CITY OF MANILA and RIZAL DEL ROSARIO in his capacity as OIC-City Treasurer of Manila v. SMART COMMUNICATIONS, INC.

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY THIRD DIVISION CITY OF MANILA and RIZAL CTA AC No. 171 DEL ROSARIO in his capacity as OIC-City Treasurer of Members: Manila, BAUTISTA, Chairperson Petitioners, FABON-VICTORINO, and RINGPIS-LIBAN, JJ. - versus - Promulgated: SMART COMMUNICATIONS, INC., Respondent. )(- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - )( DECISION Fabon-Victorino, J.: In this Petition for Review, 1 petitioners City of Manila and Rizal Del Rosario, in his capacity as Officer-in-Charge (OIC) - City Treasurer of Manila, assail the Decision2 dated March 9, 2016 and the Order3 dated May 23, 2016, both rendered by the Regional Trial Court (RTC) Branch 47 of Manila in Civil Case No. 15-134374, entitled Smart Communications Inc. vs. City of Manila and Rizal Y. Del Rosario, in his capacity as Officer-In-Charge (OIC) - City Treasurer. Petitioner City of Manila is a local government unit with the legal capacity to sue and be sued, while its co-petitioner, Rizal Del Rosario, is the Officer-In-Charge (OIC) of the Office / of the City Treasurer of the City of Manila, primarily 1 Docket, pp. 8-15. 2 Docket, pp. 16-32. 3 Docket, pp. 33-34.

DECISION CTA AC NO. 171 responsible for the imposi ion and collection of taxes within the territorial jurisdiction of the City of Manila. They were the respondents in Civil C se No. 15-134374 filed by Smart Communications, Inc. with the RTC of Manila, Branch 47. Respondent Smart C mmunications, Inc., is a domestic corporation engaged i the business of providing telecommunications servi es to the general public. Its principal office is located at the SMART Tower, 6799 Ayala Avenue, Makati City, Phil ppines. 4 It was the petitioner in Civil Case No. 15-134374. On March 27, respondent was granted a legislative franchise Republic Act No. 7294 to "establish, install, maint in, lease and operate integrated telecommunications/camp ter/ electronic services, and fixed mobile stations throug out the Philippines for public domestic and internationa telecommunications and to install corresponding transmitting and receiving stations at such places in the Philippines s it may consider necessary and convenient". Further, it was authorized by the National Telecommunications Com ission (NTC) to construct, install, operate, and maintain a nationwide Cellular Mobile Telephone Service (CMTS system. Pursuant to its gislative franchise, respondent operates a network of c II sites throughout the Philippines giving its subscribers s fficient connectivity and cellular phone coverage. It also ffers telecommunications services such as sale of mobile phones, and subscriber identity modules [SIM] cards, br adband wireless internet access, postpaid lines and pre aid cellular load in its business centers and authorized di tributors nationwide, including the City of Manila. On April 29, 2015, and upon the request of the Oversight Committee f the City Council of Manila, j respondent submitted o the Office of petitioner City Treasurer of the City of Manila five (5) Certifications 4 The Parties, Respondent's Memorandu , docket, p. 69.

DECISION CTA AC NO 171 indicating its gross sales for the years 2010 to 2014 to Mega Cellular Network, Inc. (Mega), its exclusive distributor in the City of Manila, as follows: Year Sales Output VAT Total 2010 2, 766,176,131.94 3L098, 117,267�77 2011 2,945,706 737.22 353,484,808.47 3,299,191,545.69 2012 3,030,226 870.21 363,627,224.43 3,393,854,094.64 2013 2,978,995 852.99 357,479,502.36 3,336,475 355.35 2014 2,837,526 757.86 340,503,210.94 3,178,029,968.80 On the basis of the~ e Certifications, petitioner City of Manila through Assistant City Treasurer Ma. Jazmin M Talegon, issued against respondent Smart a Letter of Assessment dated 18 IV ay 2015 for local business tax deficiencies, surcharges, and interest/penalties in the amount of P59,826,155.08, covering the years 2011 up to 2015. Subsequently, a sec and Letter of Assessment dated June 16, 2015 was issued by petitioner Del Rosario reiterating the earlier assessment for local business tax, with additional assessment f::>r regulatory fees and charges amounting to P42,009,851.00, allegedly covering around 208 cell sites of responde 1t in Manila. On June 19, 2015, r-espondent filed separate protests against the two Letters of Assessment. On June 25, 2015, respondent received from petitioner Del Rosario two (2) le ters both dated June 22, 2015 denying its protests. On July 27, 2015, respondent filed an appeal with the RTC of Manila, Branch 47 challenging the denial of its protests against the assPssments issued by petitioners, to wit: a. Regulatory fees and charges for its cell sites in the amount of P4g,009,851.00; and

