cta_decision CTA Case No. AC-297AC-297 2024-11-18

NLEX CORPORATION (FORMERLY MANILA NORTH TOLLWAYS CORPORATION) v. THE CITY OF VALENZUELA, HON. ADELIA SORIANO, in her capacity as City Treasurer, and ATTY. ULYSSES L. GALLEGO, in his capacity as Officer-in-Charge of the Business Permit and Licensing Office

REPUBLIC OF THE PHILIPPINES Court of Tax Appeals QUEZON CITY SECOND DIVISION NLEX CORPORATION CTA AC NO. 297 (FORMERLY MANILA NORTH Civil Case No. C-25725 (2020) TOLLWAYS CORPORATION) Present: Petitioner, vs. RINGPIS-LIBAN, Chairperson, MODESTO-SAN PEDRO, and THE CITY OF VALENZUELA, FERRER-FLORES, JJ. HON. ADELIA SORIANO, in her capacity as City Treasurer, and ATTY. ULYSSES L. GALLEGO, in his capacity as Officer-in- Charge of the Business Permit Promulgated: and Licensing Office, Respondents. ~-~~ x-- -------------------------------------- - - - - - - : ":- - - - - X DECISION FERRER-FLORES, J.: Before this Court is a Petition for Review filed by petitioner NLEX Corporation (Formerly Manila North Tollways Corporation), 1 partly assailing the Decision dated March 13, 20232 (assailed Decision) and Order dated May 22,2023 (assailed Order), 3 both issued by the Regional Trial Court of Caloocan City- Branch 121 (RTC/court a quo), in Civil Case No. C- 25725 (For: Annulment of Assessment of Local Business Taxes), entitled "NLEX Corporation (formerly Manila Tollways Corporation), Plaintiff, versus The City of Valenzuela, Hon. Adelia Soriano, in her capacity as City Treasurer, and Atty. Ulysses L. Gallego, in his capacity as Officer-in-Charge of the Business Permit and Licensing Office, Defendants ", the dispositive portions of which respectively read as follows: , 1 Docket, pp. 5 to 28 . 2 RTC Docket (Civil Case No. C-25725) - Volume II, pp. 954 to 972. 3 RTC Docket (Civil Case No. C-25725)- Volume II, pp. 1009 to 1010.

DECISION CTA AC No. 297 NLEX Corporation (Formerly Manila North Tal/ways Corporation) vs. The City of Valenzuela, Han. Adelia Soriano, in her capacity as City Treasurer and Atty. Ulysses L. Gallego, in his capacity as Officer-in-Charge ofthe Business Permit and Licensing Office Page 5 of34 Respondents then filed their Answer on October 19, 2020, 17 interposing, by way of affirmative and other defenses, that the Court has no jurisdiction over the subject matter of the complaint; that the petitioner had filed and engaged an erroneous legal recourse; and, that petitioner is liable to pay the appropriate and assessed local business tax. Petitioner filed its Pre-Trial Briefon November 27, 2020 18 while Pre- Trial Brief (for the Respondent) was filed on December 1, 2020. 19 The Pre- Trial was held on February 4, 2021.20 The Pre-Trial Order was issued on even date. 21 Trial then ensued, with both parties presenting their respective documentary and testimonial evidence. On March 13, 2023, the Court a quo promulgated the assailed Decision,22 which, inter alia, denied the refund of the alleged LBT and other fees for TYs 2012 to 2019, amounting to P3,841,779.85. On April 28, 2023, petitioner filed its Motion for Partial Reconsideration (Re: Decision dated 13 March 2023),23 while respondents filed their Motion for Partial Reconsideration on May 2, 2023.24 Thereafter, petitioner's Comment (Re: Motion for Partial Reconsideration dated 28 April 2023) was posted on May 15,2023.25 On May 22, 2023, the Court a quo issued the assailed Order, denying both Motions. 26 Hence, the instant Petition for Review. THE PROCEEDINGS BEFORE THIS COURT Petitioner filed the present Petition for Review on July 6, 2023.27 \ 17 RTC Docket (Civil Case No. C-25725), pp. 213 to 224. 18 RTC Docket (Civil Case No . C-25725), pp. 244 to 264. 19 RTC Docket (Civil Case No . C-25725), pp. 268 to 275 . 20 Minutes dated February 4, 2021 , RTC Docket (Civil Case No. C-25725), p. 284. 2 1 RTC Docket (Civil Case No . C-25725), pp. 285 to 291. 22 RTC Docket (Civil Case No. C-25725)- Vol. II, pp. 954 to 972. 23 RTC Docket (Civil Case No . C-25725) - Vol. TT, pp. 973 to 984. 24 RTC Docket (Civil Case No . C-25725)- Vol. II, pp. 986 to 993 . 25 RTC Docket (Civil Case No. C-25725)- Vol. II, pp. 994 to 1007. 26 RTC Docket (Civil Case No. C-25725)- Vol. II, pp. 1009 to 1010. 27 Docket, pp. 5 to 28 .

DECISION CTA AC No. 297 NLEX Corporation (Formerly Manila North Tal/ways Corporation) vs. Th e City of Valenzuela, Han. Adelia Soriano, in her capacity as City Treasurer and Atty. Ulysses L. Gallego, in his capacity as Officer-in-Charge ofthe Business Permit and Licensing Office Page 8 of34 The Court a quo has jurisdiction over the claim for refund ofthe LBT. Respondents contend that the Court a quo has no jurisdiction as the claim for refund is a tax collection case involving final and executory assessments, and the total amount claimed in relation to signages assessment exceeds the threshold of P1,000,000.00 provided under Section 7(c)(l) of Republic Act (R.A.) No. 1125,36 as amended by R.A. No. 9282.37 Consequently, this Court, allegedly, also has no jurisdiction over the present case considering that it does not involve a Decision originally decided by the RTC in the exercise of its original or appellate jurisdiction. Respondents' argument is erroneous. First, a claim for refund is totally distinct from a tax collection case under Section 7(c)(l) ofR.A. No. 1125, as amended by R.A. No. 9282. One notable difference is that the claim for refund is filed by a taxpayer to seek for the return or recovery of the amount it allegedly erroneously paid to the government, while a tax collection case is pursued by the taxing authority to enforce the payment of required taxes from a taxpayer in accordance with tax laws and rules. To stress, the authority to assess and collect taxes rests with the government agency in charge of collecting national internal revenue taxes, fees, and charges. Notably, the Bureau of Internal Revenue (BIR) is the primary agency tasked to assess and collect proper taxes, and to administer and enforce the National Internal Revenue Code (NIRC) of 1997, as amended.38 On the other hand, in local taxation, the taxes, fees, and charges are collected by the local treasurer, or its duly authorized deputies in accordance with Section 17039 ofthe Local Government Code (LGC) of 1991. This authority by the local treasurer necessarily includes the filing of judicial action in any court of competent jurisdiction for the collection of local taxes, fees, or charges and related surcharges and interest resulting from delinquency 36 An Act Creating the Court of Tax Appeals . 37 An Act Expanding the Jurisdiction of the Court of Tax Appeals, Elevating its Rank to the Level of a Collegiate Court with Special Jurisdiction and Enlarging its Membership, Amending for the Purpose Certain Sections ofRA No. 1125, as amended, Otherwise Known as the Law Creating CTA, and for Other Purposes. 38 Commissioner ofInternal Revenue vs. Yumex Philippines Corporation, G.R. No . 222476, May 05 , 2021 . 39 SEC. 170. Collection of Local Revenues by Treasurer. - All local taxes, fees, and charges shall be collected by the provincial, city, municipal, or barangay treasurer, or their duly authorized deputies. The provincial, city or municipal treasurer may designate the barangay treasurer as his deputy to collect local taxes, fees, or charges. In case a bond is required for the purpose, the provincial, city or municipal government shall pay the premiums thereon in addition to the premiums of bond that may be required under this Code.

