MALAYAN EDUCATION SYSTEM, INC. (FORMERLY KNOWN AS MALAYAN COLLEGES, INC. AND PRESENTLY OPERATING UNDER THE NAME OF MAPUA UNIVERSITY) v. CITY OF MANILA, CITY MAYOR, AND CITY TREASURER

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY Special Pirst (J)ivision MALAYAN EDUCATION CTA AC No. 260 SYSTEM, INC. (FORMERLY KNOWN AS MALAYAN (Civil Case No. CV-14-131442) COLLEGES, INC. AND PRESENTLY OPERATING Members: UNDER THE NAME OF MAPUA UNIVERSITY), DEL ROSARIO, P.J., Chairperson} MANAHAN, and Petitioner, REYES-FAJARDO, JJ. -versus- CITY OF MANILA, CITY Promulgated: MAYOR, AND CITY TREASURER, Respondents. X - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ...I~UUU. RESOLUTIO MANAHAN,J.: This resolves respondents' Motion for Reconsideration! filed on June 1, 2023 seeking the reinstatement of the Decision dated October 27, 2021 rendered by the Regional Trial Court (RTC) - Branch 11 , Manila, which ordered petitioner to pay respondents the deficiency local business tax in the amount of Php82,536,920 .97. The instant motion assails the Court's Decision dated May 10, 2023 (Assailed Decision), the dispositive portion of which, reads as follows: "WHEREFORE, premises considered, the Petition for Review is h ereby PARTIALLY GRANTED. The Decis ion da ted October 27, 2 0 2 1 a nd Order d ated December 15, 2 02 1, b oth rendered by t h e Region a l Tria l Court - Bra n ch 11 , Manila, a re REVERSED a nd SET ASIDE. Accordingly , the letter of assessm en t d a ted November 6, 2 013 is h ereby CANCELLED and SET ASIDE. 1 Dock et , CTA AC No . 260 , pp. 178- 188. ~

RESOLUTION CTA AC No. 2 6 0 SO ORDERED." Respondents, argue that there was already a breakdown of assessment as to which taxes were not paid by petitioner as there were entries under "learning institution", "rental" , "Lessor", and the corresponding amount of taxes due, hence, there was sufficient compliance with the law as to the nature of the tax, fee, and charges, and the amount of deficiency tax, surcharge, interest, and penalties were all clearly indicated in the computation sheet. Respondents further argue that petitioner was able to submit its protest letter and argue its case questioning the assessment. On the other hand, petitioner, in its Comment/Opposition (Re: Motion for Reconsideration dated June 1, 2023)2 filed on July 10, 2023, argues that respondent issued the Letter of Assessment (LOA) without clearly disclosing which provision of the Manila Revenue Code serves as the basis of said assessment. Petitioner insists that it was not made aware of respondent's legal basis, and has to resort to mere guesswork to be able to defend its claim against the City of Manila. The Ruling This Court shall determine first whether the instant motion was filed on time. Section 1, Rule 15 of the Revised Rules of the Court of Tax Appeals (RRCTA) provides that: "SE CTION 1. Who may and when to file motion. - Any aggrieved party may seek a reconsideration or n ew trial of any decision, resolution or order of the Court by filing a motion for reconsideration or new trial within fifteen days from the date of receipt of notice of the decision, resolution or order of the Court in question." (Emphasis s u p p l ie d) 2 Docket, pp. 192-20 7. ~