DECISION CTA AC NO. 171 b. Local Business Ta as a wholesaler on its gross receipts derived rom franchise operations in the amount of P59 826,155.08. On August 14, 201 , respondent paid the assessed amounts under protest o prevent any disruption in its operations within the Ci y of Manila. On this account, respondent filed with the RTC an Amended Petition dated August 25, 2015, to ref ect the payment it made under protest. During the pre-trial n the RTC, the parties agreed to expedite the proceeding by just filing their respective memoranda given that he facts of the case remained undisputed. On March 9, 2016, he RTC promulgated the assailed Decision, the dispositive p rtion of which reads: WHEREFO E, premises considered, the appeal of SM RT Communications, Inc., is hereby GRA TED. The Assessments dated 18 May 015 and 16 June 2015 issued by [Petiti ners] City of Manila and Office of the Cit Treasurer against SMART for local busines tax and regulatory fees are hereby DECL RED INVALID and VOID. [Petitioners are further ORDERED to REFUND the a ounts collected and paid as alleged loc I business tax as a wholesaler on [r spondent's] gross receipts derived from fr nchise operations in the amount of Fifty ine Million Eight Hundred Twenty Six Tho sand One Hundred Fifty- Five Peso and 08/100 (Php59,826,155. 8), considering that [respondent] is NOT liable to the City of Manila for local usiness taxes on its gross receipts derived from franchise operations ./ and realized w th the City of Manila's territorial jurisdi

DECISION CTA AC NO. 171 [Petitioners are likewise ORDERED to REFUND th amount of Forty-Two Million Nine Tho sand Eight Hundred Fifty- One Pesos (Ph 42,009.851.00). This is without prejudice to any revised assessment whic may be issued to reflect the correct and roper regulatory fees and charges of [R spondent], the correct number of cell sites based on the appropriate tax ates and bases, and at a maximum perio of five (5) years there being no proof of fraud committed and including the yea of the assessment. SO ORDERED. In finding for resp ndent, the RTC ratiocinated that being a holder of a franc ise from Congress, respondent is thereby subject only to taxes as expressly stated therein, to the exclusion of all at er forms of charges and fees, including local business t x. The RTC also held that even assuming that respond nt may be liable to pay local business taxes despite ts legislative franchise, still the assessment is erroneous for categorizing the nature of its business as a wholesaler. The RTC agreed with respondent that it is not selling an rticle of commerce but providing public services, as provid d under its legislative franchise. Further, after a re iew of petitioner City of Manila's current Revenue Code, Ordinance No. 8331, which took effect during the taxable year 2014, and its 1993 Revenue Code known as Ordinanc No. 7794, the RTC found that the assessment issued by pe itioners were based on a different tax rate and tax base This, according to the RTC, confirmed that such as essments suffer from legal and factual infirmities renderi g them without legal effect. In view of the adver e ruling, petitioners filed a Motion for Reconsideration dated April 6, 2016. /

DECISION CTA AC NO. 171 On the other hand, respondent filed a Motion to Expunge [Petitioners7 M tion for Reconsideration dated 06 April 2016 and Motion t Declare the Decision dated 09 March 2016 as Final and xecutory dated April 22, 2016, on the ground that petitioner 'Motion for Reconsideration dated April 6, 2016, lacked the required notice of hearing mandated in Sections 4 a d 5 of Rule 15 of the 1997 Rules of Civil Procedure. On May 23, 2016, he RTC promulgated the equally assailed Order, the dispositive portion of which reads: "WHEREFO E, premises considered, the court rules as follows: a. [Petitioner ] Motion for Reconsider tion dated April 6, 2016 EXPUNGED from the b. The Decision of March 9, 2016 is hereby declared as final and executory. Let it be entered into the Book of en ries of Judgment. SO ORDERE " Hence, the instan Petition for Review filed by petitioners on June 23, 2016, praying for the Court (1) to SET ASIDE and ANNUL the assailed Decision and Order rendered by the RTC; a d (2) to DISMISS the Appeal of respondent from the deni I of its protests by petitioners. Petitioners aver that their Petition for Review is a call for the exercise of the ourt's prerogative to suspend or relax procedural rules eve of the most mandatory character in order to serve the hig er interests of substantial justice. They agree that the thre (3)-day notice requirement in a motion is mandatory bu the underlying rationale for this j rule is simply to avoid s rprises to the adverse party and give him time to study and meet the arguments of the motion. Petitioners asse t that with the timely service of a

