THE CITY OF VALENZUELA and HON. ADELIA SORIANO in her capacity as City Treasurer v. NLEX CORPORATION

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SECOND DIVISION THE CITY OF VALENZUELA CTA AC NO. 290 and HON. ADELIA SORIANO in her capacity as City Treasurer, Petitioners, -versus- Members: RINGPIS-LIBAN, Chairperson, MODESTO-SAN PEDRO, and FERRER-FLORES, Jl. NLEX CORPORATION, Promulgated: Respondent. NOV Z5 ZBZ4 � ]-'l~f"- � X---------------------------------------------------------------------------~-------------- DECISION RINGPIS-LIBAN, J. THE CASE Before the Court is a Petitionfor Review filed on April 27, 2023,1 praying for the reversal and/or setting aside of the Decision dated November 25, 20222 and Resolution dated February 23, 20233, both rendered by the Regional Trial Court of Valenzuela City (RTC) - Branch 283, in Civil Case No. 27-V-20, entitled "NLEX Corporation, Plaintiff, versus The City of Valenzuela, Hon. Adelia Soriano, in her capacity as City Treasurer and Hon. Ceci!Jnne Andrade in her capacity as City Assessor, Defendants", the dispositive portions of which respectively read as follows: Decision dated November 25,2022: "WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff NLEX Corporation and ordering defendants City of Valenzuela and Hon. Adelia Soriano as Ci/ ' Docket, pp. 5 to 20. 2 Docket, pp. 21 to 40. 3 Docket, pp. 41 to 44.

Decision C'J'i\ i\C NO. 290 Assessor, to CANCEL and SET ASIDE the Notice of Deficiency dated 11 November 2019, covering the taxable year 2013 to 2019 in the total amount of nine million eight hundred eighty-six thousand seven hundred fifty-five pesos and seventeen centavos (Php9,886,755.17). No costs. SO ORDERED." Resolution dated February 23, 2023: "WHEREFORE, premises considered, the defendants' Motion for Reconsideration, is DENIED. SO ORDERED." THE PARTIES Petitioner City Government of Valenzuela (City of Valenzuela) is a local government unit. It may be served with summons, pleadings, notices, orders and other legal processes through the Office of the City Mayor, Valenzuela City Hall, Valenzuela City.4 Petitioner Adelia Soriano (Soriano) is the City Treasurer of Valenzuela City. She may be served with summons, pleadings, notices, orders and legal processes through the Office of the City Mayor, Valenzuela City Hall, Valenzuela City. 5 Respondent NLEX Corporation (NLEX) is a corporation duly organized and existing under the laws o f the Republic of the Philippines with principal office at Km. 12, Balintawak Toll Plaza, NLEX Baesa, Caloocan City.6 THE FACTS OF THE CASE On November 11, 2019, Soriano issued Notice ofDejicienry against NLEX for alleged deficiency local business taxes (LBT), for taxable years 2013 to 2019 ,rV 4 The Partie~, Petition for R evie1v, Doc ket, p. 6. Refer abo to par. 4, Co111plaint, RTC Docket - Vol. 1 (Civil Ca~e No. 27-V-20) vis-a-vis par. 4, Answe1; R'J'C D ocket R'J'C Docket- Vol. 1 (Civil Case No. 27-V-20), pp. 2, and 49 to 50, respectively. ; The Parties, Petition for Revie1v, Docket, p. 6. Refer also to par. 5, ComplaiNt, R'J'C Docket- Vol. 1 (Civil Case No. 27-V-20) vis-a-v is par. 4, A 11.rwer, RTC Docket RTC D ocket- Vol. 3 (Civil Case No. 27-V-20), pp. 2, and 49 to 50, respectively. 6 The Partie~, Petitio11jor Review, Docket, p. 6. Refer also to par. 3, Co11rplaint, RTC Docket- Vol. 1 (C ivil Case No. 27-V-20) vis-a-vis par. 4, A nswe1; RTC Docket RTC Docket- Vol. 1 (Civil Case No. 27-V-20), pp. 2, and 49 to 50, respectively; Ex hibit "J\'', RTC: Docket- Vol. 1 (C ivil Case No. 27-V-20), pp. 13 to 14.