DECISION CTA AC No . 297 NLEX Corporation (Formerly Manila North Tal/ways Corporation) vs. The City of Valenzuela, Han. Adelia Soriano, in her capacity as City Treasurer and Atty. Ulysses L. Gallego, in his capacity as Officer-in-Charge ofthe Business Permit and Licensing Office Page 9 of34 to be pursued by the LGU concerned pursuant to Sections 17440 and 18341 of the LGC of 1991. In this case, petitioner already paid the amount albeit under protest; hence, there is nothing more for respondents to collect as petitioner already paid the assessed amount. Clearly, this is a claim for refund where a taxpayer is seeking the return of the amount it allegedly erroneously paid. Second, there is yet no final and executory assessment to speak of. Section 7(c)(1) of R.A. No. 1125, as amended, provides that this Court has exclusive original jurisdiction over tax collection cases involving final and executory assessments for taxes, fees, charges and penalties where the principal amount claimed is at least P1 ,000,000.00, to wit: SEC. 7. Jurisdiction.- The CTA shall exercise: XXX XXX XXX (c) Jurisdiction over tax collection cases as herein provided: 1. Exclusive original jurisdiction in tax collection cases involving final and executory assessments for taxes, fees, charges and penalties: Provided, however, That collection cases where the principal amount of taxes and fees, exclusive of charges and penalties, claimed is less than One million pesos (Pl ,000,000.00) shall be tried by the proper Municipal Trial Court, Metropolitan Trial Court and Regional Trial Court. xxx xxx xxx (Emphasis supplied) Thus, even granting that the signage assessment imposed by respondent exceeds the amount ofP1,000,000.00, the same is not yet final and executory as the payment thereof was made under protest as evidenced by the OR No. 643185742 with a phrase "under protest" appearing on its face and its \ 40 SEC. 174. Civil Remedies . - The civil remedies for the collection of local taxes, fees, or charges, and related surcharges and interest resulting from delinquency shall be: (a) By administrative action thru distraint of goods, chattels, or effects, and other personal property of whatever character, including stocks and other securities, debts, credits, bank accounts, and interest in and rights to personal property, and by levy upon real property and interest in or rights to real property; and (b) By judicial action. Either of these remedies or all may be pursued concurrently or simultaneously at the discretion of the local government unit concerned. (Emphasis supplied) 41 SEC. 183 . Collection ofDelinquent Taxes, Fees, Charges, or other Revenues through Judicial Action. - The local government unit concerned may enforce the collection of delinquent taxes, fees, charges or other revenues by civil action in any court of competent jurisdiction. The civil action shall be filed by the local treasurer within the period prescribed in Section 194 of this Code. (Emphasis supplied) 42 Exhibit "C-2", RTC Docket (Civil Case No . C-25725)- Vol. I, p. 482 ; and Exhibit "25", RTC Docket (Civil Case No. C-25725)- Vol. II , p. 680 .

DECISION CTA AC No. 297 NLEX Corporation (Formerly Manila North Tollways Corporation) vs. The City of Valenzuela, Hon. Adelia Soriano, in her capacity as City Treasurer and Atty. Ulysses L. Gallego, in his capacity as Officer-in-Charge ofthe Business Permit and Licensing Office Page 10 of34 Complaint43 praying for its cancellation and refund timely filed before the Court a quo. Finally, Section 196 of the LGC of 1991 clearly applies to the present case considering that the Billing Form dated November 11, 2019 is not tantamount to the "notice of assessment" under Section 195 of said Code. Sections 195 and 196 of the LGC of 1991 provide as follows: Section 195. Protest ofAssessment.- When the local treasurer or his duly authorized representative finds that correct taxes, fees, or charges have not been paid, he shall issue a notice of assessment stating the nature of the tax, fee, or charge, the amount of deficiency, the surcharges, interests and penalties. Within sixty (60) days from the receipt of the notice of assessment, the taxpayer may file a written protest with the local treasurer contesting the assessment; otherwise, the assessment shall become final and executory. The local treasurer shall decide the protest within sixty (60) days from the time of its filing. Ifthe local treasurer finds the protest to be wholly or partly meritorious, he shall issue a notice cancelling wholly or partially the assessment. However, if the local treasurer finds the assessment to be wholly or partly correct, he shall deny the protest wholly or partly with notice to the taxpayer. The taxpayer shall have thirty (30) days from the receipt of the denial of the protest or from the lapse of the sixty (60)-day period prescribed herein within which to appeal with the court of competent jurisdiction otherwise the assessment becomes conclusive and unappealable. Section 196. Claim for Refund of Tax Credit. - No case or proceeding shall be maintained in any court for the recovery of any tax, fee, or charge erroneously or illegally collected until a written claim for refund or credit has been filed with the local treasurer. No case or proceeding shall be entertained in any court after the expiration of two (2) years from the date of payment of such tax, fee, or charge, or from the date the taxpayer is entitled to a refund or credit. Sections 195 and 196 ofthe LGC of 1991 provide avenues for obtaining refunds of local taxes. Section 195 implicitly allows for refunds as a consequence of a successful protest against a tax assessment, while Section 196 explicitly serves as the dedicated remedy for claims of tax refund or credit. In seeking a refund through Section 195, it is essential that the assessment notice from the local treasurer contains the factual and legal bases of the assessment. Without this, there would be no tax assessment to contest. As a result, the provisions of Section 196 would apply. 44 \ 43 RTC Docket (Civil Case No. C-25725), pp. I to 21. 44 Hon. Lourdes R. Jose, in her capacity as City Treasurer ofCity ofCaloocan vs. Tigerway Facilities and Resources, Inc., G.R No. 247331, February 26,2024.