DECISION CTA AC NO. 171 copy of the Motion for R consideration upon respondent, it had every opportunity t study and meet the arguments raised in the motion. Moreover, both the assailed Decision and Order are contrary to law and juris rudence. They argue that it is a complete and reversible e ror on the part of the court a quo to eradicate respondent's taxability. Further, the assailed Order expunging the Moti n for Reconsideration is too harsh and extreme. According t the petitioners, while the Motion for Reconsideration had inadvertently lacked a Notice of Hearing, it cannot be said that respondent, having been duly furnished with the same, as seriously prejudiced. Respondent, on the ther hand, argues that the instant Petition must be dismiss d, as the assailed Decision and Order issued by the co rt a quo have already attained finality. Likewise, the ins ant Petition for Review should be dismissed considering th t petitioners did not furnish the court a quo a copy of t e Petition for Review as required under Section 1 5 , Rule 42 of the Rules of Court. Nevertheless, respondent contends that the court a quo correctly ruled that: 1. Respondent is onl liable for taxes, charges and fees enumerated in its egislative franchise; 2. Respondent's gross sales in the City of Manila were derived pursuant to its lawful and legitimate franchise operatio s and is therefore not subject to local business tax s; 5 Sec. 1. How appeal taken; time or filing. - A party desiring to appeal from a decision of the Regional Trial Court rendered in the exercise of its appellate jurisdiction may file a verified petition for review with the Co rt of Appeals, paying at the same time to the clerk of said court the corresponding docket a d other lawful fees, depositing the amount of P500.00 for costs, and furnishing the Region I Trial Court and the adverse party with a copy of the petition. The petition shall be iled and served within fifteen (15) days from notice of the decision sought to be reviewed o of the denial of petitioner's motion for new trial or reconsideration filed in due time after judgment. Upon proper motion and the payment of the full amount of the docket and othe lawful fees and the deposit for costs before the / expiration of the reglementary period, he Court of Appeals may grant an additional period of fifteen (15) days only within which to file the petition for review. No further extension shall be granted except for the most com elling reason and in no case to exceed fifteen days. (Emphasis supplied)

DECISION CTA AC NO. 171 3. Respondent is not liable for local business tax based on the express p ovisions of the Local Government Code; 4. The imposition of I cal business tax upon respondent by petitioners tantamount to direct double taxation; 5. Respondent is ex mpt from the payment of local franchise tax in the City of Manila pursuant to Ordinance No. 8229; 6. That the assessment for local business tax suffer from legal and fac ual infirmities, as it was based on an improper tax b se and rate; 7. That the assess ent issued to respondent for regulatory fees nd charges are void for being without factual an legal bases; and 8. That respondent is entitled to a refund of its payment for alleged local business tax and regulatory fee liabilities. With the submission of their respective Memorandum, the instant petition was eemed submitted for decision on December 20, 2016.6 As culled from the P titian for Review and the parties' Memoranda, the followin are the issues submitted for the Court's resolution: 1. Whether or not t e Court has jurisdiction over the instant Petitio for Review; 2. Whether or not r spondent SMART is liable to / pay local business taxes as a wholesaler on its 6 Resolution, Docket, p. 105.

DECISION CfA AC NO. 171 gross receipts deri ed from franchise operations in the amount of P 9,826,155.08; 3. Whether or not r spondent SMART is liable to pay regulatory fees and charges in the amount of P42,009.851.00 � and 4. Whether or not re pondent SMART is entitled to a refund or tax cr dit of the local business tax and regulatory f es and charges improperly assessed by and p id to the City of Manila. THE C URT'S RULING The instant Petition for Review should be denied on jurisdictional ground. The Court of Tax A peals (CTA) is a court of special jurisdiction and can only ake cognizance of such matters as are clearly within its j risdiction. 7 Pertinently, Section 7(a)(3) of Republic Act N . 1125, as amended by R.A. Nos. 9282 and 9503 provides that the CTA has jurisdiction to review the decisions, orders or resolutions of the Regional Trial Court in local tax ases decided in their original or appellate jurisdiction, thu : SEC. The CTA shall exercise: (a) Exclu ive appellate jurisdiction to review by app al, as herein provided: XXX XXX XXX (3) Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided or resolved by / 7 Commissioner of Internal Revenue . Silicon Philippines, Inc. (formerly Intel Philippines Manufacturing, Inc.), G.R. No. 16977 , March 12, 2014.

