G.R. No. 226680 - Aces Philippines Cellular Satellite Corp. vs. Commissioner of Internal Revenue

In 1995, Philippine Long Distance Telephone Company (PLDT) entered into a Gateway Agreement with PT Asia Cellular Satellite (ACeS Indonesia) for the supply of equipment, software, data and documentation to construct and operate satellite gateways in the Philippines.
In the same year, ACeS Philippines Cellular Satellite Corporation was incorporated as a PLDT subsidiary to operate these gateways and related telecommunications services.

Recitals: ACeS Indonesia contracted to launch and operate the ACeS satellite system; PLDT sought exclusive rights to sell satellite communications time (ACeS Services) in the Philippines.
Paragraph 2.2: ACeS Indonesia granted PLDT (and its authorized distributors) the exclusive right to provide ACeS Services to Philippine residents during the agreement term; ACeS Indonesia agreed not to contract with others in the Territory.
Section 3.2: Satellite air time fees charged at US$0.025 per six-second “Billable Unit,” invoiced only for successful, completed calls; set-up, unanswered, and incomplete calls were not billable.

ACeS Indonesia assigned its rights and obligations under the Air Time Purchase Agreement to ACeS International Limited (incorporated in Bermuda).
PLDT transferred its rights and obligations to ACeS Philippines, which thereafter operated Philippine gateways and became the exclusive distributor of ACeS Services to Philippine subscribers.

In 2007, the Bureau of Internal Revenue audited ACeS Philippines and found P199,312,169.00 paid in 2006 to ACeS Bermuda without 35% final withholding tax (FWT).
On August 23, 2012, the Commissioner of Internal Revenue issued a Final Decision on Disputed Assessment (FDDA) assessing deficiency FWT of P69,759,259.15, 25% surcharge, interest, and compromise penalty for a total of P170,935,184.92.

ACeS Philippines filed a protest; the CTA Second Division (2014) affirmed the FDDA with modification—basic FWT plus 25% surcharge totaling P87,199,073.94—and imposed both deficiency and delinquency interest.
On June 8, 2016, the CTA En Banc affirmed the Division’s ruling, holding that the satellite airtime fees were Philippine-sourced income because the service was completed only when signals were received at Philippine gateways.
ACeS Philippines petitioned to the Supreme Court, challenging both source-of-income findings and the imposition of simultaneous interest charges.

Are the satellite airtime fee payments to ACeS Bermuda income from sources within the Philippines, thus subject to 35% final withholding tax?
If so, is ACeS Philippines properly liable for both deficiency and delinquency interest on the unpaid FWT?