DECISION CTA AC No. 297 NLEX Corporation (Form erly Manila North Tollways Corporation) vs. Th e City of Valenzuela, Han . Adelia Sorian o, in her capacity as City Treasurer and Atty. Ulysses L. Gallego, in his capacity as Officer-in-Charge ofthe Business Permit and Licensing Office Page II of34 In this case, Billing Form (Revised Billing Statement) dated November 11, 2019,45 was only issued by License Officer III, Angelina J. Reyes, and approved by respondent Atty. Gallego, in his capacity as the OIC ofthe BPLO against petitioner for TYs 2012 to 2019. However, his authority to issue or approve the issuance of the alleged assessment was not established. Further, although the Billing Form stated that the amount of tax and penalty was for the signage services, there was no express mention of the factual and legal bases including the provisions of the Valenzuela City Revenue Code upon which the Revised Assessment was based. To reiterate, Section 195 only finds application in cases where a notice of assessment is issued to the taxpayer, thereby presupposing the existence of a valid tax assessment.46 Hence, the Billing Form cannot be considered the "notice of assessment" issued by the local treasurer to render Section 195 of the LGC of 1991 operative. Inasmuch as there was no "notice of assessment" issued by respondent City Treasurer to petitioner in this case and petitioner herein claims that it erroneously paid the LBT, then Section 196 of the LGC of 1991 is the applicable provision. To reiterate, Section 196 of the LGC of 1991 provides that no case or proceeding shall be maintained in any court for the recovery of any tax, fee, or charge erroneously or illegally collected until a written claim for refund or credit has been filed with the local treasurer and no case or proceeding shall be entertained in any court after the expiration of two years from the date of payment of such tax, fee, or charge, or from the date the taxpayer is entitled to a refund or credit. In this case, it is shown that petitioner paid under protest the LBT on signage services on November 11, 201947 in the total amount of P3,841,779.85. Counting from the said date, petitioner had until November 11, 2021 to file its administrative and judicial claims for refund, with the administrative claim for refund initiated first before the judicial claim. Notably, petitioner filed its Revised Protest ofthe Local Business Taxes and Other Fees Assessment for TYs 2005 to 2019 with Claim for Refund against the Revised Assessment issued by the BPLO, Valenzuela City before respondent Soriano on January 10, 202048 and the judicial claim for refund filed before the Court a quo on June 30, 2020.49 Thus, both administrative and judicial claims fell within the two-year prescriptive period. \ 45 Exhibits " B-3" and "B-4", RTC Docket (Civil Case No. C-25725) - Vol. I, pp. 479 to 480 . 46 Han. Lourdes R. Jose, in her capacity as City Treasurer ofCity ofCaloocan vs. Tigerway Facilities and Resources, Inc., supra. 47 Exhibit "C-2", RTC Docket (Civil Case No. C-25725) - Vol. I, p. 482; and Exhibit "25", RTC Docket (Civil Case No. C-25725)- Vol. II, p. 680. 48 Annex "A" RTC Docket (Civil Case No . C-25725), pp. 44 to 49. 49 RTC Docket (Civil Case No . C-25725), pp. I to 21.

DECISION CTA AC No. 297 NLEX Corporation (Formerly Manila North Tollways Corporation) vs. The City of Valenzuela, Hon. Adelia Soriano, in her capacity as City Treasurer and Atty. Ulysses L. Gallego, in his capacity as Officer-in-Charge ofthe Business Permit and Licensing Office Page 12 of34 Undoubtedly, the Court a quo has jurisdiction over the claim for refund filed by petitioner in relation to its LBT erroneously paid on its income earned from signages. Now, the Court shall determine whether petitioner is entitled to refund for the amount of signage services and other charges or fees, including their corresponding penalties in the total amount of P3,841,779.85, as evidenced by OR No. 6431857,50 broken down, as follows: OR No. 6431857 Nature of Collection Amount I l �}g~!:l:g~ �~-~.~.~~�~�� ........)..... p ! .?~?. . ~?~:?.~..! ( J?.!:l:~!:l:I.?:g~y~!~~~~~~. --�� .....J...... -- -- . .?.99.:.99 ! � or's Permit 1 9 050.00 540.16 270.08 666.33 _:P=--=.3,c8__:_41::2,:_:_77.:_:9:...:..8::.::5:...Ji ...... ....................................................................... . .... .............!L __ For purposes of our discussion, the above assessments shall be categorized into two groups- (1) the Barangay Clearance, Mayor's Permit, Ecological and Waste Management Charges, Peace & Order Charge, Dr. Pio Scholarship Fund, Fire Inspection Fee and Penalties for Operating without Permit (collectively referred as "Other Charges") and (2) Signage Services, Surcharge & Interest and Tax Credited. The Other Charges are mere regulatory fees and not taxes; hence, the Court has no jurisdiction to rule on the refundability ofthe same. Jurisdiction is defined as the power and authority of a court to hear, try, and decide a case. In order for the court or an adjudicative body to have authority to dispose of the case on the merits, it must acquire, among others, jurisdiction over the subject matter. It is axiomatic that jurisdiction over the subject matter is the power to hear and determine the general class to which the proceedings in question belong; it is conferred by law and not by the consent or acquiescence of any or all of the parties or by erroneous belief of\ 50 Exhibit "C-2", RTC Docket (Civil Case No. C-25725)- Vol. I, p. 482; and Exhibit "25", RTC Docket (Civil Case No. C-25725)- Vol. II, p. 680.

DECISION CTA AC No. 297 NLEX Corporation (Formerly Manila North Tollways Corporation) vs. The City of Valenzuela, Hon. Adelia Soriano, in her capacity as City Treasurer and Atty. Ulysses L. Gallego, in his capacity as Officer-in-Charge ofthe Business Permit and Licensing Office Page 13 of34 the court that it exists. Thus, when a court has no jurisdiction over the subject matter, the only power it has is to dismiss the action.51 Section 7(a)(3) of R.A. No. 1125, as amended by R.A. No. 9282, confers jurisdiction to this Court relative to decisions, orders or resolutions of regional trial courts in local tax cases, to wit: SEC. 7. Jurisdiction . - The CTA shall exercise: (a) Exclusive appellate jurisdiction to review by appeal, 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 them in the exercise of their original or appellate jurisdiction; xxx (Emphasis and underscoring added) Based on the foregoing, the appellate jurisdiction of this Court over decisions, orders, or resolutions of the regional trial court becomes operative when the latter has ruled on a local tax case, i.e., one which is in the nature of a tax case or which primarily involves a tax issue. Local taxes include those involving real property tax (RPT), which is governed by Book II, Title II of LGC of 1991. Among the possible issues are the legality or validity of the RPT assessment; protests of assessments; disputed assessments, surcharges, or penalties; legality or validity of a tax ordinance; claims for tax refund/credit; claims for tax exemption; actions to collect the tax due; and even prescription of assessments.52 Moreover, when the appeal comes from a judicial remedy which questions the authority of the local government to impose the tax, the aforequoted Section 7(a)(3) ofR.A. No. 1125, as amended, applies.53 The question then is whether the Court a quo resolved a local tax case, in order to fall within the ambit ofthis Court's exclusive appellate jurisdiction, insofar as the present refund claim is concerned. This question, in turn, depends ultimately and particularly on whether the assessment of the Other Charges imposed by respondents are in fact taxes. "\ 51 Mitsubishi Motors Philippines Corporation vs. Bureau ofCustoms, G.R. No. 209830, June 17, 2015 . 52 Herarc Realty Corporation vs. The Provincial Treasurer ofBatangas, eta/., G.R . No. 210736, September 5, 2018, citing Salva vs. Magpile, G.R. No. 220440, November 8, 2017, and Ignacio vs. Office ofthe City Treasurer ofQuezon City, G.R. No. 221620, September II, 2017. 53 National Power Corporation vs. Municipal Government ofNavotas, eta!. , G.R. No. 192300, November 24, 2014.

