REPUBLICOF THE PHILIPPINES COURT OF TAX APPEALS QUEZONCITY SECONDDIVISION MEDTEX CORPORATION Petitioner, CTACASE NO.8508 -versus-Members: CASTANEDA,JR.,Chairperson CASANOVA,and COTANGCO-MANALASTAS, JJ. COMMISSIONER OFPromulgated: INTERNALREVENUE,SEP012014 Respondent./ r7, .,.. X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - X DECISION STATEMENT OF THE CASE ThisPetitionforReviewfiledbyMedtexCorporation seekstoreverseandsetasidetheFinalDecisiononDisputed Assessment(FDDA)findingMedtexCorporationEablefor deficiencytaxesandcompromisepenaltiesintheaggregate amount of P548, 149.00 forcalendar year 2006. STATEMENT OF FACTS PetitionerMedtexCorporationisacorporationduly organizedandexistingunderandbyvirtueof thelawsof the Phjlippines1 withprincipalofficeat 7 thStreet,Phase IT,Bataan Processing Zone,Marivcles,Bataan.2 Its primary purpose isto engagein,operate,conductandmaintainthebusinessof developing,manufacturing,importing,exporting,buying, sellingorotherwisedealingin,atwholesale,suchgoodsas { 1 Exhibits "I","J","K",docket ,pp.14401449. 2Petition forReview,docket ,p.10. DECISION CTACaseNo.8508 Page 2of 38 textile,heavyfabricwovenand knitted fabrics ,othermade-up articlesoftextile,medicalandhealihcaresupplies,devices, equipmentandrelatedproductsandgoodsofsimilarnature andanyandalltechnology,equipment,materials,supplies usedoremployedinorrelatedtothemanufactureofsuch finishedproducts. 3 Ontheother hand,respondent Commissioner of Interna l Revenueistheheadof theBureauof InternalRevenue(BIR) , thegovernmentagencychargedwi thimplementingthe NationalInternalRevenueCode(NIRC)andcollectingall internalrevenuetaxes.SheholdsofficeattheBIRNational OfficeBuilding,BIR Road,Diliman,Quezon City. On March1,2007,petitionerfiledits Annual Information ReturnofCreditabl eIncomeTaxesWithheld (Expanded)/IncomePaymentsExemptfromWithholdingTax (BIRFor mNo.1604 -E) .4 OnAugust18,2011 ,respondentissuedagainst petitionerthePreliminaryAssessmentNotice(PAN)wit h DetailsofDiscrepancies,swhichpetitionerreceivedon September9 ,20 11 ,assessingthelatterfordeficiencyincome tax,expandedwithholding t ax (EWT)andfinalwi t hholding tax (FWT)withcompromise pena liiesforcalendar year 2006,viz: Net income per returnP32,081,141.00 Add:Undeclared Incomeper , Audit755,779.23 Deductions not allowed3,682,008. 7'1'1,'137,787.97 under RJ\No.7916 Net Incomeper a u dit36,518,928.97 Tax Due1,825,946.45 Less:Tax paid1,604,057.05 Balance of Tax Due221,889.40 Interest207,244.70 TotalDeficiency Income Tax429,134.10 Deficiency Expanded Withholding Taxes IncomePaymentsAmountTax Due Professional fees73,333.327,333.33 Rental16,500.00825.00 Repairs11,635.00232.70 Freight I handling2,340,561.9447,811.24 Total DeficiencyExpanded55,202.27 Withholding Tax Less:Remittances54,797.27 3Exhibit "J",docket,p.lt1t12. 4 Exhibit "AA'',docket,p.2032. sExhibit"A",docket,p.37;Par.l(b),JointStipulationofFactsandIssues(JSFI), docket,p.737. DECISION CTACaseNo.8508 Page3of 38 Deficiency Withholding Tax Add:Interest Total Deficiency Expanded Withholding Tax Deficiency Final Withholding Tax Dividends paid FilipinoStockholders 60% Chinese /Taiwanese Stockholders 40% Final tax Due Add:Surcharge Interest Total Deficiency Final Withholdingtax Subtotal CompromisePenalties For failuretoPayn1corne For failureto remit/pay -EWT For failuretoremit/ pay-Final Tax TOTAL AMOUNTPAYABLE 405.00 398.52 803.52803.52 145,000,000.00 87,000,000.008,700,000.00 58,000,000.0011,600,000.00 20,300,000.00 5,075,000.00 P19,975,200.0025,050,200.00 15,350,200.0015,350,200.00 45,780,137.62 25,000.00 2,000.00 p 52,000.00 25,000.00 P45,832, 137.62 Petitioner filedwith respondent itsProtest Letter6 against thesaidPreliminaryAssessmentNoticeonSeptember23, 2011.7 OnFebruary22,2012,respondentissuedarevised PreliminaryAssessmentNoticewithDetailsofDiscrepancies afterareinvestigation, 8whichpetitionerreceivedonMarch9, 2012.Petitionerwasassessed[orthefollowingdeficiency 1ncometax,withholdingtaxandpenaltiesforcalendaryear 2006: Deficiency Income Tax Net Incomeper returnP32,081,1111.00 Add:UndeclaredIncomeper Audit p 755,779.23 Deductions not allowedunder R.ANo.3,682,008.744,437,787.97 7916 Net Incomeper audit36,518,928.97 Tax Due1,825,916.45 Less:Tax paid1,601,057.05 Balance of Tax Due221,889.40 Interest2111,193.09 Total Deficiency Income Tax136,382.18 Deficiency Expanded Withholding Taxes Income PaymentsTax BaseTax Due Professionalfees( 1 0%)73,333.327 ,333.33 Rental16,500.00825.00 Repairs11,635.00232.70 6Exhibit "B",docket,p.11 11. 7 Par.I(c)of JSFI,docket,p.737. 8Exhi bit "C",docket,p.46;Par.I(d),JSFI,docket,pp.737 -738. DECISION CTACaseNo.8508 Page4of 38 Freight I handling TotalDeficiency Expanded Withholding Tax Less:Remittances DeficiencyWithholding Tax Add:Interest Total DeficiencyExpanded Withholding Tax DeficiencyFinal Withholding Tax Dividendspaid toIndividual Final tax Dueon Dividends Less:Remittances DeficiencyFinal Withholding Tax Add:Surcharge Interest TotalDefici encyPinal Withholding tax Compromise Penalties Por failuretoPay- income For failuretoremit/pay - EWT For failuretoremit / pay - Final Tax TOTAL AMOUNTPAYABLE 2,340,561.9446,811.24 2,442,030.2655,202.27 54,797.27 405.00 405.00 810 276,805.00 27,680.50 0 27,680.50 6,920.13 34,831,30 69,431.92 p 25,000.00 2,000.00 6 ,000.0033,000.00 p 539,624.41 Consequently,petitioner submittedaLetter onMarch 23, 2012toprotesttherevisedPANdatedFebruary22,2012. 