D ecision C'J'i\ i\C NO. 290 in the total amount of P9,886,755.17, inclusive of surcharges and interests/ broken down as follows : Taxable Year Amount 2013 p 1,694,857.08 2014 1,178,643.75 2015 1,310,729.79 2016 1,445,838.54 2017 1,599,918.12 2018 1,444,651 .39 2019 1,212,116.60 T otal P 9 ,886 ,755.17 Thereafter, on November 21, 2019, NLEX filed with the Office of City Treasurer its undated letter (Re: Protest of the Local Business Tax es for TYs 2013 to 2019),8 requesting for the cancellation of the assessment for lack of legal basis . Due to inaction of Soriano, NLEX flied with the Regional Trial Court (RTC) its Complaint on February 19, 2020.9 The case was raffled to Branch 283, and was docketed as Civil Case No. 27-V-20. Soriano ftled her Answer on March 12, 2020.10 The Pre-Trial was held on November 5, 2020. NLEX filed its Pre-Trial Brief through email on October 30,2020, and the hard copy thereof was received by the Court on November 30, 2020.11 The City of Valenzuela and Soriano filed their Pre-Trial Brief via email on October 30, 2020.12 In the Order dated November 5, 2020,13 the case was set for the continuation of Pre-Trial onJanuary 28, 2021. In a separate Order,14 the case was referred for mediation in the Philippine Mediation Center. However, the parties failed to mediate. Thus, the case was set for Judicial Dispute Resolution QDR) in another branch,15 which is RTC-Branch 7 5 . Since n o setdem ent w as reached b y the partie s during the JDR proceedings, RTC-Branch 75 ordered that the case be f01warded to RTC - Branch 283 for further proceedings.16 The Pre-Trial of the case was terminated on April29, 2021.17 ~ 7 Ex hibits "C" and " 6", RTC: Docket- Vol. 1 (Civil Case No. 27-V-20), pp. 22 to 29 and 976, respectively. s Ex hibit "1-3", RTC Docket- Vol. 1 (C ivil Case No. 27-V-20), pp. 15 to 20. 9 RTC: Docket- Vol. 1 (Civil Case No. 27-V-20), pp. 1 to 12. tO R'I'C Docket- Vol. 1 (Civil Case No. 27-V-20), pp. 49 to 55. II R'I'C D ocket (Civil Case No. 27-V-20)- Vol. 1, pp. 109 to 125. 12 R'J'C D ocket (Civil Case No. 27-V-20)- Vol. 1, pp. 99 to 102. 13 O rder dated Nove mber 5, 2020, RTC D ocket (C ivil Case No. 27-V-20), p. 926. 14 Order dated November 5, 2020, RTC: Doc ket (Civil Case No. 27-V-20), p. 927. 15 Order dated January 28, 2021, R'f C Doc ket (Civil Case No. 27-V-20) - Vol. 1, p. 981. II� O rder dated March 4, 2021, RT C Docket (Civ il Case No. 27-V-20) - Vol. 1, p. 1003. 17 Order dated April 29, 2021, RT C Docket (Civil Case No. 27-V-20) - Vol. 1, pp. 1016 to 1022.