DECISION CTA AC No. 297 NLEX Corporation (Formerly Manila North Tollways Corporation) vs. Th e City of Valenzuela, Hon. Adelia Soriano, in her capacity as City Treasurer and Atty. Ulysses L. Gallego, in his capacity as Officer-in-Charge ofthe Business Permit and Licensing Office Page 14 of34 We answer both issues in the negative. Article X, Section 5 of the Constitution grants LGUs the power to levy taxes, viz.: SECTION 5. Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local governments. In relation thereto, Section 16 of the LGC of 1991 grants LGUs the powers necessary to promote the general welfare, to wit: SECTION 16. General Welfare.- Every local government unit shall exercise the powers expressly granted, those necessarily implied therefrom, as well as powers necessary, appropriate, or incidental for its efficient and effective governance, and those which are essential to the promotion of the general welfare. Within their respective territorial jurisdictions, local government units shall ensure and support, among other things, the preservation and enrichment of culture, promote health and safety, enhance the right of the people to a balanced ecology, encourage and support the development of appropriate and self-reliant scientific and technological capabilities, improve public morals, enhance economic prosperity and social justice, promote full employment among their residents, maintain peace and order, and preserve the comfort and convenience of their inhabitants. (Emphasis supplied) Hence, not only can LGUs levy local taxes, but they can also impose all other fees or charges necessary to promote the general welfare. Section 131 of the LGC of 1991 defines the term "charges " as pecuniary liability, as rents or fees against persons or property, while the term ''fee" means "a charge fixed by law or ordinance for the regulation or inspection of a business or activity". In this regard, Section 143 of the LGC of 1991 provides for the taxes on businesses that may be imposed by cities and municipalities; while Section 147 of the same Code provides for the fees and charges that may be imposed by cities and municipalities on business and occupation, to wit: SECTION 147. Fees and Charges. - The municipality may impose and collect such reasonable fees and charges on business and occupation and, except as reserved to the province in Section 139 of this Code, on the practice of any profession or calling, commensurate with the cost of regulation, inspection and licensing before any person may\

DECISION CTA AC No. 297 NLEX Corporation (Formerly Manila North Tollways Corporation) vs. The City of Valenzuela, Han. Adelia Soriano, in her capacity as City Treasurer and Atty. Ulysses L. Gallego, in his capacity as Officer-in-Charge ofthe Business Permit and Licensing Office Page 15 of34 engage in such business or occupation, or practice such profession or calling. (Emphasis supplied) Furthermore, Section 458 of the LGC of 1991 grants the sangguniang panlungsod the power to enact ordinances for the general welfare of the city and its inhabitants, including the regulation relative to the use of land, buildings and structures within the city in order to promote the general welfare, to wit: SECTION 458. Powers, Duties, Functions and Compensation.- (a) The sangguniang panlungsod, as the legislative body of the city, shall enact ordinances, approve resolutions and appropriate funds for the general welfare of the city and its inhabitants pursuant to Section 16 of this Code and in the proper exercise of the corporate powers of the city as provided for under Section 22 of this Code, and shall: XXX XXX XXX (4) Regulate activities relative to the use of land, buildings and structures within the city in order to promote the general welfare and for said purpose shall: XXX XXX XXX (i) Declare, prevent or abate any nuisance; (ii) Require that buildings and the premises thereof and any land within the city be kept and maintained in a sanitary condition; impose penalties for any violation thereof; or, upon failure to comply with said requirement, have the work done at the expense of the owner, administrator or tenant concerned; or require the filling up of any land or premises to a grade necessary for proper sanitation; (Emphasis supplied) In Smart Communications Inc. vs. Municipality of Malvar, Batangas,54 one of the issues raised was whether the fees imposed under a particular ordinance are in fact taxes. The Supreme Court therein held: Since the main purpose of Ordinance No. 18 is to regulate certain construction activities of the identified special projects, which included "cell sites" or telecommunications towers, the fees imposed in Ordinance No. 18 are primarily regulatory in nature, and not primarily revenue- raising. While the fees may contribute to the revenues of the Municipality, this effect is merely incidental. Thus, the fees imposed in Ordinance No. 18 are not taxes. In Progressive Development Corporation v. Quezon City, the Court declared that "if the generating of revenue is the primary purpose and \ 54 G.R. No. 204429, February 18, 2014.

DECISION CTA AC No. 297 NLEX Corporation (Formerly Manila North Tal/ways Corporation) vs. The City of Valenzuela, Han. Adelia Soriano, in her capacity as City Treasurer and Atty. Uly sses L. Gallego, in his capacity as Officer-in-Charge ofthe Business Permit and Licensing Office Page 16 of34 regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that incidentally revenue is also obtained does not make the imposition a tax." In Victorias Milling Co. , Inc. v. Municipality ofVictorias, the Court reiterated that the purpose and effect of the imposition determine whether it is a tax or a fee, and that the lack of any standards for such imposition gives the presumption that the same is a tax. We accordingly say that the designation given by the municipal authorities does not decide whether the imposition is properly a license tax or a license fee. The determining factors are the purpose and effect of the imposition as may be apparent from the provisions of the ordinance. Thus, "[w]hen no police inspection, supervision, or regulation is provided, nor any standard set for the applicant to establish, or that he agrees to attain or maintain, but any and all persons engaged in the business designated, without qualification or hindrance, may come, and a license on payment of the stipulated sum will issue, to do business, subject to no prescribed rule of conduct and under no guardian eye, but according to the unrestrained judgment or fancy of the applicant and licensee, the presumption is strong that the power of taxation, and not the police power, is being exercised." (Emphasis supplied) Relative thereto, it has been held that the power to "regulate" means the power to protect, foster, promote, preserve, and control, with due regard for the interests, first and foremost, of the public, then of the utility and of its patrons.55 The nature and the parameters of the exercise of police power were explained by the High Court in Acebedo Optical Company, Inc. vs. The Honorable Court ofAppeals, et al., 56 as follows: Police power as an inherent attribute of sovereignty is the power to prescribe regulations to promote the health, morals, peace, education, good order or safety and general welfare of the people. The State, through the legislature, has delegated the exercise of police power to local government units, as agencies of the State, in order to effectively accomplish and carry out the declared objects of their creation. This delegation of police power is embodied in the general welfare clause ofthe Local Government Code which provides: XXX XXX XXX The scope of police power has been held to be so comprehensive as to encompass almost all matters affecting the health, safety, peace, order, morals, comfort and convenience of the community. Police power is 55 Gerochi, eta/. vs. Department ofEnergy, G.R. No . 159796, July 17, 2007, citing Philippine Association ofService Exporters, Inc. vs. Han. Ruben D. Torres, G.R. No. 101279, August 6, 1992, citing Philippine Communications Satellite Corporation v. Alcuaz, 180 SCRA 218 (1989). 56 G.R. No. 100 !52, March 31, 2000.