DECISION CfA AC NO. 171 them in the ex rcise of their original or appellate jurisdiction;" Similarly, Section 3 a)(3) of Rule 4 of the Revised Rules of the Court of Tax ppeals provides: SEC. 3. Cas s within the jurisdiction of the Court in tvtston. - The Court in Division shall exe cise: (a) Exclusiv original over or appellate jurisdiction to review by appeal the following: XXX XXX XXX (3) Decisio s, resolutions or orders of the Regional Trial Courts in local tax cases decided or resolv d by them in the exercise of their original j risdiction; On the other hand, the manner by which an adverse party may elevate its cas to the CTA is provided in Section 3(a) of Rule 8 of the R vised Rules of the Court of Tax Appeals, to wit: "(a) A par y adversely affected by a decision, ruli g or the inaction of the Commissioner f Internal Revenue on disputed assess ents or claims for refund of internal reven e taxes, or by a decision or ruling of the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry, the Secretary of Agriculture, or a Regional Trial Court in the exercise o its original jurisdiction may appeal to he Court by petition for review filed ithin thirty days after receipt of a c py of such decision or ruling, or expir tion of the period fixed by law for the ommissioner of Internal / Revenue to act on the disputed assessments, xx " (Emphasis supplied)

DECISION CTA AC NO. 171 Finally, Section 4 o the same Rule, in relation to Section 1 of Rule 42 of t e Rules of Court, lays down the modality by which an appeal may be lodged in the CTA, thus: SEC. 1. Ho appeal taken; time for filing. - A party desiring to appeal from a decision of t e Regional Trial Court rendered in the exercise of its appellate juri diction may file a verified petiti n for review with the Court of Appeals paying at the same time to the clerk of s id court the corresponding docket and other lawful fees, depositing the amount of PSOO. 0 for costs, and furnishing the Regional Tri I Court and the adverse party with a c py of the petition. The petition shall b filed and served within fifteen (15) da s from notice of the decision sough to be reviewed or of the denial of petitioner's motion for new trial or re onsideration filed in due time after ju gment. xxx" (Emphasis supplied) The prov1s1ons cle rly provide that the Petition for Review must be filed wit this Court within thirty (30) days from notice of the decis'on sought to be reviewed or the denial of a motion for re onsideration filed in due time after the decision subject of th appeal was issued. In this case, the otion for reconsideration filed by petitioners assailing the TC Decision dated March 9, 2016 was found defective fo lack of the required notice in violation of Sections 4 nd 5 of Rule 15 of the Rules of Court, thus expunged f om the record by the RTC in the assailed Order of May 23 2016. Considering that pe itioners' Motion for Reconsideration was expunged from the r cord of the case, the RTC rightfully/ declared the assailed D cision of March 9, 2016 to have gained finality. Moreov r, since there was no motion for

DECISION CfA AC NO. 171 reconsideration to resolv , the 30-day period to file the appeal should be reckone from the date of receipt of the decision sought to be over urned. Counting thirty (30) days from March 22, 20168 , the day petitioners received a copy of the assailed Decision, they had until April 21, 2016 t appeal with the CTA. Thus, the filing of the instant Petitio for Review on June 23, 2016 was way beyond the 30-day eriod within which to seek review by this Court. Consequen ly, the Court has no jurisdiction to entertain the present case. It cannot be overem hasized that jurisdiction over the subject matter or nature of an action is fundamental for a court to act on a given co troversy, and is conferred only by law and not by the cons nt or waiver upon a court which, otherwise, would have no jurisdiction over the subject matter or nature of an ction. Lack of jurisdiction of the court over an action or the subject matter of an action cannot be cured by the silence, acquiescence, or even by express consent of the parties. If the court has no jurisdiction over the natu e of an action, its only jurisdiction is to dismiss the case. T e court could not decide the case on the merits. 9 Even assuming th t the Court has jurisdiction to entertain the instant Peti ion for Review, the same must still be dismissed. Section 11 of R.A. o. 1125, as amended by R.A. No. 9282 and R.A. No. 9503, provides that: "SEC. 11. Who May Appeal; Mode of Appeal; Effect f Appeal. - Any party adversely affe ted by a decision, ruling or inaction f the Commissioner of Internal Reven e, the Commissioner of Customs, the ecretary of Finance, the 8 Annex "A", Compliance, docket, p. 42 / 9 Nippon Express (Philippines) Corp vs. Commissioner of Internal Revenue, G.R. No. 185666, February 4, 2015.