9 However,onthesameday,respondentissuedtheFormal LetterofDemandwithDetailsofDiscrepanciesandAudit Results/ AssessmentNotices10,assessingpetitionerfor deficiencytaxes inthetotalamount of P548, 194.3211,detailed as follows: Deficiency Income Tax Net Incomeper return Add:UndeclaredIncome per Audit Deductions not allowedunder RANo.7916 Net Incomeper audit Tax Due Less:Tax paid Balance of Tax Due Interest (April16,2007 to April16,201 2) Total DeficiencyIncome Tax Deficiency ExpandedWithholding Taxes IncomePayments Professional fees(10%) Rental Repairs Freight I handling Total Deficiency Expanded Withholding Tax Less:Remitta nces Deficiency Withholding Tax Add:Interest(Janua ry2 1,2007toApril20, 2012) Total DeficiencyExpandedWithholding Tax 9Exhibit "D",docket ,p.liJ20. 10Exhibit "E",docket ,p.55. 11Par.I(f) ,JSFI ,docket,p.738. P32,081,141.00 p 755,779. 23 3,682,008. 714,437,787.97 36,518,928.97 1,825,946.15 1,604 ,057.05 221,889.40 221,889 .IJ.O 443,778.80 Tax BaseTax Due 73,333.327,333.33 16,500.00825.00 11,635.00232.70 2,310,561.9416,811.24 2,11 2,030.2655,202.27 54,797.27 405.00 125.25 830.25 DECISION CTACaseNo.8508 Page5of 38 DeficiencyFinal Withholding Tax Dividends paid toIndividu al276,805.00 Final tax Du eonDividends27,680.50 Less:Remittances0 Deficiency Final Withholding Tax27,680.50 Add:Su rcharge6,920.13 Interest (Oct.11,2005to Apr.11,20 12)35,984.65 TotalDeficiencyFinal Withholding tax70,585.28 ComiJromisePenalties For failuretoPay- income p 25,000.00 For failuretoremit / pay- EWT2,000 .00 For failuretoremit / pay- Final tax6,000.0033,000.00 TOTAL AMOUNTPAYABLE p 548,191.32 OnApril24,201 2 ,respondentthroughherRegional DirectorissuedaLetter12denyingpetitioner'srequestfor cancellationof theassessment.13 Shelikewisestated thatt h e issuescontained inpetitioner'sprotestletterdatedMarch23 , 2012werealsointhe protest letter datedSeptember 22,2011 , which was the basis forthe r e-investiga tion. On May 3 ,20 12,petitioner protested the Formal Letter of DemandthroughaLetter datedMay2,2 01 2.14 RespondentissuedherFinalDecisiononDisputed AssessmentonMay17,201 2,15denyingpetitioner'sProt est LetterdatedMay2 ,2012.TheFDDAwasreceivedby petitioner on May29,2012. 16 Consequently,petitionerfiledtheinstantPetitionfor Reviewon tJunc27,201217. Respondentfil edaMotionforLeavetoFileandAdmit AttachedAnswer18onSeptember11 ,201 2 .Ontheot her hand,petitionersubmitteditsMotiontoDeclareRespondent inDefault19onSeptember1.3,201 2 .IntheResolut iondated September19,2012,theCourtgrantedrespondent'smotion anddeniedpetitioner'smotion .20 Asaresult,respondent's Answer was admitted./;-12Exhibit "F",docket,1432. 13Par.I(g),JSFI,docket,p.738. 14BIR Records,p.591. 1sExhibit "H",docket,p.69. 16Exhibit "BB",page8,docket,p.2031J . 17 Docket,p.6. 18Docket,pp.676-690. 19Docket,pp.691 692. 2oDocket,p.694. DECISION CTACaseNo.8508 Page6of 38 IntheAnswcr21,respondentinterposedthefollowing special andaffirmative defenses: "Respondentincorporatesandrepleadsallthe foregoingavermentsandinfurthersupportofthe SpecificDenialshereinsetforth,respondentCIR respectfully allegesas her defense that: 5.ThePetitionforReviewfiledbypetitioner deservesscant consideration.Petitionerisliableto paydeficiencytaxesfortaxableyear2006 comprisingofIncomeTax,ExpandedWithholding Tax,andFinalWithholdingTax,plusCompromise Penalties,broken downas follows: Income TaxP443,778.80 ~ x p n d e d Withholding Tax1'830.25 Final Withholding TaxP70,585.28 Compromise PenaltiesP33,000.00 TotalP548, 194. 32 6.Tobesure,petitioner'staxliabilitieswere properly and legallyassessed.Pursuant toLetter of AuthorityNo.00074164dated14August2007, petitioner'sinternalrevenuetaxliabilitieswere investigatedbyRevenueOfficerFlorentinoR. Rubiano. 7.Duringinvestigation,petitionerwas requestedtoproducecertaindocumentsneeded1n the audit examination of its books of accounts. 8.Uponsubmissionofthepreliminaryreport ofinvestigationbyRORubiano,petitionerthrough itsrepresentativewasinvitedforaninformal conferencetoinformitoftheresultofthe investigation and to giveit achance topresent other evidencetosupport itsprotest against theproposed assessment.It should be emphasized that petitioner throughitsrepresentativewasinvitedtwiceforan informal hearing tosupport its protest.J-2 1Docket, pp.682-690. DECISION CTACaseNo.8508 Page7of 38 9.Itbearsstressingthatpetitionerwasgiven considerablelengthof timetopresentdocumentary evidencetosupportitsprotest.Hence,itcould neverbearguedthatpetitionerwasdenieddue process. 10.Further,petitionerfailedtodisputethe finalwithholdingtaxassessmentagainstitfor failuretopresentdocumentaryevidencethatwill support its protest. J 1.APreliminaryAssessmentNoticedated August18,2011wasissuedagainstpetitioner.A letter-protest datedSeptember 23,201 1wasfiledby petitioner throughitsDirector withtheOfficeof the RegionalDirector,RevenueRegion4,Pampanga, received by the latter on even date,and forwardedto theRevenueDistrictOfficer,RevenueDistrictOffice No.20,Balanga, Bataan, forreconsideration. 12.OnNovember28,2011,adiscussionwas madewiththerepresentativesofthecorporation: Mr.\Jerry Urdabc and Mr.Wilson Pastclero, Tax and AccountingManagerandAsst.AccountingHead, respectively. 13.Itmustberecalledthatduringsaid discussion,thesubjecttaxdeficiencieswere explainedtotherepresentativesofthepetitioner and they agreedtopay the same. 14.Contrariwise,respondentconsideredthe documentaryevidencepresentedbypetitioner's representative,however,petitionershouldnotand cannotdictatethatrespondenthonorthesameif it wasfoundinsufficienttosupportpetitioner's protest. 