RESOLUTION CTA AC No. 260 The records of the instant case reveal that respondents received the Assailed Decision on May 22, 2023. In accordance with the a bovementioned provision of the RRCTA, respondents h ad fifteen (15) days from receipt of n otice of said decision from May 22, 2 0 23 or u ntil J u ne 6, 2 0 23 with in wh ich to file their m otion for reconsideration . Thus, the filing of responden ts' Motion fo r Reconsideration on J u n e 1, 20 23 was on time. Responden ts in sists that th ere was no violation of petition er's right to due process becau se it was able to file its p rotest letter against th e LOA and was able to argue its case. A scrut iny of the protest letter p articularly on petitioner's argument of lack of du e process would show th at petitioner was asking for a clarification on th e legal b asis of the subject LOA, t o wit :3 "A review of the Formal Deman d and th e Computation would reveal that the assessment fa iled to mention the particular provision of the Manila City Ordinance imposing the alleged business tax upon which the assessment is based. The computation of the tax base attached to the Formal Demand is likewise silent on the particular rate of business tax used in arriving at the deficiencies. Malayan have been requesting the Office of the City Treasurer of Manila to inform Malayan of the basis of the assessment. The only verbal reply which Malayan got from some officials of the City Treasurer of Manila was that the assessment was based on Section 193 of th e LGC, on the with drawal of the tax exemption p rivileges including non-stock and non-profit h ospitals and educational institu tions. Considering that Section 193 of the LGC does not provide for the specific imposition of the business tax, there was no way for Malayan to intelligently answer the assessment given that the Formal Demand and even the officials of the City Treasurer of Manila could not provide them with the basis of the assessment. XXX XXX XXX Considering that the failure of the Formal Demand to specifically inform Malayan of the particular tax ordinance provis ion and the rates used in com puting the deficien cy tax assessments, the Formal Demand violates the provisions of Section 195 of the LGC and violates Malayan's constitutional righ t to due process of the law. The absence of clear information as to the legal basis of th e assessment effectively preven ted Malayan intelligently answering or arguing against the assessment. In the interest of fairness, it is only just to provide Malayan w ith the legal basis of the assessment. 3 RTC Docket, Civil Case No. 14-131442, Folder 2 of 4, Exhibit F, Protest Letter dated January 6, 2014, pp. 138 and 142. ~

RESOLUTION CTA AC No. 260 Otherwise, the Formal Demand would violate Malayan's right to due process of law". (Emphasis supplied} However, respondent City Treasurer in her Letter dated January 7, 2014,4 instead of responding to petitioner's inquiry and providing the particular tax rate in the Manila Revenue Code as the basis of the LOA, merely cited the "Gross on Learning Institution and Rental Income" as the basis of her computation without providing the specific tax rate 1n the Manila Revenue Code which was used in arriving at the deficiency local business tax of petitioner, to wit: "On another point, MCI decries the alleged "lack of due process" since the Formal Demand and Computation failed to provide an explicit basis of the assessment leaving it without an opportunity to intelligently refute the same. Such argument is without merit. To begin with, the accompanying computation evidently provided the particulars: "Gross on Learning Institution and Rental Income" as well as the amounts due or liable. Consequently, the legal requirements under Section 195 of the Local Government Code "to state the nature of the tax and the amount of deficiency including interest" have satisfactorily been met. It likewise bears emphasis that the financial records submitted by MCI were in relation to a Notice to Submit Documents informing it of an audit and examination to be conducted thereon. It therefore cannot feign ignorance of the tax rate or bewail an absence of adequate notice." Respondents must be aware that the essence of due process in administrative proceedings is not only for the petitioner to file a protest letter and have the opportunity to be heard but as well as the opportunity to properly and intelligently prepare for the answer to such charges. As held in Alberta De Joya Iglesias v. The Office ofthe Ombudsman, et al. 5, to wit: Administrative due process demands that the party being charged is given an opportunity to be heard. Due process is complied with "if the party who is properly notified of allegations against him or her is given an opportunity to defend himself or herself against those allegations, and such defense was considered by the tribunal in arriving at its own independent conclusions." In F/ 0 Ledesma v. Court of Appeals: 4 RTC Docket, Civil Case No. 14- 13 1442, Folder 2 of 4 , Exhibit G, p. 145. s G.R. No. 180745, August 30 ,2017 . ~

RESOLUTION CTA AC No. 260 Due process is satisfied when a person is notified of the charge against him a nd given an opportunity to explain or defend himself. In administrative proceedings, the filing of charges and giving reasonable opportunity for the person so charged to answer the accusations against him constitute the minimum requiremen ts of due process. The essence of due process is simply to be h eard, or as a pplied to administrative proceedings, an opportunity to explain one's side, or a n opportunity to seek a reconsideration of the action or ruling complained of. An importa nt component of due process is the right of the accused to be informed of the nature of the charges against him or h er. A proper appraisal of the accusations would giv e the accused an opportunity to adequately prepare for his or her defense. Otherwise, substantial justice would be undermined. (Emphasis supplied) Furthermore, in Commissioner of Internal Revenue v. Azucena T. Reyes6, the Supreme Court ruled that such observance of due process is not merely formal but a su bstantive requirement of law, to wit: "Fourth, petitioner violated the cardina l rule in administrative law that the taxpayer be accorded due process. Not only was th e law h ere disregarded, but no valid notice was sent, eith er. A void assessment bears no valid fruit. The law imposes a substantive , not merely a formal, requirement. To proceed heedlessly with tax collection without first establishing a valid assessment is evidently violative of the cardinal principle in administrat ive investigations: that taxpayers should be able to present the ir case and adduce supporting evidence. xxx" (Emphasis supplied) Based on the said factual findings, it will be difficult for p etitioner to prepare an adequate d efens e against such assessment if it is left guessing as to what particular provision of the Manila Revenue Code it violated in the first place. In the exercise by the state of its power to tax, be it by the National Government or by the local government units , the law should be construed strictly against them and liberally in favor 6 G.R. Nos. 159694 and 16358 1, January 27, 2006. ~