Page 4 of16 Decision CT/\ i\ C N O . 290 Trial then ensued, with both parties presenting their respective documentary and testimonial evidence. On November 25, 2022, RTC -Branch 283 promulgated the assailed Decision,18 ordering the City of Valenzuela and Soriano to cancel and set aside the Notiu oJDejitienry dated November 11,2019, covering taxable years 2013 to 2019 in the total amount of 1>9,886,755.17. Thereafter, on J anuaty 23, 2023, the City of Valenzuela and Soriano flied their Motion for Ruonsideration,19 while NLEX sent via email its Opposition [To the Motion for Reconsideration dated 26 January 2023} on February 9, 2023.20 On February 23, 2023, RTC - Branch 283 issued the assailed Resolution21 denying the Motion for Reconsideration filed by the City of Valenzuela and Soriano. On April 27, 2023, the City of Valenzuela and Soriano flied the present Petition for Review.22 In the Resolution dated June 22 2023,23 the Court noted that the subject Petition for Review failed to attach the proof of the authority of the affiant to file the instant petition and to sign the Verification and Certification of Non-Forum Shopping. Thus, the Court ordered the City of Valenzuela and Soriano to submit the said lacking documents within ten (1 0) days from notice. Thus, on July 19, 2023, petitioners submitted their Manifestation/ Compliance (to the Resolution dated 22 June 2023).24 In compliance with this Court's Minute Resolution dated August 4, 2023,25 RTC- Branch 283 transmitted to the Court the entire records of Civil Case No . 27-V-20 on August 18, 2023.26 On August 24, 2023, NLEX flied its Comment (To the Petitionfor Review dated 24 April2023).27 In the Resolution dated September 6, 2023,28 the Court ordered the parties to file their respective memoranda. On October 12, 2023, NLEX filed its ~ IS RTC D ocket (Civil Case No. 27-V-20) - Vol. 3, pp. 2632 to 2651 . 19 RTC Docket (C ivil Case N o. 27-V-20) - Vol. 3, pp. 2652 to 2657, and 2680 to 2687. 20 RTC Docket (C ivil Ca~e No. 27-V-20) - Vol. 3, pp. 2659 to 2666. 21 RTC Docket (C ivil Case o. 27-V -20) - Vol. 3, pp. 2688 to 2691. 22 D ocket, pp. 5 to 18. 23 Docket, pp. 46 to 47. 2~ Docket, pp. 48 to 52. 2s Docket, p. 54. 26 R'T'C-Branch 283 T rcm.rllliltal dated August 16, 2023, D ocket, p. 55. 27 Docket, pp. 99 to 11 4. 28 D ocket, p. 11 8.

Decision C'l't\ t\C NO. 290 Memorandum,29 while the City of Valenzuela and Soriano filed their Memorandum on November 15, 2023.30 The case was deemed submitted for decision on December 13, 2023.31 THE ISSUES The City of Valenzuela and Soriano submit the following issues for this Court's resolution, to wit: "2.1 The Honorable Court committed grave error when it held that the assessment for the years 2013 and 2014 [have] prescribed, contrary to law, particularly, Section 194 of the Local Government Code. 2.2 The Honorable Court committed grave error when it cancelled and set aside the Notice of Deficiency dated 11 November 2019 without any factual and legal basis."32 On the other hand, for NLEX, the issues are as follows: "I. Whether the Petition for Review must be denied for failure to comply with the requirements under the Rules of Court. II. Whether the Trial Court correctly ruled that the deficiency LBT for TYs 2013 and 2014 had already prescribed. III. Whether the Trial Court correctly cancelled the Notice of Deficiency." 33 THE ARGUMENTS OF THE PARTIES The City of Valenzuela and Soriano argue that the assessments for years 2013 and 2014 have not yet prescribed because local taxes may be assessed and collected within 10 years from knowledge of fraud; that NLEX is guilty of fraud when it deliberately concealed its proper gross receipts amount; and that the Quarterly VAT Return or BIR Form No. 2550-Q should have been submitted to Soriano to properly reconcile the deficiency in the declared gross receipts. / 29 Docke t, pp. 11 9 to 135. >o D ocket, pp. 137 to 144. 3l Minute Resolution dated December 13, 2023, Docket, p. 145. 32 Issues, petitioners' l'l1.emomnd111n, D ocket, p. 139. 33 Issues, respondent\ Memorand11111, Docket, p. 124.