DECISION CTA AC No. 297 NLEX Corporation (Formerly Manila North Tollways Corp oration) vs. The City of Valenzuela, Han. Adelia Soriano, in her capacity as City Treasurer and Atty. Ulysses L. Gallego, in his cap acity as Officer-in-Charge of the Business Perm it and Licensing Office essentially regulatory in nature and the power to issue licenses or grant business permits, if exercised for a regulatory and not revenue-raising purpose, is within the ambit of this power. XXX XXX XXX (T)he issuance of business licenses and permits by a municipality or city is essentially regulatory in nature. The authority, which devolved upon local government units to issue or grant such licenses or permits, is essentially in the exercise of the police power of the State within the contemplation of the general welfare clause of the Local Government Code. (Emphasis supplied) Additionally, the Supreme Court, in Progressive Development Corporation vs. Quezon City,57 distinguished tax from a license or permit fee in this wise: The term "tax" frequently applies to all kinds of exactions of monies which become public funds . It is often loosely used to include levies for revenue as well as levies for regulatory purposes such that license fees are frequently called taxes although license fe e is a legal concept distinguishable from tax: the former is imposed in the exercise of police power primarily for purposes ofregulation, while the latter is imposed under the taxing power primarily for purposes of raising revenues. Thus, if generating of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that incidentally revenue is also obtained does not make the imposition a tax. To be considered a license fee, the imposition questioned must relate to an occupation or activity that so engages the public interest in health, morals, safety and development as to require regulation for the protection and promotion of such public interest; the imposition must also bear a reasonable relation to the probable expenses of regulation, taking into account not only the costs of direct regulation but also its incidental consequences as w ell. When an activity, occupation or profession is of such a character that inspection or supervision by public officials is reasonably necessary for the safeguarding and furtherance of public health, morals and safety, or the general welfare, the legislature may provide that such inspection or supervision or other form of regulation shall be carried out at the expense of the persons engaged in such occupation or performing such activity, and that no one shall engage in the occupation or carry out the activity until a fee or charge sufficient to cover the cost of the inspection or supervision has been paid. (Emphasis supplied) Based on the foregoing jurisprudential pronouncements, it can be surmised that the purpose of an imposition will determine its nature as either a tax or a fee. If the purpose is primarily revenue, or if revenue is at least one\ 57 G.R. No . L-36081 , April24, 1989.

DECISION CTA AC No. 297 NLEX Corporation (Formerly Manila North Tollways Corporation) vs. The City of Valenzuela, Han. Adelia Soriano, in her capacity as City Treasurer and Atty. Ulysses L. Gallego, in his capacity as Officer-in-Charge ofthe Business Permit and Licensing Office Page 18 of34 of the real and substantial purposes, then the exaction is properly classified as an exercise ofthe power to tax. 58 On the other hand, ifthe purpose is primarily to regulate, then it is deemed an exercise of police power in the form of a fee, even though revenue is incidentally generated.59 Stated otherwise, if generation of revenue is the primary purpose, the imposition is a tax, but, if regulation is the primary purpose, the imposition is properly categorized as a regulatory fee. 60 Thus, to determine whether the imposition for the Other Charges is a tax or a fee, the Court deems it necessary to examine the alleged legal bases of the assessments. Apparently, the LBT assessment against petltwner for the signage services and other charges arose from the letter dated March 23, 201861 by Architect Padilla requiring petitioner to secure sign permits from the Office of the Building Official for the signages it maintained along the NLEX in Valenzuela City, pursuant to P.D. No. 1096 or the National Building Code of the Philippines, we quote: This is in relation to the SIGNS and SIGNAGES along the North Luzon Expressway (NLEX). Please be informed that as per an ocular inspection conducted by this office, many signs and signage were notices along NLEX. Further, as per a verification conducted, no records of the sign permits and were found as to some of the aforementioned signs and signages, Under SECTION 301 of PD 1096 or the National Building Code of the Philippines and its IRR, SECTION301 No person, firm or corporation, including any agency or instrumentality of the government shall construct, alter, repair, convert, use, occupy, move, demolish, and add any building/structure or any portion thereof or cause the same to be done, without first obtaining a building permit therefor from the Building Official assigned in the place where the subject building/structure is located or to be done. ~ 58 City of Cagayan De Oro vs. Cagayan Electric Power & Light Co., Inc., G.R. No. 224825, October 17, 2018, citing Philippine Airlines, Inc. vs. Edu, G.R. No. L-41383, August 15 , 1998. 59 City ofCagayan De Oro v. Cagayan Electric Power & Light Co., Inc., G.R. No. 224825, October 17, 2018, citing Chevron Philippines, Inc. vs. Bases Conversion Development Authority, G.R. No. 173863, September 15,2010. �6 City ofCagayan De Oro v. Cagayan Electric Power & Light Co. , Inc., G.R. No. 224825, October 17, 2018, citing Gerochi, et al. vs. Department ofEnergy, G.R. No. 159796, July 17, 2007. 61 Exhibit "22", RTC Docket (Civil Case No. C-25725)- Vol. II, p. 654.

DECISION CTA AC No. 297 NLEX Corporation (Formerly Manila North Tal/ways Corporation) vs. The City of Valenzuela, Han. Adelia Soriano, in her capacity as City Treasurer and Atty. Ulysses L. Gallego, in his capacity as Officer-in-Charge ofthe Business Permit and Licensing Office Page 19 of34 Accordingly, a SIGN PERMIT must be obtained from the Building Official assigned in the place where the subject SIGN or SIGNAGE is located or to be done. In view of the foregoing, you are hereby ordered to submit copies of the SIGN PERMITS of the SIGNS and SIGNAGES along NLEX, m Valenzuela City, within five (5) days upon receipt hereof. Failure to comply or wilful disregard of this notice would compel this office to declare the structures as ILLEGAL/DANGEROUS/ NUISANCE, initiate the issuance of a DISMANTLING/ DEMOLITION ORDER for the subject structures, and endorse this issue to the City Legal Office for the filing of the appropriate LEGAL ACTION against the violator. Respondent Atty. Gallego, the OIC of the BPLO, Valenzuela City, likewise testified, as follows: Q Mr. Witness, after finding the report of Architect Edison Padilla that the NLEX is not paying local business taxes derived from signage services as you answered in question no. 6 and that the NLEX is operating toll plaza from 2005 however they start paying all operation only on 2012 as you answer in question no. 5, what did you do next? A We prepared an assessment for NLEX and later we reported it to the City Mayor which the City Mayor directed us to collect the tax deficiencies ofNLEX.62 (Emphasis supplied) On the basis of the foregoing, the Billing Form dated November 11, 2019,63 as approved by respondent Atty. Gallego, which was issued assessing petitioner for Signage Services and Other Charges for TYs 2012 to 2019, comprised the following taxes/fees; (a) Signage Services; (b) Mayor's Permit - Signage Services; (c) Ecological and Waste Management Charges; (d) Peace & Order Charge; (e) Barangay Clearance; (f) Dr. Pio Scholarship Fund; (g) Fire Inspection Fee- National; and, (h) Penalties for Operating without Permit. The Court finds the foregoing Other Charges as regulatory fees/charges imposed by respondents in the exercise of police power. According to respondents, petitioner as a contractor, was assessed for signage services and other charges on the bases of Section 5, par. (e) of Tax Ordinance No. 92-012, Series of 1992, as amended, otherwise known as 62 Transcript of Stenographic Notes (TSN) dated November 3, 2022, p. 11. 63 Exhibits "B-3" and "B-4", RTC Docket (Civil Case No. C-25725)- Vol. I, pp. 479 to 480.