15.Toexemplify,perreportof RevenueOfficer SonnyApoloniodated16December2011, petitioner'srepresentativeshavesubmittedthe followingdocumentstocounterthefindingsfor protest ontheir Final Withholding Tax liability:{--DECISION CTA CaseNo.8508 Page8of 38 a.Minutes and Secretary's Certificate b.General InformationSheet c.ArticlesofIncorporation-Medtecs Ltd. d.Computation of Deficiency Taxes 16.Asreported,uponverificationofthe MinutesoftheBoardofDirectorsandofthe Secretary'sCertificate,itwasrevealedthatnotall dividendswerepaidtocorporationsbutincludes individualstockholders.Hence,theassessmentof l.Oo/oFinal Withholding Tax. 17.Asaresultofreinvestigation,thetax liabilitiesofpetitionerwasreducedfrom P45,832, 137.62toP539,624.41,thus,theissuance of aPreliminaryAssessmentNoticedatedFebruary 22,2012. 18.It must be stressedthat the protest filedby petitioner(withregardtheRevisedPan)isamere rehasho[ itsformerprotest,andwhichhasalready beensettledevenintheinformalconferencestage. Toreiterate,petitioner[ailedtofiledocumentary evidencethat willsupport itsprotest whenthecase wasreferredbacktotheexaminerfor reinvestigation.Infact,thedocumentsitpresented evenrevealedthatitisfurtherliable[orFinal Withholding Tax,as the dividendspaid toindividual stockholdersshouldbetaxedat1 0/oFinal Withholding Tax: STOCKIIOLDF.:RAmountAmount Paid Subscribed MedtecsInternationalCorp.17,047,000.0017,047,000.00 Limited Chu Wen-Fu19,900.0019,900.00 Marinette B.Avera7,500.007,500.00 Wang Wan-Fa3,000.003,000.00 Richard Fook Hing Sze600.00600.00 WilfridoC.Rodriguez1,000.001,000.00 Huang Hung400.00400.00 Clement Yang100.00100.00 Paul Winston Poe100.00100.00 DECISION CTACase No.8508 Page9of 38 19.Hence,the issuance of theFormal Letter of Demandfortaxdeficienciesinthe amountofP548, 194.32representing IncomeTax,ExpandedWithholdingTax, Withholding Tax. aggregate deficiency andFinal 20.Respondenthasdisallowedthefollowing expensesintheamountofP3,682,008.74,for simplereasonthattheseexpensesarcnotallowed deductionsunderPEZALaw.InSanPablo ManufacturingCorporationvs.Commissionerof InternalRevenue,GRNo.147749,June22, 2006: 'Wherethelawenumeratesthe subjectorconditionuponwhichit applies,it istobeconstrued as excluding fromitseffectsallthosenotexpressly mentioned.Expressiouniusestexclusio alterius.Anythingthat isnot included in theenumerationisexcludedtherefrom andameaningthatdoesnotappearnor isintendedorreflectedinthevery languageofthestatutecannotbeplace therein.Theruleproceedsfromthe premisethatthelegislaturewouldnot havemadespecificen umcrationsina statuteifithadtheintentionnotto restrict itsmeaning and confineitsterms tothose expressly mentioned. Theruleofexpressiouniusest exclusioalteriusisacanonofrestrictive interpretation. ' 21.Further,thestrengthofBTRRulingmay only beused by thespecificrcqucstccof theRuling. Asthefactsrepresentedthereinmay onlybetrue to the case subject of the Ruling. 22.Tobesure,Assessmentsareprimafacie correctandmadeingoodfaith.Itisthe taxpayer and not theBureauof InternalRevenue whohasthedutyof provingotherwise.Itisan elementaryrulethatintheabsenceof proof of{-DECISION CTACaseNo.8508 Page10 of38 anyirregularitiesintheperformanceof official duties,anassessmentwillnotbedisturbed.All presumptionsareinfavoroftaxassessments. Verily,failuretopresentproofoferrorinthe assessmentwilljustifyjudicialaffirmanceof said assessment. 23.It isafal lacytoarguethat the Assessment N oticcsarcvoidforhavingnobasesinfactandin law.Petitionermusthaveforgottenthefactthat severalinformalconferenceswerecalledtodiscuss itstaxdeficiencies.Further,theDetailsof DiscrepanciesattachedtotheAssessmentNotices clearlyinformedpetitionerofthelawandfactson which the assessment was based. 24.Vcrily,petitionerhasbeeninformedof the basisofitstaxliabilities.Theassessmentissued against it is valid and based on factsand law. 25.Petitionercannotandshouldnotcry violationofdueprocesswhenitwasgivenseveral opportunitiestopresent documentaryevidence,has beeninvitedforinformalconferences,anditstax liabilities were rcinvcstigatcd. 26.Rudimentary,theessenceof dueprocess issimplytobeheard,orasappliedto administrativeproceedings,anopportunityto explainone'sside,oranopportunitytoseeka reconsiderationoftheactionorruling complained of. 27.Fromtheforegoing,onecanhardly decipherwhenpetitionerhasbeendenieddue process. 28.Alltold,there isdueand demandable from petitionertheaggregateamountofFiveHundred FortyEightThousandOneHundredNinetyFour Pesosand32/ 100(?548, 194.32)fordeficiency IncomeTax,ExpandedWithholdingTax,Final Withholding Tax,andCompromise Penalties. "DECISION CTACaseNo.8508 Page11of 38 Respondent 'sPre-TrialBrief22 wassubmittedonOctober 19,2012;whilethePre-TrialBrief(ForPetitioner)23wasfiled on October17,2012. OnDecember6 ,2012,thepartiesfiledtheirJoint StipulationofFactsandIssues24.Subsequently,theCourt terminatedthepre-trialandissuedthePre-TrialOrderon December12,201 2. 25 Duringtrial ,bothpartiespresentedandformall yoffered theirrespectivedocumentaryevidence.Petitionerpresented WilsonPasteleroandresponden tpresentedSonnyApolon ioas their witnesses. Theinstantcasewassubmittedfordecisionon September2 ,2013,26consideringpetitioner'sMemorandum27 filedonJuly24,2 013andrespondent 'sMemor andum2s submittedthrough register edmailon August23,2013,which the Court received on August 29,2013. STATEMENT OF ISSUES Thepartiesinterposedthefollowingissues29forthis Court'sresolution: "A.WHETHERTHEDEFICIENCYTAXES ASSESSMENT AGAINST THE PETITIONERSHOULD BECANCELLEDANDWITHDRAWNFORFAILURE OFRESPONDENTTOCOMPLYWITHTHEDUE PROCESSREQUIREMENTSUNDERTHE NATIONALINTERNALREVENUECODEAND REVENUEREGULATIONNO.12-99; B.WHETHERPETITIONERISLIABLEFOR THEAMOUNTOFP548 , 194. 