Page 6 of16 Decision C'J'/\ 1\C lQ . 290 NLEX contends that the Petition for Review must be denied for failure to comply with the requirements under the Rules of Court; that the trial court correctly ruled that the deficiency LBT for taxable years 2013 and 2014 had already prescribed; and that the trial court correctly cancelled the Notice of Deficienry because it submitted sufficient proof of its correct gross receipts. THE COURT'S RULING WHETHER OR NOT THE PETITION FOR REVIEW WAS FILED IN ACCORDANCE WITH THE RULES NLEX argues that City of Valenzuela and Soriano's failure to comply with the requirements under Rule 42 of the Rules of Court warrants the outright dismissal of the Petition for Review because the right to appeal is a mere statutory privilege to be exercised strictly in accordance with the provisions of law. NLEX contends that while the Decision and Resolution attached by City of Valenzuela and Soriano to the Petition for Review referred to the factual antecedents of the case, the same, however fail to support any of the material allegations in the Petition for Review. Section 2, Rule 6 of the Revised Rules of the Court of Tax Appeals provides as follows: Petition for review; contents. - The petition for review shall contain allegations showing the jurisdiction of the Court, a concise statement of the complete facts and a summary statement of the issues involved in the case, as well as the reasons relied upon for the review of the challenged decision. The petition shall be verified and must contain a certification against forum shopping as provided in Section 3, Rule 46 of the Rules of Court. A clearly legible duplicate original or certified true copy of the decision appealed from shall be attached to the petition. In Galvez vs. Court ofAppeals, et aL,34 the Supreme Court ruled as follows: "In Atillo v. Bombqy, a case strikingly similar to this one because the petitioner did not annex to her petition copies of the pleadings and other material portions of the record like the complaint, answer and position papers filed in the trial court in violation of the rule, the Court had the occasion to hold that although the phrase 'of the pleadings and other material portions of the record as would support the allegations of the petition' contemplated the exercise of discretion by a petitioner in selecting ~ 3~ G .R. N o. 157445, A pril 3, 2013.

Page 7 of16 Decision C'l'i\ i\ C N O . 290 the documents relevant to the petition for review, it was still the CA that would determine if the attached supporting documents were sufficient to make out a prima jade case. In so holding, however, the Court 'fairly assumed that the CA took pains in the case at bar to examine the documents attached to the petition so that it could discern whether on the basis of what have been submitted it could already judiciously determine the merits of the petition. The crucial issue to consider then is whether or not the documents accompanying the petition before the CA sufficiently supported the allegations therein.' In Cusi-Hernandez v. Dia~ a case where the petitioner did not attach to her petition for review a copy of the contract to sell that was at the center of controversy, the Court nonetheless found that there was a substantial compliance with the rule, considering that the petitioner had appended to the petition for review a certified copy of the decision of the MTC that contained a verbatim reproduction of the omitted contract. Moreover, it is settled that the petitioner's failure to append the pleadings and pertinent documents to the petition can be rectified by the subsequent filing of a motion for reconsideration to which is attached the omitted pleadings and documents as required by the CA. The foregoing rulings show that the mere failure to attach copies of the pleadings and other material portions of the record as would support the allegations of the petition for review is not necessarily fatal as to warrant the outright denial of due course when the clearly legible duplicate originals or true copies of the judgments or final orders of both lower courts, certified correct by the clerk of court of the RTC, and other attachments of the petition sufficiently substantiate the allegations. For the guidance of the CA, therefore, the Court has laid down three guideposts in determining the necessity of attaching the pleadings and portions of the records to the petition in Air PhilippineJ Corporation v. Zamora, which involved the dismissal of a petition for certiorari assailing an unfavorable decision in a labor dispute for failing to attach copies of all pleadings (like the complaint, answer, position paper) and other material portions of the record as would support the allegations in the petition, to wit: First, not all pleadings and parts of case records are required to be attached to the petition. Only those which are relevant and pertinent must accompany it. The test of relevancy is whether the document in question will support the material allegations in the petition, whether said document will make out a primafacie case ~