RESOLUTION CTA AC No. 260 of the taxpayer as held in Commissioner of Internal Revenue v. Metro Star Superama, Inc. 7 , to wit: It is an elementary rule enshrined in the 1987 Constitution that no person shall be d eprived of property without due process of law. In balancing the scales between the power of the State to tax and its inherent right to prosecute perceived transgressors of the law on one side, and the constitutional rights of a citizen to due process of law and the equal protection of the laws on the other, the scales must tilt in favor of the individual, for a citizen's right is amply protected by the Bill of Rights under the Constitution. Thus, while "taxes are the lifeblood of the government," the power to tax h as its limits, in spite of a ll its plenitude. Hence in Commissioner ofInternal Revenue v. Algue, Inc. , it was said - Taxes are the lifeblood of t h e government and so should be collected without unnecessary hindra n ce. On the other hand, such collection should be made in accordance with law as any a rbitra riness will n egate the very reason for government itself. It is t h erefore n ecessary to reconcile the apparently conflicting interests of the authorities and th e taxpayers so that the real purpose of taxation, which is the promotion of the common good, may be achieved. XXX XXX XXX It is said that taxes are what we pay for civilized society. Without taxes, the government would be paralyzed for th e lack of th e motive power to activate and operate it. Hence, despite the natural reluctan ce to surrender part of one's hard-earned income to taxing authorities, every p erson who is able to must contribute his share in the running of the government. The government for its part is expected to respond in the form of tangible a nd intangible benefits intended to improve t h e lives of the people and enh a n ce their moral and material values. This symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that it is a n arbitrary method of exaction by those in the seat of power. But even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure. If it is not, then 7 G.R. No. 185371, December 08, 2 010.(M---

RESOLUTION CTA AC No. 260 the taxpayer has a right to complain and the courts will then come to his succor. For all the awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate x x x that the law h as not been observed. (Emphasis supplied) Further, in the cited case of Luz R. Yamane, in her capacity as the City Treasurer ofMakati City v. BA Lepanto Condominium Corporation8 in the Assailed Decision, th e Supreme Court ruled that even if Section 195 of the Local Government Code of 1991 does not expressly require the assessment notice to specifically cite the provision of the ordinance, reference to the local tax ordinance is vital considering that the Manila Revenue Code provides multiple provisions on business taxes and at varying rates, to wit: "Ostensibly, the notice of assessmen t, which sta nds as the first instance the taxpayer is officially made aware of the pending tax liability, s h ould be sufficiently informative to apprise the taxpayer the legal basis of the tax. Section 195 of the Local Government Code does not go as far as to expressly require that t h e notice of assessmen t specifically cite the provision of th e ordina n ce involved but it does require th at it state the n ature of the tax, fee or charge, th e amount of deficiency, surcharges, interests a nd penalties. In this case, the n otice of assessment sent to th e Corporation did state that the assessment was for business taxes, as well as the a mount of the assessment. There may have been prima facie complia n ce with th e requirement under Section 195. However in this case, the Revenue Code provides multiple provisions on business taxes, and at varying rates. Hence, we could appreciate the Corporation's confusion, as expressed in its protest, as to the exact legal basis for the tax. Reference to the local tax ordinance is vital, for the power of local government units to impose local taxes is exercised through the appropriate ordinance enacted by the sanggunian, and not by the Local Government Code alone. What determines tax liability is the tax ordinance, the Local Government Code being the enabling law for the local legislative body." (Emphasis supplied) Thus, it is incumbent upon respondents to refer and state the particular provision of the Manila Revenue Code in the LOA it issues to their taxpayers b ecause just like the revenue code cited in the abovemen tioned case, it consists of multiple provisions on business taxes and at varying rates. s G.R. NO. 154993, October 25, 2005. ~

RESOLUTION CTA AC No. 260 WHEREFORE, premises considered, respondents' Motion for Reconsideration is hereby DENIED for lack of merit. SO ORDERED. ~N~i �~~ MANAHAN Associate Justice WE CONCUR: Presiding Justice 1m. ~ ~ r~J�, ~Fa,'~ MARIAN REIEs-FAJARDo Associate Justice