 193407-08, January 14, 2015. 59. Visayas Geothermal Power Company vs. Commissioner of Internal Revenue , CTA Case No. 8425, November 17, 2014, as affirmed in CTA EB No. 1291, September 21, 2016. 60. Deutsche Knowledge Services Pte. Ltd. vs. Commissioner of Internal Revenue , CTA Case No. 9079, January 9, 2018; Deutsche Knowledge Services Pte. Ltd. vs. Commissioner of Internal Revenue , CTA Case No. 8065, September 20, 2017; Deutsche Knowledge Services Pte. Ltd. vs. Commissioner of Internal Revenue , CTA Case Nos. 8623, 8656, 8661 & 8685, August 4, 2017; Emerson Electric (Asia) Limited-ROHQ vs. Commissioner of Internal Revenue , CTA Case No. 8657, December 21, 2016; and Procter & Gamble Asia, Pte. Ltd. vs. Commissioner of Internal Revenue , CTA Case No. 7820, June 22, 2016. 61. Exhibit "P-19", Judicial Affidavit of Marietta B. Ticagan, Q25 & A25, Docket, Vol. 4, pp. 1897-1898; Exhibit "P-16-d", Judicial Affidavit of Mr. Prabal Mitra, Q25 and A25, Docket, Vol. 8, p. 3559. 62. Exhibits "P-3" to "P-3-I". 63. Exhibits "P-4" to "P-4-I". 64. Exhibit "P-3-a". 65. Commissioner of Internal Revenue vs. Juliane Baier-Nickel, as represented by Marina Q. De Guzman (Attorney-in-fact) , G.R. No. 153793, August 29, 2006. 66. Exhibit "P-5", Docket, Vol. 9, pp. 4265-4270. 67. Exhibits "P-6" to "P-6-I", Docket, Vol. 9, pp. 4271-4494. 68. Exhibit "P-7", Docket, Vol. 9, pp. 4495-4496. 69. Exhibit "P-8", Docket, Vol. 9, pp. 4497-4500, Vol. 10, pp. 4501-4513. 70. SEC. 42. Income from Sources within the Philippines. (A) Gross Income from Sources within the Philippines . The following items of gross income shall be treated as gross income from sources within the Philippines: xxx xxx xxx (4) Rentals and Royalties . Rentals and royalties from property located in the Philippines or from any interest in such property, including rentals or royalties for (C) Gross Income from Sources without the Philippines . The following items of gross income shall be treated as income from sources without the Philippines. xxx xxx xxx (4) Rentals or royalties from property located without the Philippines or from any interest in such property including rentals or royalties for the use of or for the privilege of using without the Philippines, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises and other like properties; and x x x 71. Exhibit "P-16-d", Judicial Affidavit of Mr. Prabal Mitra, Q57 and A57, Docket, Vol. 8, p. 3564. 72. Exhibit "P-16-d", Judicial Affidavit of Mr. Prabal Mitra, Q58 and A58, Docket, Vol. 8, p. 3565. 73. Exhibit "P-9". 74. Exhibit "P-10". 75. Exhibit "P-19", Docket, Vol. 4, pp. 1890-1906, particularly, Answers to Q50 to Q52. 76. The Philippines International Fair, Inc. vs. The Collector of Internal Revenue, et al. , G.R. Nos. L-12928 and L-12932, March 31, 1962. 77. Commissioner of Internal Revenue vs. Lianga Bay Logging Co., Inc., et al. , G.R. No. L-35266, January 21, 1991. 78. Due date of payment per Final Decision, Exhibit "R-15".