Page 8 o f16 Decision CT1\ i\C NO. 290 of grave abuse of discretion as to convince the court to give due course to the petition. Second, even if a document is relevant and pertinent to the petition, it need not be appended if it is shown that the contents thereof can also [be] found in another document already attached to the petition. Thus, if the material allegations in a position paper are summarized in a questioned judgment, it will suffice that only a certified true copy of the judgment is attached. Third, a petition lacking an essential pleading or part of the case record may still be given due course or reinstated (if earlier dismissed) upon showing that petitioner later submitted the documents required, or that it will serve the higher interest of justice that the case be decided on the merits. The guideposts, which equally apply to a petition for review flled in the CA under Rule 42, reflect that the significant determinant of the sufficiency of the attached documents is whether the accompanying documents support the allegations of the petition." (Emphases supplied) In this case, the relevancy of the documents that City of Valenzuela and Soriano attached to their Petition for Review could be appreciated by looking at their allegations and grounds in support of the Petition for Review. The City ofValenzuela and Soriano allege that the assessments for taxable years 2013 and 2014 have not yet prescribed and that respondent was clearly guilty of fraud when it deliberately concealed its proper gross receipts amount without the corresponding submission of allegedly excluded VAT to the City Treasurer upon declaring the gross receipts or upon notice of deficiency. It is also apparent that both legal and factual issues were raised. Petitioners only attached in the Petition, the certified true xerox copies of the Decision dated November 25, 202235 and Resolution dated February 23, 202336, both rendered by RTC- Branch 283, in Civil Case No. 27-V-20, entitled "NLEX Corporation vs. The Ciry of Valenzuela) Hon. Adelia Soriano1 in her capatiry as Ciry Treasurer and Hon. Ceti!Jnne Andrade in her capatiry as Ciry Assessor11 to their Petitionfor Review. Nevertheless, records show that RTC- Branch 283 transmitted to the Court the entire records of Civil Case No. 27-V-20 on August 18, 2023.37 Thus, the Court is not prevented from passing upon the issues raised by petitioners and resolving their appeal considering that the records of the Court a quo were already elevated to this Court. . #' 3; D ocket, pp. 21 to 40. 36 D ocket, pp. 4 1 to 44. 37 RTC-13ranch 283 Transmittal dated i\ ugust 16, 2023, Doc ket, p. 55 .

Page 9 of16 Decision C'I'J\ 1\ C N O . 290 WHETHER OR NOT THE RTC CORRECTLY CANCELLED AND SET ASIDE THE NOTICE OF DEFICIENCY DATED NOVEMBER 11,2019, COVERING THE TAXABLE YEAR 2013 TO 2019 IN THE TOTAL AMOUNT OF PHP9,886,755.17. The assessment erroneouslyincluded VATin the gross receipts for purposes ofcomputing LBT Article X, Section 5 of our Constitution recognizes the power of local government units to tax, suf?ject to such guidelines and limitations as the Congress mqy provide. " The said guidelines and limitations are embodied in Section 151 of the Local Government Code (LGC) of 1991, to wit: "SEC. 151. Scope of Taxing Powers. - Except as otherwise provided in this Code, the city may levy the taxes, fees, and charges which the province or municipality may impose: Provided, however, That the taxes, fees and charges levied and collected by highly urbanized and independent component cities shall accrue to them and distributed in accordance with the provisions of this Code. The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or municipality by not more than fifty percent (50%) except the rates of professional and amusement taxes." (Emphasis added) Relative thereto, Section 143(e) and (h) of the LGC of 1991 reads: "SEC. 143. Tax on Business. - The municipality may impose taxes on the following businesses: XXX XXX XXX (e) On contractors and other independent contractors, in accordance with the following schedule: With gross sales or receipts for the preceding Amount of Tax Per calendar year in the amount of: Annum Less than P5,000.00 P27.50 P5,000 .00 or more but less than P1 0,000.00 61.60 10,000.00 or more but less than 15,000.00 104.50 15,000.00 or more but less than 20,000.00 165.00 20,000.00 or more but less than 30,000.00 275.00 30,000.00 or more but less than 40,000.00 385.0~