DECISION CTA AC No. 297 NLEX Corporation (Formerly Manila North Tollways Corporation) vs. Th e City of Valenzuela, Hon. Adelia Soriano, in her capacity as City Treasurer and Atty. Ulysses L. Gallego, in his capacity as Officer-in-Charge ofthe Business Permit and Licensing Office Page 23 of34 Ordinance No. 37, Series of 200967 XXX XXX XXX WHEREAS, the Local Government Code of 1991 provides the Sangguniang Panlungsod, as the legislative body of the City, to enact Ordinances which shall ensure the efficient and effective delivery of the basic services through the establishment of a scholarship fund for the poor but deserving students residing within the City in schools located within its jurisdiction; XXX XXX XXX SECTION 2. DECLARATION OF POLICY - It is hereby declared the policy of the City Government of Valenzuela to establish and maintain a system ofscholarship grants, student loan program, subsidies and other incentives which shall be available to deserving graduating students in public and/or private secondary school, especially to the underprivileged. XXX XXX XXX SECTION 5. APPROPRIATIONS- The annual funding of DR. PIO VALENZUELA SCHOLARSHIP FUND shall come from at least one percent (1 %) of the City Business taxes for the next preceding calendar year. Ordinance No. 51, Series of 201268 SECTION 5. APPROPRIATIONS- The funding of the said scholarship shall as provided under Section 5 (Ordinance No. 37, Series of2009) come from at least one percent (1 %) of the City Business taxes without prejudice to being subjected to an additional one percent (1 %) thereof when the circumstances so warrants. As to the Fire Inspection Fee, Sections 2 and 7 of R.A. 9514 or the Revised Fire Code ofthe Philippines of2008, provides: Section 2. It is the policy of the State to ensure public safety and promote economic development through the prevention and suppression of all kinds of destructive fires and promote the professionalization of the fire service as a profession. Towards this end, the State shall enforce all laws, rules and regulations to ensure adherence to standard fire prevention and safety measures, and promote accountability for fire safety in the fire protection service and prevention service. XXX XXX XXX 67 An Ordinance Enacting and Instituting the Dr. Pio Valenzuela Scholarship Program of 2009, Exhibit "31 ", RTC Docket (Civil Case No. C-25725)- Vol. ll, pp. 869 to 873. 68 An Ordinance Amending Section 5 of Ordinance No. 37, Series of2009 otherwise known as the Dr. Pio Valenzuela Scholarship Program of2009, Exhibit "32", RTC Docket (Civil Case No. C-25725) - Vol. II, pp. 874 to 876.

DECISION CTA AC No. 297 NLEX Corporation (Formerly Manila North Tal/ways Corporation) vs. The City of Valenzuela, Han. Adelia Soriano, in her capacity as City Treasurer and Atty. Ulysses L. Gallego, in his capacity as Officer-in-Charge ofthe Business Permit and Licensing Office Page 24 of34 Section 7. Inspections, Safety Measures, Fire Safety, Constructions, and Protective and/or Warning Systems.- As may be defined and provided in the Rules and Regulations, owners, administrators or occupants of buildings, structures and their premises or facilities and other responsible persons shall be required to comply with the following, as may be appropriate: a. Inspection Requirement- A fire safety inspection shall be conducted by the Chief, BFP or his duly authorized representative as prerequisite to the grants of permits and/or licenses by local governments and other government agencies concerned, for the: (1) Use or occupancy of buildings, structures, facilities or their premises including the installation or fire protection and fire safety equipment, and electrical system in any building structure or facility; and (2) Storage, handling and/or use of explosives or of combustible, flammable, toxic and other hazardous materials; (Emphases added) XXX XXX XXX From the foregoing, it is clear that the assessments for Other Charges are regulatory fees/charges imposed by respondents in the exercise of police power. Note also that an ordinance which regulates the construction and installation of building and other structures such as billboards has been ruled to be an exercise of police power.69 Consistently, a reading of Section 2 of P.D. No. 1096, the legal basis cited by Architect Padilla in the above-stated letter dated March 23, 2018, shows the declared policy of the state to be "to safeguard life, health, property, and public welfare, consistent with the principles of sound environmental management and control; and to this end, make it the purpose of this Code to provide for all buildings and structures, a framework of minimum standards and requirements to regulate and control their location, site, design quality of materials, construction, use, occupancy, and maintenance." It has been settled that the payment of fees for the issuance of business permits is regulatory in nature under the LGU' s police power. It is not a tax for revenue generation.70 Business taxes imposed in the exercise of police power for regulatory purposes are paid for the privilege of carrying on a business in the year the tax was paid. It is paid at the beginning of the year as a fee to allow the business to operate for the rest of the year. It is deemed a prerequisite to the conduct ofbusiness.71 "\ 69 Refer to Evasco, Jr. et at. vs, Montanez, G.R. No . 199172, February 21, 2018. 70 Bases Conversion and Development Authority, eta!. vs. City Government of Baguio, G.R. No. 192694, February 22, 2023. 71 Mobil Philippines, Inc. vs. The City Treasurer ofMakati, et al., G.R. No. 154092, July 14,2005 .

DECISION CTA AC No. 297 NLEX Corporation (Formerly Manila North Tal/ways Corporation) vs. The City of Valenzuela, Hon. Adelia Soriano, in her capacity as City Treasurer and Atty. Ulysses L. Gallego, in his capacity as Officer-in-Charge ofthe Business Permit and Licensing Office Page 26 of34 20,000.00 or more but less than 30,000.00 275.00 30,000.00 or more but less than 40,000.00 385.00 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 1,3 20.00 100,000.00 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 10,250.00 1,000,000.00 1,000,000.00 or more but less than 11 ,500.00 2,000,000.00 2,000,000.00 or more at a rate not exceeding fifty percent (50%) of one percent (1 %). XXX XXX XXX 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: xxx. (Emphasis and underscoring supplied) Based on the foregoing Section 151, in relation to Section 143(e), a city, like respondent City, is empowered to impose business taxes, inter alia, on contractors and other independent contractors. Relative thereto, under Section 131 (h) of the LGC of 1991, a "contractor" includes persons, natural or juridical, not subject to professional tax under Section 139 ofthis 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 any event, such power to tax by a city is subject to the rule on tax situs as enunciated under Section 150 ofthe LGC of 1991, to wit: SEC. 150. Situs of the Tax. - (a) For purposes of collection of the taxes under Section 143 of this Code, manufacturers, assemblers, repackers, brewers, distillers, rectifiers and compounders ofliquor, distilled spirits and wines, millers, producers, exporters, wholesalers, distributors, dealers, contractors, banks and other financial institutions, and other businesses, maintaining or operating branch or sales outlet elsewhere shall record the sale in the branch or sales outlet making the sale or transaction, and the tax thereon shall accrue and shall be paid to the municipality where such branch or sales outlet is located. In cases where there is no such branch or sales outlet in the city or municipality\

DECISION CTA AC No. 297 NLEX Corporation (Formerly Manila North Tal/ways Corporation) vs. The City of Valenzuela, Han. Adelia Soriano, in her capacity as City Treasurer and Atty. Ulysses L. Gallego, in his capacity as Officer-in-Charge ofthe Business Permit and Licensing Office Page 27 of34 where the sale or transaction was made, the sale shall be duly recorded in the principal office and the taxes due shall accrue and shall be paid to such city or municipality. (Emphasis and underscoring added) The aforecited provision is implemented by Section 243(a) and (b) of the IRR of the LGC which provides: Article 243. Situs ofthe Tax.- (a) Definition of Terms- (1) Principal Office - the head or main office of the business appearing in the pertinent documents submitted to the Securities and Exchange Commission, or the Department of Trade or Industry, or other appropriate agencies, as the case may be. The city or municipality specifically mentioned in the articles of incorporation of official registration papers as being the official address of said principal office shall be considered as the situs thereof. XXX XXX XXX (2) Branch or Sales Office - a fixed place in a locality which conducts operations of the business as an extension of the principal office. Offices used only as display areas of the products where no stocks or items are stored for sale, although orders for the products may be received thereat, are not branch or sales offices as herein contemplated. A warehouse which accepts orders and/or issues sales invoices independent of a branch with sales office shall be considered as a sales office. (3) Warehouse- a building utilized for the storage of products for sale and from which goods or merchandise are withdrawn for delivery to customers or dealers, or by persons acting in behalf of the business. A warehouse that does not accept orders and/or issue sales invoices as aforementioned shall not be considered a branch or sales office. XXX XXX XXX (b) Sales Allocation - (1) All sales made in a locality where there is a branch or sales office or warehouse shall be recorded in said branch or sales office or warehouse and the tax shall be payable to the city or municipality where the same is located. (2) In cases where there is no such branch, sales office, or warehouse in the locality where the sale is made, the sale shall be recorded in the principal office along with the sales made by said principal office and the tax shall accrue to the city or municipality where said principal office is located. (Emphasis and underscoring supplied) ~