32REPRESENTING DEFICIENCYTAXESFOR2006COMPRISINGOF{-22Docket,pp.697-700. 23Docket,pp.702-711. 24Docket,pp.737-739. 2sDocket,pp.1381to1386. 26 Resolution dated September 2,2013,docket,p.2160. 27Docket,pp.2106- 2 132. 2sDocket,pp.21392146. 29Docket,p .738. DECISION CTACaseNo.8508 Page12of38 INCOMETAX,EXPANDEDWITHHOLDINGTAX, ANDFINALWITHHOLDINGTAX,PLUS COMPROMISE PENALTIES." RULINGOF THE COURT TheCourt willaddressfirstthetimelinessof thefilingof the instant Petition forReview. Section 228 of the National Internal RevenueCode(NIRC) of 1.997provides: "SEC.228.Protesting Assessment.- Whenthe Commissioner or hisduly authorizedrepresentative findsthai proper taxes shouldbe assessed,he shall firstnotifythetaxpayerofhisfindings:Provided, however,Thataprcassessmentnoticeshallnotbe required in the followingcases: XXXXXXXXX Thetaxpayersshallbeinformedinwritingof thelawandthefactsonwhichtheassessmentis made;otherwise,the assessment shallbe void. Withinaperiodtobeprescribedby implementingrulesandregulations,thetaxpayer shallberequiredtorespondtosaidnotice.If the taxpayerfailstorespond,theCommissionerorhis dulyauthorizedrepresentativeshallJssuean assessment based on his findings . Suchassessmentmaybeprotested administrativelybyfilingarequestfor reconsiderationorreinvestigationwithinthirty(30) daysfromreceiptoftheassessmentinsuchform and mannerasmay beprescribedby implementing rulesandregulations.Withinsixty(60)daysfrom filingoftheprotest,allrelevantsupporting documentsshallhavebeensubmitted;otherwise, the assessment shall become final.{--DECISION CTACa seNo.8508 Page13of 38 If theprotestisdeniedinwholeorinpart,or isnotacteduponwithinonehundredeighty(180) daysfromsubmissionofdocuments,thetaxpayer adverselyaffectedbythedecisionorinactionmay appeal totheCourt of Tax Appeals within thirty (30) daysfromreceiptof thesaiddecision,orfromthe lapseoftheonehundredeighty(180)-dayperiod; otherwise,thedecisionshallbecomefinal, executory and demandable." RespondentissuedtheFDDAonMay17,2012,which petitionerreceivedonMay29,2012. 3Assuch,petitioner had until ~ u n e 28,2012,withinwhichtoappealrespondent's decision. OnJune27,2012,petitionerfiledthisPetitionfor Review;thus,it is seasonably filed. Petitionercontendsthatthedeficiencytaxassessment wasvoidforfailureofrespondenttoobservedueprocessin theissuanceofthesaidassessment.TheFormalLetterof DemandwasissuedonMarch23,2013,whichwasthesame daypetitionersubmitteditsprotestletteragainsttherevised PreliminaryAssessmentNotice.Petitionerallegesthatitwas deprived of its right to respond to the PAN. Respondentinsiststhat petitioner wasnotdeniedof due process.Respondentpointsoutthaishereconsidered petitioner'sProtestLetterfiledonSeptember23,2011that resultedintheissuanceofrevisedPreliminaryAssessment Notice,reducingthedeficiencytaxassessmentfrom P45,832,137.62 to P539,624.41. TheCourt findsthat the assessment is valid. The1987ConstitutionofthePhilippinesexpressly providesthatnopersonshallbedeprivedoflife,libert-y,or propertywithoutdueprocessof law,norshallanypersonbe deniedtheequalprotectionofthelaws. 31 Inthecaseof Commissionerof InternalRevenueus.SteelasiaManufacturing Corporation32,the Court of Tax Appeals En Bane held:{-3oExhibit "H" 31 Section1, ArticleIII ,1987Philippines Constitu tion. 32CTA EBNos.63 1 and 632,December 22,20 11. DECISION CTA CaseNo.8508 Page14 of 38 "(S)ufficeittosaythatdueprocessinour jurisdictionreferstotherightof thetaxpayertobe informedof thelegalandfactualfindingsof theBIR asregardsitsdeficiencytaxes,andtheopportunity tobe heard through protest. Notethatapreliminaryassessmentnotice preparatorytotheissuanceofaformalorfinal assessmentnoticeisnot,legallyspeaking,an assessment evenif itcontainsacomputationof the taxliabilitiesofataxpayerandademandfor payment of the computed tax liabilities was made in such preliminary assessment notice.Section 228of theNIRCof1997clearlyreferstotheFinal AssessmentNoticethaishouldbeformally protestedtobySAMC;else,thesamebecomesfinal and executory." TheCTAEn Bane has likewisepronounced that aprotest againstthePAN,unliketheprotestagainsttheFAN,isnot indispensable.Apreliminaryassessmentnoticemayormay notevenbeprotestedtobythetaxpayer,andthefactof non-protest shallnot inany waymakethe preliminary assessment noticefinalandunappealable.Thus,the issuance of theFAN beforethelapseof thefifteen( 15)-dayperiodforthetaxpayer tofileitsprotesttothePAN,inflictsnoprejudiceonthe taxpayerforaslongasthelatterisproperlyservedaFormal AssessmentNoticeandthat it wasabletointelligentlycontest theFANbyfilingaprotest letter withintheperiodprovidedby law.Moreover,thisCourtobservedthatpetitionerwas affordedtheproceduraldueprocessrequiredbylawwhenit wasfullyapprisedofthelegalandfactualbasesofthe assessment issued against it andthat petitioner was giventhe opportunitytosubstantiallyprotestordisputetheassailed assessments via its protest letter. 