Page 10 of16 Decision C'i'A i\C NO. 290 40,000.00 or more but less than 50,000.00 550.00 50,000.00 or more but less than 75,000.00 880.00 75,000.00 or more but less than 100,000.00 1,320.00 100,000.00 or more but less than 150,000.00 1,980.00 150,000.00 or more but less than 200,000.00 2,640.00 200,000.00 or more but less than 250,000.00 3,630.00 250,000.00 or more but less than 300,000.00 4,620.00 300,000.00 or more but less than 400,000.00 6,160.00 400,000.00 or more but less than 500,000.00 8,250.00 500,000.00 or more but less than 750,000.00 9,250.00 750,000.00 or more but less than 1,000,000.00 10,250.00 1,000,000.00 or more but less than 2,000,000.00 11,500.00 2,000,000.00 or more at a rate not exceeding fifty percent (50%) of one percent (1 %)." XXX XXX XXX (h) On any business, not otherwise specified in the preceding paragraphs, which the sanggunian concerned may deem proper to tax: Provided, That on any business subject to the excise, value-added or percentage tax under the National Internal Revenue Code, as amended, the rate of tax shall not exceed two percent (2%) of gross sales or receipts of the preceding calendar year. The sanggunian concerned may prescribe a schedule of graduated tax rates but in no case to exceed the rates prescribed herein." (Emphases added) It is clear from the afore-quoted Sections 151, 143(e) and (h), that cities may impose business taxes on contractors and other independent contractors. Relative thereto, Section 131 (h) of the LGC of 1991, declares that a "contractor," includes persons, natural or juridical, not subject to professional tax under Section 139 of this Code, whose activity consists essentially of the sale of all kinds of services for a fee, regardless of whether or not the performance of the service calls for the exercise or use of the physical or mental faculties of such contractor or his employees. In this regard, Section 4 of DOF Local Finance Circular No. 001-1338 states that tollway operators/concessionaires shall be classified under the category of contractors. Note that Section 143 specifically refers to gross receipts which is defined under Section 131 (n) of the LGC of 1991, as follows: "SEC. 131 . Definition ofTerms. -When used in this Title, the term/ 38 SUBJ ECT: Presaibing Guidelines Governing the Poi/Jer ofMunidpalities and Cities to Impo.re Business Tax, Fees and Charges on To//1/Jqy Operators/Concessionaires Pursuant to Sedion 143 (e), Republic Act No. 7160, Othmvise Kno1vn as the Low/ Go!Jerwmnt Code of 1991, and Its Implemmting RH!es and Regulation.r.

Page 11 o f16 Decision CT/\ 1\C NO. 290 XXX XXX XXX (n) 'Gross Sales or Receipts' include the total amount of money or its equivalent representing the contract price, compensation or service fee, including the amount charged or materials supplied with the services and deposits or advance payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person excluding discounts if determinable at the time of sales, sales return, excise tax, and value-added tax (VAT); XXX XXX xxx" (Emphases added) As clearly defined, gross sales or receipts exclude value-added tax (VAT). In the implementation of the above provisions of the LGC, the Bureau of Local Government Finance (BLGF) issued Memorandum Circular No. 01-001- 2017,39 addressed to all provincial, city and municipal treasurers, and assistant treasurers, reminding them of the assessment of LBT for renewal of Business Permit, viz : "It has come to the attention of this Bureau of reported erroneous assessment of taxes and fees in the local governments during the registration and renewal of business permits and licenses. In order to ease the process and prevent undue harassment on the part of the taxpayers, all concerned are reminded of the following: XXX XXX XXX B. Assessment of LBT for Renewal of Business Permit 1. In the absence of audited Financial Statement, the LBT shall be based on the Sworn Declaration of gross sales or receipts by the taxpayers or its Income Tax Returns (ITR) . In case of suspected underdeclaration of gross sales/receipts, the application shall be tagged by the LGU, and the business may be subjected to the examination of books of accounts by the local treasurer, which shall be done after the business renewal period. 2. If applicable, the following shall not form part of the gross sales or receipts: 1. XXX XXX XX~- 39 SUBJECT: Reminders in the Assessment o f th e Local Business Tax (T.B'J ), Registration and Renewal of Business Permits and Licenses and Payment of Community T ax.