DECISION CTA AC No. 297 NLEX Corporation (Form erly Manila North Tollways Corporation) vs. The City of Valenzuela, Han. Adelia Soriano, in her capacity as City Treasurer and Atty. Ulysses L. Gallego, in his capacity as Officer-in-Charge ofthe Business Permit and Licensing Office Page 28 of34 Thus, when a contractor maintains or operates a branch, sales outlet or warehouse elsewhere, the recording of the sale shall be in made in such branch, sales outlet or warehouse, and the corresponding business tax shall accrue and be paid to the municipality or city where the same branch, sales outlet or warehouse is located. However, in case there is no such a branch sales outlet or warehouse in the city or municipality where the sale or transaction was made, the sale shall be duly recorded in the principal office of the contractor and the business tax shall accrue to the city where the said principal office is located. In other words, for a city to validly impose the foregoing LBT, the situs thereof must be in that city. From the foregoing, in general, the situs of LBT is with the city or municipality where the taxpayer maintains its principal office which is the address specified in the articles of incorporation or official registration papers of the concerned taxpayer as being its official address. By way of exception, in case the sales or transactions by the same taxpayer through a branch or sales outlet, or otherwise, located in any other city or municipality, the business taxes due thereon shall accrue or be attributable to such latter city or municipality. Indeed, LGUs have the power to impose LBT on the privilege of doing business within their territorial jurisdictions. The term "doing business" contemplates some "trade or commercial activity regularly engaged in as a means of livelihood or with a view to profit."73 Considering the foregoing provisions of the LGC, the pertinent LBT is payable by every separate or distinct establishment or place only where business is conducted, or only where there is a trade or commercial activity regularly engaged in by the taxpayer, as a means of livelihood or with a view to profit. Furthermore, a branch or sales office may only be treated as such when there is trade or commercial activity regularly engaged in by the taxpayer, as a means of livelihood or with a view to profit, in such establishment or place. The issue now is whether petitioner's signages or installations in Valenzuela City is considered a branch, sales office or warehouse for LBT purposes. Specifically, it must be shown that, for the subject period, petitioner conducted business therein, or that in such fixed place or location, there was trade or commercial activity regularly engaged in by petitioner, as a means of livelihood or with a view to profit. The Court rules in the negative. \ 73 City ofDavao, eta!. vs. Arc Investors, Inc., G.R. No. 249668 . July 13, 2022.

DECISION CTA AC No. 297 NLEX Corporation (Formerly Manila North Tollways Corp oration) vs. The City of Valenzuela, Hon. Adelia Soriano, in her cap acity as City Treasurer and Atty. Ulysses L. Gallego, in his capacity as Officer-in-Charge ofthe Business Perm it and Licensing Office Page 29 of34 Based on the aforecited Article 243 of the IRR of the LGC of 1991, branch or sales office is defined as a fixed place in a locality which conducts operations of the business as an extension of the principal office. By this definition, a branch or sales office presupposes that there is a fixed location or establishment where business subject to the tax is conducted. Notably, offices used only as display areas of the products where no stocks or items are stored for sale, although orders for the products may be received thereat, are not branch or sales offices. Moreover, a warehouse that does not accept orders and/or issue sales invoices as aforementioned shall not be considered a branch or sales office. In this regard, Mr. Huger L. Labang, petitioner's Vice President for Accounting, testified that petitioner's principal office handles all transactions related to the Signage Services and all revenue generated are likewise booked in its principal office, viz.: Q76: Other than the toll booths and the existing road network, does NLEX have any other installations in Valenzuela City? A76: Yes. Q77 : What are these installations? A 77: Along the NLEX road network, there are various installations and/or open spaces that NLEX utilizes to generate rental income form clients who use the same for advertising purposes. In other words, NLEX generates advertising revenue from the lease of signage spaces. Q78: Is this the reason for the Signages Assessment? A78: We believe that this is the case. Q79 : What is NLEX' s position regarding the Signages Assessment? A79: We believe that the Signages Assessment is erroneous, due to the simple fact that, similar to our toll booths, the assets used to generate advertising revenue should not be considered as a Branch Office. Again, we understand that a Branch Office is defined as a fixed place in a locality which conducts operations of the business as an extension of the principal office. Advertising installations, which have a limited purpose, do not operate in any such capacity. Furthermore, unlike our toll booths, there is no physical space within the general vicinity of these assets that are used for the generation. Booking, and/or recording of revenue for these transactions. Q80: Do NLEX' s toll booths record or deal directly with clients for purposes of its advertising revenue? Q80: No. Q81: How then are the revenues generated from rental booked and/or recorded? ~

DECISION CTA AC No. 297 NLEX Corporation (Formerly Manila North Tollways Corporation) vs. The City of Valenzuela, Han. Adelia Soriano, in her capacity as City Treasurer and Atty. Ulysses L. Gallego, in his capacity as Officer-in-Charge ofthe Business Permit and Licensing Office Page 30 of34 A81: The leasing of these assets are handled by our Non-Toll Business Department of the NLEX principal office. Once the contract has been finalized, the NLEX principal office issues Billing Statements to the various clients. Once these are settled, the NLEX principal office issues Official Receipts evidencing payments of the same. Given that the NLEX principal office handles all transactions related to this item, all revenue generated are likewise booked in the NLEX principal office. 74 (Emphasis supplied) Based on the foregoing, petitioner's advertising installations, which have a limited purpose, do not operate in any such capacity. Moreover, as testified by petitioner's witness, there is no physical space within the general vicinity of these assets that are used for the generation, booking, and/or recording of revenue for these transactions. An examination of the records reveals that petitioner's principal office from the year 2008 up to present is located at the NLEX Compound, Balintawak, Caloocan City, as evidenced by the Mayor's Permit and ORs issued by Caloocan City from 2008 to 2013,75 Certification issued by Caloocan City as to LBT payments from 2008 to 2012,76 and Amended Articles ofIncorporation dated June 9, 2015.77 Petitioner also presented sample Billing Statements, Memo to Bill, Accounts Receivable Voucher, Official Receipt Voucher and Official Receipt78 for advertising revenues issued by petitioner's principal office located in "NLEX Compound, Balintawak, Caloocan City". Parenthetically, this is consistent with Revenue Memorandum Order (RMO) No. 12-2013 dated May 2, 2013 issued by the BIR which requires that the business address where the sales invoices or other commercial invoices shall be used, shall be printed in the sales invoices or commercial invoices, to wit: II Policies XXX XXX XXX J. The ORs/Sis/Cis shall be printed showing among others the following (see Annex C for sample receipts/invoices): XXX XXX 74 RTC Docket (Civil Case No. C-25725)- Vol. I, pp. 201 to 202. 75 Exhibits "G-1 to G-6a", RTC Docket (Civil Case No. C-25725) - Vol. l, pp. 514 to 531 . 76 Exhibit "J-15 ", RTC Docket (Civil Case No. C-25725)- Vol. I, p. 571. 77 Exhibit "H", RTC Docket (Civil Case No . C-25725)- Vol. I, pp. 532 and 536. 78 Exhibits "N-1" and sub-markings and "N-2" and sub-markings, RTC Docket (Civil Case No. C-25725)- Vol. I, pp. 615 to 625.