33 Recordsrevealedthatpetitionersuccessfullyprotested thePreliminaryAssessmentNoticedatedAugust18,2011 assessing petitionerfordeficiencytaxes[orcalendar year 2006 intheamountofP45,832, 137.62.Asaresult,respondent revisedthePreliminaryAssessmentNoticeonFebruary22, 2012,assessingpetitionerfordeficiencytaxesinthereduced { 33 OakwoodManagementServices(Philippines),Inc.vs.CommissionerofInternal Revenue,CTA CaseNo.7989,August 8,2013. DECISION CTACaseNo.8508 Page15of 38 amou nt of P539,624.4l.Considering theforegoing,petitioner was clearly a ffordeddu eprocess. TheCou rtwilln owproceedtodeterminewhether petitionerisliableforthetotalamountofP548, 194.32, representingdeficiencyincometax,expandedwithholdingtax and final wit hholding tax,inclusiveof increments,forcalendar year 2006. IntheFormalLetterof Demand34 datedMarch23,20 1.2, respondentinformedpetitionerthatafterre-investigation, petitionerhasbeenfou ndliablefordeficiencyincometax, wit hholdingtaxandpenaltiesforcalendaryear2006,as shownbelow: Deficiency IncomeTax Net Income per returnp32,081,141.00 Add: Undeclared Income per audit p 755,779.23 Deductions not allowed under RJ\79163,682, 008.744,437,787.97 Net Income per audit36,518,928.97 Income tax due1,825,946.45 Less:Tax paid1,604,057.05 DeficiencyIncome Tax22 1,889.40 Add:Interest (April16,2007 to April16, 2012)221,889.40 Total Deficiency IncomeTax p 443,778. 80 Deficiency Expanded WithholdingTax IncomePaymentsTax BaseTax Due Professional Fees ( 10%) p 73,333.32 p 7,333.33 Rentals16,500.00825.00 11,635.00232.70 Freightj Handling2,340,561.9446,811.24 Total2,442,030.2655,202.27 Less:54,797.27 Total Deficiency Expanded Withholding Tax405.00 Add: Interest (January 21 ,2007 to April20, 2012)425.25 Total Deficiency FinalWithholdingTax p 830.2 5 Deficiency Final WithholdingTax 1)ividends paid to Individuals p 276,805.00 Final Tax Due on Dividends27,680.50 Less:Remittances-Deficiency Expanded Withholding Tax7 ,680.50 Add:Surcharge6,920.13 Interest (Oct.11 ,2005 to Apr.11,2012)35,984.65 Total Deficiency Final WithholdingTax p 70,585.28 34Exhibit "E",docket,p.55. f DECISION CTACaseNo.8508 Page16 of 38 Compromise Penalties For failu reto pay - IncomeTax For failure to withhold/ remit / pay- l ~ W TFor failure towithhold/remit/pay - Final Tax Total Compromise Penalties TOTAL AMOUNT PAYABLE A.Deficiency Income Tax- P221,889.40 1. Undeclared Income - P755, 779.23 25, 000.00 2, 000.00 6,000 .00 p 33,000.00 p 548,194.32 Uponreconciliationof sala riesandwagesper Alphalist of cmployccs35attachedtotheAnnualInformationReturnof IncomeTaxesWithheldandFinalWithholdingTaxesorBIR FormNo.1604-CFandperFinancialStatements(Scheduleof AdministrativeandSelling Expcnsc36and Statement of Cost of GoodsManufacturedandSold37),38respondentfoundthai pctltloncrhasunrecordedincomeintheamountof P755, 779 .23 .Thediscrepancyof P755,779.23wastreatedby r espondent a sundeclared income,computed a sfollows :39 Per Alphalist Schedule Schedule 7.17 . 2Schedule 7.3Total pp NonTaxable272,487.80376,269.71 p 648,757.51 SSS and Other Deductions190,317.10f>1,466.80282,967.00474,780.90 Taxable3,267,538.5827,292.734,859,930. 138,154,761.44 Total1'>3,730,373.48f>28,759.531'>5,519, 166.84P9,278,299.85 Per Financial Statement Salariesf>642,176.73 Wages-Overtime21,159.52 HolidayPay3,205.42 Other EmployeeBenefits33,555.95 Direct Labor7,822,123.00 TotalP8,522,520.62 Discrepancy - Undeclared Expense/Income p 755,779. 23 Petitionerarguesthai therevenueexaminer'sconclusion is baseless and erroneous forthe la tter'scomputation failedto /-35 13IRRecords,pp.182- 189. 36BIR Records,pp.339 and 313. 37BIRRecords,pp.337 and 312. 38Exhibit "L",docket,p.1458. 39Bm. Records,pp.471472. DECISION CTJ\CaseNo.8508 Page17of 38 considerthefollowingitemsindeterminingtheamountof salaries per FinancialStatement: Per BIR Computation p 8,522,520. 70 Add: 530 100 FO- Salaries andWages1,164,593.89 520800 DL - Retirement Expense379,223.28 530400 FO-Bonus and13th Month Pay137,025.64 530200FO- Overtime Pay92,2 13.77 601600 - 13th Month Pay71,872.12 530300 FO- Holiday33,888.16 Deduct: 520900 DL - Other EmployeeBenefits513,084.30 602900 - Other Employee Benefits33,555.95 520500 DL - SSS401,040.60 520600 J )L - Pag-ibig81 ,600.00 520550DL - Medicare76,900.30 Others16,856.56 Total per Alphalist p 9,278,299.85 Petitioner asserts thefollowing: 1.AmountsincludedintheSalariesandWages, RetirementExpense,Bonusand13thMonthPay, OvertimePay,13lltMonthPayandHoliday accounts were notconsideredbytheBIRexaminerincomputingthe compensation.Theseaccounts wereproperly reported in the Alphalist. 2.AmountslodgedunderOtherEmployeeBenefits wereerroneouslyincludedbytheBTRexaminerin computingthetotalcompensationperFinancial Statement.Theseamountsshouldnotbeincludedas theseconsistof((deminimis ))benefitssuchasgroceries forChristmascelebration,uniforms,birthday cakes,and giftsgiventoemployeesunderthemanufacturing departments.Section2.33(C)(4)of RevenueRegulations (RR)No.3-98providesfortheexemptionofdeminimis benefits. 3.The amounts lodgedunder DL-SSS,DL-Medicare, DL-Pag-ibigshouldnotbeincludedastheseactually pertaintoemployercontributionsandthereforenot requiredtobereportedintheAlphalist.Moreover,SSS,/ Medicare,andPag-ibigareexemptfromwithholdingtax p-DECISION CTACaseNo.8508 Page18of 38 oncompensationunderSection32(B)(7)(f)of theNIRCof 1997. TheCourtfindsrespondent'sassessmentastothe alleged undeclared income bereft of merit. Recordsshow that respondent appears tohave picked up thetotalamount of P8,522,520. 7040 basedontheScheduleof Admin.andSellingExpense41 andStatem.ent of Cost of Goods ManufacturedandSoldfortheyearendedDecember31, 200642 ,which consist of the following: Admin.and Selling Expenses Salariesp642, 176.73 Wages-Overtime21,459.52 Holiday Pay3,205.42 Other Employee Benefits33,555.95 p 700,397.62 Cost of GoodsManufactured and Sold - Direct Labor Salaries and Wages5,942,274.95 Overtime Pay518,858.08 Holiday210,871.86 Bonus and13th Month Pay456,716.27 sss401 ,040.60 Medicare76,900.30 Pag-ibig81 ,600.00 t(379 ,223.28) Other Employee Henefit513,084.307 ,822,123.08 Total perFSp8,522,520. 