Page 12 o f16 Decision CT!\ 1\C NO. 290 11. Determinable discounts at the time of sales, sales returns, excise tax, and value-added tax (VAT); xxx xxx xxx" (Emphasis supplied) In fine, it is apparent in all the afore-quoted provisions, that VAT does not form part of a taxpayer's gross sales or receipts. In this case, the Tax Data and Assessment Forms- Deficienry attached to the Notice of Deficienry dated November 11, 201940 issued by Soriano against NLEX clearly shows that VAT was included in the computation of latter's gross sales used as basis for imposing deficiency LBT for taxable years 2013 to 2019. Thus, Soriano erred when she assessed NLEX with LBT based on its gross sales as reported in its audited financial statements, including VAT in their computation of the same. When the law is clear and free from any doubt or ambiguity, there is no room for construction or interpretation. There is only room for application. Thus, a statute that is clear, plain, and free from ambiguity, must be given its literal meaning and applied without attempted interpretation. 41 The City of Valenzuela and Soriano argue that it is the duty of NLEX to submit the Quarterly VAT Returns or BIR Form 2550-Q to prove its claim that the deficiency VAT is remitted to the BIR and that the same is excluded by the LGC of1991. On the contrary, NLEX claims that the submission of the Quarterly VAT Returns was never an issue during the assessment of the deficiency LBT and the trial of this case. It is only when the Court a quo issued the subject Decision that the City Government and Soriano claim that it should have submitted the Quarterly VAT Returns for them to be able to reconcile the alleged deficiency in the declared gross receipts . NLEX further argues that the non-submission of the Quarterly VAT Returns does not validate the assessment since it erroneously included VAT in the gross receipts. The Court agrees with NLEX. The LGC of 1991, the Rules and Regulations Implementing The Local Government Code of1991, and BLGF Memorandum Circular No. 01-001-2017, are quite clear in enumerating the exclusions from gross sales or receipts and require hardly anything beyond a simple application of their provisions. If VAT is listed ~ 4o Exhibit " 6", RTC D ocket- Vol. 1 (C ivil Case No. 27-V-20) , p. 976. 41 Aces PhilippiNes Cel!ttlar Satellite Co1p. us. Commissiomr ojlNtemal ReuwJle, C .R. No. 226680, f\ugust 30, 2022.

Page 13 of16 Decision C'l'i\ i\C N O . 290 among the exclusions from gross sales or receipts, then Soriano cannot include such in computing the gross sales or receipts of NLEX. Considering that the law is clear and unambiguous, it must be taken to mean exactly what it says and this Court has no choice but to see to it that its mandate is obeyed.42 Thus, the City of Valenzuela and Soriano cannot invoke the definition of gross receipts under DOF Local Finance Circular No. 001-13 considering that it expands or amends the definition under Section 131(n) of the LGC of 1991 in that the enumerated exclusions from gross receipts in the former refer to "VAT paid by the taxpayer" instead of ''VAT", as stated in the latter. Fraud as basis ofassessment beyond the 5-yearprescriptive period Section 194 of the LGC of 1991 provides: "SECTION 194. Periods ofAssessment and Collection.- (a) Local taxes, fees, or charges shall be assessed within five (5) years from the date they became due. No action for the collection of such taxes, fees, or charges, whether administrative or judicial, shall be instituted after the expiration of such period: Provided, That taxes, fees or charges which have accrued before the effectivity of tlus Code may be assessed within a period of three (3) years from the date they became due. (b) In case of fraud or intent to evade the payment of taxes, fees, or charges, the same may be assessed within ten (10) years from discovery of the fraud or intent to evade payment. (c) Local taxes, fees, or charges may be collected within five (5) years from the date of assessment by administrative or judicial action. No such action shall be instituted after the expiration of said period: Provided, however, That taxes, fees or charges assessed before the effectivity of tills Code may be collected within a period of three (3) years from the date of assessment. (d) The tunning of the periods of prescription provided in the preceding paragraphs shall be suspended for the time during whlch: (1) The treasurer is legally prevented from making the assessment of collection/ 42 Abello us. Commissio ner oflntemal Reuw11e, eta!., C .R. No. 120721, February 23 , 2005.