DECISION CTA AC No. 297 NLEX Corporation (Formerly Manila North Tal/ways Corp oration) vs. Th e City of Valenzuela, Han. Adelia Soriano, in her capacity as City Treasurer and Atty. Ulysses L. Gallego, in his capacity as Officer-in-Charge ofthe Business Permit and Licensing Office 4. Business address where such ORs/Sis/Cis shall be used; (Emphasis supplied) Taken together, the foregoing proves that petitioner has no branch, sales outlet or warehouse in Valenzuela City within the context of Section 143 of LGC of 1991 and that all its activities or sales transactions pertaining to the income generated from such installations are consummated and recorded in petitioner's principal office located in Caloocan City. On the other hand, respondents failed to present evidence to the contrary. Respondents have not shown any evidence to prove that petitioner has a branch, sales office or warehouse located in Valenzuela City or is engaged in any sales transactions through a branch or sales outlet in the said city. Evidently, any and all LBT due thereon should accrue to Caloocan City where its principal office is located in accordance with Section 150 of the LGC of1991. In sum, since there is no showing that the signages or installations in Valenzuela City may be treated as a branch or sales office, or as a fixed place, where business transactions were held for the subject period, no valid levy or collection of LBT, including the surcharge and interest incidental thereto, on the said signages or installations may be made by respondent against petitioner. As to the assessment tagged as "Tax Credited " in the amount of P167,986.64, the same is also not proper inasmuch as respondent failed to provide factual and legal bases as to its imposition. In National Power Corporation vs. Province ofPampanga, et al./9 the Supreme Court elucidated on the significance of the taxing authority's duty to adequately inform the taxpayer of the factual and legal basis for the assessment. The Supreme Court held therein that failure of the taxing authority to sufficiently inform the taxpayer of the facts and law used as bases or the assessment will render the assessment void. Tax assessments issued in violation of the due process rights of a taxpayer are null and void and of no force and effect. Based on the foregoing, Section 195 of the LGC of 1991 requires that the notice of assessment should state the nature of the tax, fee or charge, the amount of deficiency, surcharges, interests and penalties. Furthermore, \ 79 G.R. No . 230648, October 6, 202 1.

DECISION CTA AC No. 297 NLEX Corporation (Form erly Manila North Tollways Corporation) vs. The City of Valenzuela, Han. Adelia Soriano, in her capacity as City Treasurer and Atty. Ulysses L. Gallego, in his capacity as Officer-in-Charge ofthe Business Permit and Licensing Office Page 32 of34 failure of the taxing authority to sufficiently inform the taxpayer of the facts and law used as bases for the assessment will render the assessment void. In this case, the imposition of Tax Credit against petitioner does not appear in the Billing Form issued by respondent Atty. Gallego, although it was paid by petitioner, as shown in the OR No. 6431857.80 Hence, the Court finds the imposition and collection of the "Tax Credited" in the amount P167,986.64, for respondents' failure to specify the nature or the amount of the tax credit as well as the factual or legal bases for its assessment. Such being the case, the Billing Form dated November 11, 2019 issued by respondent City (as approved by respondent Atty. Gallego),81 assessing petitioner for Signage Services, the related Surcharge & Interest, as well as the amount for "Tax Credited ", covering TYs 2012 to 2019, is void, for being ultra vires. Petitioner is therefore entitled to the refund in the total amount of P3,814,290.27, for TYs 2012 to 2019, determined as follows: 82 Nature TY I Tax Amount Penalty83 I Total I 2012 Ir 508.44 I r -------1--�588748.5714-�rI��-�-��r�� 1,093.15 I ��-----�-�-i -63_3_5-o l -- i---�� l ��---��-��-�-�-�-��-��-��---��- -��-��-��-�-��---��'-��-__:__ �.�.�_�_�_�_�_�_�_�_�_�_�_�_-_�_�_�-_�_3�-�__�_:_�_s�_��_�_i�_�_�_-_2�_ �_ �_~_-o_-__-__4_�_�_�_-_�_�__�_'l -��-�--l.................:.................t��-��--�-�� . !-��-�-�-�--~~~~ -----~~-~- ~~~:~ ;:!::~ 1-. .. ::=~4~:~-j-~:~lJ ______!___ .. ;~ ~ ~ ~i~ ~~~1-z t �-��-1}j}~l~2Q-~?69~.:j!i~t- ---- . -~~i:988:1~ 1 _______ � Signage Services _ J_Q~ _2Q_l?_______i_________ ._o44_:�?_2t� �- 64�i�:�s4s�:o4-�l ~QJ?. - j JQ?.,.?~.?. :99 .... !f!�4.~:9.;4.9.-.] 89, 70 1:.49 __ ��-��------!��- 2.9...!2___ ....... 1.............. .. �._~. �.n:.?� .- .... ..?..4.. ??.4.:~:4. !QJ.. �~~-: �9...1 Tax Credite~____L______,__________ i 167,986.64 ! 167,986.64 I _______ ----�------------�----!~!-~!..1 r 1,735,274.54 I r 1,911 ,029.09 1 P 3,814,290.27 1 WHEREFORE, in light of the foregoing considerations, the present Petitionfor Review is PARTIALLY GRANTED. Accordingly, the assailed Decision dated March 13, 2023 and Order dated May 22, 2023, both issued by the RTC- Branch 121, in Civil Case No. C-25725, insofar as the denial of petitioner's claim for refund relative to the Local Business Tax for taxable years 2012 to 2019 for lack of jurisdiction is concerned, are hereby SET ASIDE.\ 80 Exhibit "C-2", RTC Docket (Civil Case No. C-25725)- Vol. I, p. 482; and Exhibit "25", RTC Docket (Civil Case No. C-25725)- Vol. II, p. 680. 81 Exhibits "C" and "C-1 ", RTC Docket (Civil Case No. 12-1142) - Vol. 4, pp. 56 to 57; and Exhibits " I" and " 1-A", RTC Docket (Civil Case No. 12-1142)- Vol. 5, pp. 43 to 45. 82 Refer to Exhibits "8-3 " and "8-4", RTC Docket (C ivil Case No. C-25725) - Vol. I, pp. 479 to 480. &3 Out of the total Surcharge & Interest per OR No. 6431857 amounting to PJ ,920,953.42, only P1 ,911 ,029.09 pertains to Signage Services while the remaining P9,924.33 is attributable to Other Charges; See Exhibit "C-2", RTC Docket (Civil Case No. C-25725)- Vol. I, p. 482.

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