70 However,ascorrectlypointedoutbypetitionerinits reconciliation,theemployercontributionsforSSS,Medicare (Philhealth)andPag-ibigintheaggregateamountof P559,540.90(P401,040.60+P76,900.30+P81,600.00),as well astheprovisionforRetirementintheamountof P379,223.28 andotheremployeebenefits(notexceedingP30,000.00per employee)intheaggregateamountofP546,640.25 (P33,555.95plus P513,084.30),arenot requiredtobereported intheAlphalistandapparentlyshouldbeexcludedfromthe computation of grossincomeperFS pursuant toSection32of the NTRCof 1 997. Ontheother hand,respondentshouldhaveincludedthe paymentstoemployeesundertheFactoryOverheadAccount, { 40Court's actua lcomputa t ion is P8,522, 520.62. 4 1BIR Records,p.339. 42BIR Records,p.337. DECISION CTA CaseNo.8508 Page19of 38 otherthantheAdmin.andSellingExpenseandDirectLabor Accou nts,whichareproperlyreportedintheAlphalistasthe sameformpart of thecompensationof petitioner'semployees, such as thefollowing: Factory Ove rhead Salaries and WagesPl , 164,593.89 I3onus and13th month pay137,025.64 OvertimePay92,213.77 Iloliday33,888. 16P1,427,721.46 Admin.and Se lling Expenses 13th month pay71,872.12 TotalP1,499,593.58 Fromtheforegoing,petitioner'ssalariesandwagesas reportedinitsFSamountstoP9,295, 156.41,computedas follows: Admin.and Selling Expenses Salaries p 642,176.73 Wages-Overtime21, 4 59.52 I Ioliday Pay3,205.42 13th month pay7 1,872.12 p 738,713.79 Direct Labor Salaries and Wages?5,942,274.95 Overtime Pay518,858. 08 Holiday210,871.86 I3onus and13thMonth Pay456,716.277,128,721.16 Factory Ove rhead Salaries and WagesPl,l64,593.89 I3onusand13thmonth pay137,025.64 Overtime Pay92,213.77 Iloliday33,888.161,427 '721.46 Total pe rFSP9 ,295, 156.4 1 Thus,petitionerwasabletoreconcilethealleged discrepancy,exceptfortheamountofP16,856.56,asshown below: p9,278,299.85!-DECISION CTA CaseNo.8508 Page20 of 38 Per FS Discrepancy 9,295,156.41 p(16,856.56) Nevertheless,petit ionerwasabletoprovethatithasno undeclaredincomeinits FScontrary tothefindingsof the BIR examiner. 2 .DeductionsnotallowedunderRANo.7916 P3,682,008. 74 Respondentdisallowedthefollowingexpensesas deductionsfromgrossincomeforpurposesofcomputingthe fivepercent (5/o) gross incometax,brokendownasfollows: Forex Lossf>1,745,974.25 Other Dues to Authorities21,550.00 Insurance121,319.22 Documents and Handling42,240.00 Miscellaneous1,419,972.79 OfficeSupplies47,120.25 Tools andSpareparts283,832.23 Totalp3 ,682,008. 74 Theaforesaidexpensesweredisallowedforthesimple reasonthaithesamewerenotamongthedeductions allowableunder Republic Act(RA)No.7916(PEZALaw) ,citing as basis theSupreme Court ruling inSan Pablo Manufacturing Corporation us.Commissioner of Internal Revenuf!+3,to wit: "Wherethelawenumeratesthesubjector conditionuponwhichitapplies,itisiobe construedasexcluding fromitseffectsallthosenot expresslymentioned.Expressiouniusestexclusio alterius.Anythingthaiisnotincludedinthe enumerationisexcludedtherefromandameaning that docsnotappearnorisintendedorreflectedin theverylanguageofthestatutecannotbeplaced therein.The rule proceeds fromthe premise that the legislaturewouldnothavemadespecific enumerations in astatute if it had theintention not iorestrict its meaning andconfine itsterms iothose expressly mentioned.43G.R.No.147749, June 22,2006. DECISION CTA Case No. 8508 Page2 1 of 38 Theruleof expressio unius est exclusioalterius is acanon of restrictive interpretation." Ontheotherhand,petitionercontendsthatthe disallowance has no basis since the abovedisallowed expenses arechargeabletoCostofGoodManufactured.Accordingly, the same arc deductible forthe 5/ogross income tax purposes. PetitionerreferstoSection7ofRevenueRegulationsNo.2-2005,whichprovidesforthedeductibleexpensesforPEZA-registeredentities,to wit: "REVENUE REGULATIONSNO.2-2005 SECTION 7.Gross income earned - xxx Forpurposesofcomputingthetotalfive percent(5/o)taxrateimposedbyRepublicActNo. 7227,Republic Act No.7903,Republic ActNo.7922 andRepublicActNo.7916,thecostofsalesor directcost shallconsist only of the followingcost or expenseitemswhichshallbecomputedin accordancewiththeGenerally AcceptedAccounting Principles(GAAP): For ECOZONES under RANo.7916 -1.ECOZONEExport TradeEnterprisesand Enterprises: Enterprises,Free DomesticMarket - Direct Salaries,wages or labor expenses Productionsupervisionsalaries Rawmaterialsusedtnthemanufacture of products DecreaseinGoodsInProcessAccount (intermediate goods) Decrease in Finished Goods Account Supplies and fuels used in production Depreciationofmachineryand equipment used in production Financingchargesassociatedwithfixed assetsusedinproductiontheamountof which were not previously capitalized"v DECISION CTACase No.8508 Page22of38 PetitionerlikewisecitesBIRRulingNo.DA080-2007 datedFebruary8 ,2007 ,whichprovidesthatthefollowing expensesincurredbyaPEZAmanufacturingcompanycanbe deductedincomputingthegrossincomesubjecttothe5o/o final tax: 1.AgencyfeesakintocommiSSionandservice charges,whicharepaidtotheagencythat providescontractualworkerstocomplementthe regular workforce during peak season; 2.Transportationexpenses(inbound)suchas freight ,transfer,handling,brokerageand insurancecostsincurredinimportingraw materialsfromvarious overseas vendors; 3.Remunerationofexpatriatesdirectlyinvolvedin production;and 4.Communicationcostssuchasmobile