Decision C'l't\ i\ C NO. 290 (2) The taxpayer requests for a reinvestigation and executes a waiver in writing before expiration of the period within which to assess or collect; and (3) The taxpayer is out of the country or otherwise cannot be located." (Emphases supplied) From the foregoing, local taxes, fees, or charges shall be assessed within five (5) years from the date they became due. In case of fraud or intent to evade the payment of taxes, fees, or charges, the same may be assessed within ten (1 0) years from discovery of the fraud or intent to evade payment. In Commissioner ofInternal Revenue vs. Spouses Magaan,43 citing Commissioner of Internal Revenue vs. Fitness fry Design, Inc.,44 the Supreme Court already ruled: "Fraud is a question of fact that should be alleged and duly proven. 'The willful neglect to file the required tax return or the fraudulent intent to evade the payment of taxes, considering that the same is accompanied by legal consequences, cannot be presumed.' Fraud entails corresponding sanctions under the tax law. Therefore, it is indispensablefor the Commissioner ofInternal Revenue to include the basisfor its allegations offraud in the assessment notice. (Emphasis supplied, citations omitted)" (Emphases added) As can be gleaned from the foregoing jurisprudential pronouncements, fraudulent intent to evade the payment of taxes, considering that the same is accompanied by legal consequences, cannot be presumed. It is also indispensable that the basis for allegations of fraud be included in the assessment notice. In this case, other than the bare allegations of the City of Valenzuela and Soriano that NLEX deliberately concealed its proper gross receipts without submission of allegedly excluded VAT, there is nothing in the records that establishes the same. Basic is the rule that bare allegations, unsubstantiated by evidence, are not equivalent to proof, i.e., mere allegations are not evidence.45 A cursory review of the subject Notice ofDeficiency issued by Soriano shows that the basis for her allegations of fraud were not included therein nor was the term "fraud" even mentioned. Consequently, the assessment for taxable years 2013 and 2014 issued on November 11,2019 had already prescribed on January 20,2018 and January 20, 2019, respectively, considering that LBT are paid within the first twenty (20) days ~ ~3 G.R. No. 232663, May 3, 2021. ~~ 799 Phil. 391,412-415 (2016) jPer J. Leonen, Second Divisionj. ~5 Castillo vs. Rep11blic, el a/. , C.R. No. 214064, February 6, 2017.

Page 15 of16 Decision CTA AC NO. 290 ofJanuary or of each subsequent quarter, as the case may be, under Section 167 of the LGC of 1991, to wit: "SECTION 167. Time of Pqyment. - Unless otherwise provided in this Code, all local taxes, fees, and charges shall be paid within the first twenty (20) days of January or of each subsequent quarter, as the case may be. The sanggunian concerned may, for a justifiable reason or cause, extend the time for payment of such taxes, fees, or charges without surcharges or penalties, but only for a period not exceeding six (6) months." In fine, considering that petitioners cannot validly impose the subject deficiency LBT, the Petition for Review must be denied. WHEREFORE, in light of the foregoing considerations, the present Petition for Review is DENIED for lack of merit. Accordingly, the Decision dated November 25, 2022, and the Resolution dated February 23, 2023, both rendered by the RTC- Branch 283, Valenzuela City, in Civil Case No. 27-V-20, are AFFIRMED. SO ORDERED. ~. ~ _, '--- MA. BELEN M. RINGPIS-LIBAN Associate Justice WE CONCUR: MARIARO ustice

Page 16 of16 Decision CTJ\ i\C NO. 290 ATTESTATION I attest that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. MA. BELEN M. RINGPIS-LIBAN Associate Justice Chairperson CERTIFICATION Pursuant to Article VIII, Section 13 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 opinion of the Court. Presiding Justice