DECISION CTA AC NO. 171 Secretary of Trade and Industry or the Secretary of Agriculture or the Central Board of Assessment Appeals or the Regional Trial Courts may file an appeal with the CTA within thirty (30) days after the eceipt of such decision or ruling or af er the expiration of the period fixed by Ia for action as referred to in Section 7(a)(2) herein. Appeal sh II be made by filing a petition for rev ew under a procedure analogous to t at provided for under Rule 42 of th 1997 Rules of Civil Procedure with the CTA within thirty (30) days fro the receipt of the decision or ruling or in the case of inaction as her in provided, from the expiration of the period fixed by law to act thereon. A Divisi n of the CTA shall hear the appeal: Prov�ded, however, That with respect to decisio s or rulings of the Central Board of Asses ment Appeals and the Regional Trial C urt in the exercise of its appellate jurisdic ion appeal shall be made by filing a peti ion for review under a procedure analo ous to that provided for under Rule 43 o the 1997 Rules of Civil Procedure with t e CTA, which shall hear the case en bane. ' (Emphasis supplied) Further, Section 4(a) of Rule 8 of the Revised Rules of the Court of Tax Appeals as amended, specifies where to appeal and mode of appeal, to wit: "SEC. 4. ere to appeal; mode of appeal. - (a) An ap eal from a decision or ruling or the ina tion of the Commissioner of Internal evenue on disputed assessments or claim for refund of internal revenue taxes erroneously or illegally / collected, the d cision or ruling of the

DECISION CTA AC NO. 171 Commissioner of ustoms, the Secretary of Finance, the Seer tary of Trade & Industry, the Secretary f Agriculture, and the Regional Trial ourt in the exercise of their original jurisdiction, shall be taken to the C urt by filing before it a petition for rev ew as provided in Rule 42 of the Rule of Court. The Court in Division shall act on the appeal. II (Emphasis supplied) Therefore, appeals iled with this Court assailing a Decision rendered by the RTC in the exercise of its original jurisdiction shall be brought before the Court in Division by way of a Petition for Revi w under a procedure analogous to that provided under Rul 42 of the 1997 Rules of Civil Procedure. In fine, the arty appealing must comply with the legal and procedur I requirements set forth in the provision, lest the appeal ill not prosper. Section 1 of Rule 42 of the 1997 Rules of Civil Procedure, as amended, cited earlier provides that aside from the adverse party, t e petitioner or the appellant must furnish the Regional Trial Court with a copy of the Petition for Review. Record reveals that etitioners failed to furnish the RTC which rendered the assail d Decision and Order, with a copy of the instant Petition fo Review. Such omission renders the instant petition dismissible under Section 3 of Rule 42 of the 1997 Rules of Civil Pr cedure, as amended, which reads: "SEC. 3. E ect of failure to comply with requiremen . - The failure of the petitioner to c mply with any of the foregoing requirements regarding the payment of the docket and other lawful fees, the deposit for costs, proof of service of the petition, a d the contents of and the documents whic should accompany the / petition shall be sufficient ground for the dismissal thereof II

DECISION CfA AC NO. 171 It is well to emphasi ed that the right to appeal is not a natural right and is not art of due process, but merely a statutory privilege to be xercised only in accordance with the law. Being the part who sought to appeal, he must comply with the requi ements of the relevant rules; otherwise, he would lose the statutory right to appeal. It cannot be overemphasiz d, indeed, that the procedures regulating appeals as laid down in the Rules of Court must be followed because s rict compliance with them is indispensable for the o derly and speedy disposition of justice. 10 WHEREFORE, pre ises considered, the instant Petition for Review is DIS ISSED for lack of jurisdiction. SO ORDERED. We concur: ~.~A'- LOVELl~. BAUTISTA MA. BELEN M. RINGPIS-LIBAN Assod:te Justice Associate Justice AT ESTATION 10 Juanito Magsino vs. Elena De Ocam o and Ramon Guico, G.R. No. 166944, August 18, 2014.

DECISION CTA AC NO. 171 I attest that the con lusions in the above Decision were reached in consultation b fore the case was assigned to the writer of the opinion of th Court's Division. LOVELK. BAUTISTA Associate Justice Chairperson Pursuant to Secti n 13 of Article VIII of the Constitution, and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinio of the Court's Division. Presiding Justice