phone/telephonecharges,network/ server charges,SAPcharges,ITmanagementand consultancyfeesandinternetconnectionwhich areincurredinthetransmissionoftechnical productiondatatobeusedtofacilitatethe productionof its products. PetitioneraversthatitisclearfromBIRRulingNo.DA 080-2007thatnotonlythoseexpenseswhichhavesimilar nameastheexpensesenumeratedunderRRNo.02-2005are deductibleexpenseincomputingthe5o/ogrossincomet ax, contrarytotheinterpretationoftherevenueexaminer. Applyingtherulinginthecaseatbar,petitionerassertsthat expensesrelatedtothemanufactureofitsgoodsareclearly deductibleexpense forthepurposeof computing theS0logross tncometax.Thedetailsofthedisallowedexpensesareas follows: a)Forex Loss - P1,745,974.25 Petitionerallegesthatitsforcxlossisanallowed deductionincomputingthe5logrossincometaxreferringt o PEZA Memorandum Circular No.2005-032,which states:!J-DECISION CTACase No.8508 Page23of38 "TheTaxtreatmentofforeignexchangega.Ins shalldependontheactivitiesfromwhichthere arise.Thus,iftheforcxgainisattributedtoan activitywithincometaxincentive(IncomeTax Holidayor5/oGrossIncomeTax),saidforexgain shallbecoveredbythesameincometaxincentive. Ontheother hand,if theforcxgainisattributedto anactivitywithoutincometaxincentive,saidforex gainshalllikewisewithoutincometaxincentive, i.e.,therefore,subjecttonormalcorporateincome tax." PetitioneraversthatwhilethesaidPEZAMemorandum pertainstoforexgains,thesametreatmentshouldbeapplied toforcxlosses.Accordingly,forcxlossarisingfromthe registeredactivityshall be deductiblefromincome arising from said registered activity. b)Other Dues to Authoritie s - P21,550.00 Petitionerclaimsthatthispertainstomiscellaneous expensesincurredforimportprocessingandchargeableto Costof GoodsManufactured.Thisexpenseincludescharges topetitioner'spettycashforwhichnosupportingdocuments arc available. c)Insurance Expense - P121,319 .22 Petitionerassertsthatthisconsistsofinsurance premiumpaidtocoverpropertiesinthefactorysuchas machineryandotherassetsagainstfire ,typhoonandother risks.Insuranceexpensewasalsoincurredforinsuringthe rawmaterials usedintheproductionagainstfireand product liability risk.Thus, this expense is part of the Cost of Goods. d)Documents and Handling - P42,240.00 Petitionerpointsout that theseexpensesarcincurredin relationtoimport processingat haulingat Customs.Inother words,thesearcactuallypartofcostofmaterialsand chargeabletoCostofGoodsManufactured.Inparticular, theseexpensesincludechargestopetitioner'spettycash,/--DECISION CTACase No.8508 Page24of 38 haulingservices,salaryof contractualworkers,import/ export processing fee,etc. e)Miscellaneous Expense - P1,419,972.79 Petitionerexplainsthatthisincludesdepreciation chargesof factorybuilding andmachinery thai arechargeable toCostofGoodsManufactured.Thisaccountalsoincludes medicalsupplies, janitorial supplies,security services,etc. f)Office Supplies - P47,120.2 5 Petitionermaintainsthaitheseareofficesupplies consumed in the factoryoffices. g)Tools and Spare Parts- P283,832.23 Petitionerarguesthaithesearenecessaryexpensesto keepthemachineryrunningtoproducegoods.Accordingly, these expenses are chargeable toCost of Goods Manufactured. PertinenttothepresentcaseisRRNo.11 -2005which revokedSection 7of RRNo.02-2005.Thesignificant portions o[ whichare quotedhereunder: "REVENUE REGULATIONSNO.11 -2005 SECTION3.Grossincomeearned- For purposeso[implementingthetaxincentiveof registeredSpecialEconomicZone(ECOZONE) enterprisesinSection24of RepublicActNo.7916, theterm'grossincomeearned'shallrefertogross salesorgrossrevenuesderivedfrombusiness activitywithintheECOZONE,netofsales discounts,salesreturnsanddisallowancesand minuscostsof salesordirectcostsbutbeforeany deductionismadeforadministrative,marketing, sellingand/ oroperatingexpensesorincidental losses during agiven taxable period. Forpurposesofcomputingthetotalfive percent(5/o)tax rateimposed,thefollowingdire ct DECISION CTA Case No.8508 Page25of38 costs areincludedintheallowabledeductionsto arriveatgrossincomeearnedforspecifictypesof enterprises: 1.ECOZONEExportEnterprises,FreeTrade EnterprisesandDomesticMarket Enterprises: - Direct Salaries, wages or labor expenses - Production supervision salaries RawmaterialsusedInthemanufacture of products DecreaseinGoods1nProcessAccount (intermediate goods) - Decrease inFinishedGoods Account Supplies and fuelsused in production - Depreciationofmachineryand equipment usedinproductionandof thai portionofthebuildingownedor constructedthaiisusedexclusivelyin the production of goods - Rentandutilitychargesassociatedwith building,equipment and warehouseused inproduction - Financingchargesassociatedwithfixed assetsusedinproductiontheamountof whichwerenotpreviouslycapitalized" (Emphasissupplied) ThisCourt,InEastAsiaUtilitiesCorporationus. CommissionerofInternalRevenue'!\declaredthatthe enumerationofdirectcostsunderRRNo.11-05isnot exclusiveorclosedlistofexpensesthaimaybedeductedby PEZA-registeredenterprisesfromtheirgrosssalesforthe purposeorcomputingthe5/ogrossincometax.Inst ead,the enumerationofdirectcostsisintendedasaguidein determiningtheitemsthatmaybeconsidereddirectcostsor costs of sales.It notedthat RRNo.11-05amendedSection 7 ofRRNo.02-05bydeletingthewords"consistonly"and restating thepertinent phrase to"the followingdirect costs arc includedintheallowabledeductionsxxx".ThisCourtfurt her ruled that:44 CTACaseNo.8179,May 21,20 14. DECISION CTACase No.8508 Page26of38 "Itisclearfromtheamcndmcn tmadeunder RRNo.11. -05thatthelistisnotmeanttobeall -inclusivebutmerelyenumeratestheexpensesthat canbeconsideredasdirectcosts.PEZA-registered enterprisesmaybeallowedtodeductexpenses whichareinthenatureof directcostseventhough thesame arc not included in the list. Thecriteria in determining whether the item of costorexpenseshouldbepartof directcostisthe directrelationofsuchitemintherenditionofthe PEZA-registeredservices.Iftheitemofcostor expensecanbedirectlyattributedinprovidingthe PEZA-registeredservices,thenitshouldbetreated as direct cost." ItisalsonoteworthythatSection27(A)oftheNIRCof 1997definestheterms"grossincome"and"costofgoods sold",in the following manner: "Forpurposesof thisSection,theterm'gross income'derivedfrombusinessshallbeequivalent togrosssaleslesssalesreturns,discountsand allowancesandcostofgoodssold.'Costof goods sold'shallincludeallbusinessexpensesdirectly incurredtoproducethemerchandisetobring them to their present location and usc. XXXXXXXXX Foramanufacturingconcern,'costof goods manufacturedandsold'shallincludeallcostsof productionof finishedgoods,suchasrawmaterials used,directlaborandmanufacturingoverhead, freightcost,insurancepremiums,andothercosts incurredtobring theraw materials tothefactoryor warehouse."(Emphasis supplied) Basedontheforegoing,forpurposesofcomputingthe 5o/a preferential tax,grosssales/revenues may bereduced only by sales discounts,salesreturnsandallowances,cost of sales ordirectcostsoranyof theenumeratedallowabledeductions underRRNo.1 1-2005.Corollarythereto,indetermining whetheranexpenseispartof directcost,saidexpensemust / DECISION CTACaseNo.8508 Page27 of 38 bedirectlyattributedtotheperformanceofthe PEZA-rcgistcredactivity,i.e. ,manufacturing bondage, garters and other garment products. Company's ofelastic TheCourtwillnowdeterminewhetherthedisallowed expensesaredirectcostorcostofsaleswhichcanbe considered as valid deductions from petitioner's gross income. a)Forex Loss - P1 ,745,9 7 4 .25 Petitioner'sScheduleof RealizedForeignExchange Loss45 intheamountofPl ,745,974.25showsthai[orexlossarose fromforeigncurrencypayments,tradereceipts,and restatementofforeigncurrencybankaccounts.Petitioner alsopresentedJournalVouchersonthesubjectforexlosses fromtJanuary2006toDecember2006.46However,ascrutiny ofsaidJournalVouchersrevealsthaitheyonlyrefertothe restatement of foreigncurrency bank accounts. AsidefromthescheduleandthetJournalVouchers, whichareself-serving,petitionerdidnotpresentsupporting documentstoprovethatitsforcxlossisdirectlyconnected with the conduct of its registered activity,i.e.,the manufacture ofclasticbondage,garters,andothergarmentproducts.47 Withoutsupportingdocuments,thedeterminationwhether suchforcxlossisconnectedwiththeconductofpetitioner's registeredbusinesswouldbeimpossible.Hence,the disallowanceshould be sustained. b)Other Dues to Authorit ies- P21 ,250.00 Petitionerfailedtoofferanydocumentaryevidenceto substantiatesuchexpenseotherthanthebreakdownofthis account.48Withoutthesupportingdocumentstocorroborate thescheduleofpayments,theCourtcannotascertainthai indeedtheamountcanbeattributedtopetitioner'sregistered activity.Hence,the disallowanceshouldbesustained. c)Insurance - P121,319.22 45Exhibit "0 ",docket,pp.178 1- 1782. 46Exhibits "P" to "P-9",docket ,pp.1783- 1792. 47 Petitioner's Memorandum,docket,pp.2 1072 108. 48Exh ibit"Q",docket,p.1793. DECISION CTACaseNo.8508 Page28 of 38 Petitioner'sscheduleof insurancc119showsthatthetotal amountofP121,319.22representstherecordingsof amortizationofinsuranceandsupportedbyvarious,Journal Vouchers,AccountsPayableVouchersandInvoicesissuedby insurancecompanies.5oUponexaminationof thesupporting documents,theCourtfoundthatthesaidexpenseshouldbe includedinthedeductionsforthecomputationofitsgross Income. d)Documents and Handling - P42,240.00 Petitioner'sScheduleofDocumentsandHandling Expense51 showsthattheamountofP42,240.00represents pettycashliquidationofimport/ exportprocessingfees, paymentsofsalariesofthecontractualworkersandhauling services andother petty expenses. AsverifiedbythisCourt,theamountofP27 ,285.00is unsupported by documents;hence, thesaid amount should be disallowedoutright. Meanwhile,theremainingamountofP14,955.00 represents payment forthefollowing: PARTICULARS Import Processing Fees IEIRDNo.26788715- Nylon Yarn,Poly Yarn IEIRDNo.26788925-Velcro,Ilook,Spandex Yarn IEIRDNo.26788681- Velcro,Hook IEIRDNo.26788532- Metal Strap - Spandex Yarn,Rubber IEIRDNo.26803584Threads No.26803225- Polybag IEIRDNo.26831497- Machine s pareparts No.26831472-Rubber Thread mm.DNo.26831551- Velcro,I look IEIRDNo.26831576- Inner 13ox No.26831734- Yarn IEIRDNo.26831743- Machinespareparts No.26831874- Velcro,llook IEIRDNo.26851235- Polyester Yarn No.26851287-Liner Hox,PVCPolybag IEIRDNo.26851366- Polyurethane Spandex Yarn 49Exhibit "Q",docket,p.1793. 5oExhibit "R",docket,pp.17951812. 51 Exhibit "S",docket,p.1814. PCVI APVAmount 1355'P250.00 1357250 .00 1363250.00 1358250.00 1367250.00 1369250.00 1373250.00 1373250. 00 1375250.00 1376250.00 1379250.00 1380250.00 1381250.00 1384250.00 1388250.00 1393250.00 ! DECISION CTACaseNo.8508 Page29of 38 IEIRDNo.26851095 IEIRDNo.2685 1296 sub-total - Machine Spare Parts - 1 ~ u b b e r Thread Salary of Contractual Workersand Hauling Service March16-31,2006-ORNo.1163 April16-30 ,2006-OR No.1165 May16-31, 2006-ORNo.1168 June16-30 ,2006-ORNo.1171 August16-31,2006-ORNo.1175 November1-15, 2006- 1 ~ No.1180 sub-total Cannot beascertained the natureof thepayments PEZJ\ OR No. 4665420 PEZJ\ OR No. 4665299 PJ-