REPUBLIC OF THE PHILIPPINES v.

CITY OF PARANAQUE

Facts:
Philippine Reclamation Authority (PRA) is a government-owned and controlled
corporation (GOCC), a taxable entity, and, therefore, not exempt from payment of
real property taxes. The Public Estates Authority (PEA) is a government corporation
created by virtue of P.D. No. 1084 to provide a coordinated, economical and efficient
reclamation of lands, and the administration and operation of lands belonging to,
managed and/or operated by, the government with the object of maximizing their
utilization and hastening their development consistent with public interest.It is not a
GOCC under the Administrative Code, nor is it a GOCC under Section 16, Article XII
of the 1987Constitution because it is not required to meet the test of economic
viability.It is a government instrumentality vested with corporate powers and
performing an essential public service. Although it has a capital stock divided into
shares, it may not be classified as a stock corporation because it lacks the second
requisite of a stock corporation: to distribute dividends and allotment of surplus and
profits to its stockholders.It may not be classified as a non-stock corporation
because it has no members and it is not organized for charitable, religious,
educational, professional, cultural, recreational, fraternal, literary, scientific, social,
civil service, or similar purposes, like trade, industry, agriculture and like chambers
as provided in Section88 of the Corporation Code. PRA since its creation consistently
represented itself to be a GOCC. PRAs very own charter (P.D. No. 1084) declared it
to be a GOCC and that it has entered into several thousands of contracts where it
represented itself to be a GOCC. In fact, PRA admitted in its original and amended
petitions and pre-trial brief filed with the RTC of Paraaque City that it was a GOCC.

ISSUE:
Whether or not petitioner is an incorporated instrumentality of the national
government and is, therefore, exempt from payment of real property tax under
sections 234(a) and 133(o) of Republic Act 7160 or the Local Government Code.

HELD:
When the law vests in a government instrumentality corporate powers, the
instrumentality does not necessarily become a corporation. Unless the government
instrumentality is organized as a stock or non-stock corporation, it remains a
government instrumentality exercising not only governmental but also corporate
powers. Introductory Provisions of the Administrative Code of 1987 defines a GOCC
as any agency organized as a stock or non-stock corporation, vested with functions
relating to public needs whether governmental or proprietary in nature, and owned
by the Government directly or through its instrumentalities either wholly, or, where
applicable as in the case of stock corporations, to the extent of at least fifty-one
(51) percent of its capital stock, it is clear that a GOCC must be "organized as a
stock or non-stock corporation" while an instrumentality is vested by law with
corporate powers. Many government instrumentalities are vested with corporate
powers but they do not become stock or non-stock corporations, which is a
necessary condition before an agency or instrumentality is deemed a GOCC.The
fundamental provision above authorizes Congress to create GOCCs through special
charters on two conditions:
1)the GOCC must be established for the common good; and
2) the GOCC must meet the test of economic viability.
PRA may have passed the first condition of common good but failed the second one
- economic viability. Undoubtedly, the purpose behind the creation of PRA was not
for economic or commercial activities. Neither was it created to compete in the
market place considering that there were no other competing reclamation
companies being operated by the private sector. Further, when local governments
invoke the power to tax on national government instrumentalities, such power is
construed strictly against local governments. The rule is that a tax is never
presumed and there must be clear language in the law imposing the tax. Any doubt
whether a person, article or activity is taxable is resolved against taxation. Tax
exemption is strictly construed against the taxpayer claiming the exemption.
However ,when Congress grants an exemption to a national government
instrumentality from local taxation, such exemption is construed liberally in favor of
the national government instrumentality.

.
Ursal vs. CTA

FACTS:
Genaro Ursal as City Assessor of Cebu in the exercise of his powers assessed for
taxation certain real properties of Consuelo Noel and Jesusa Samson in the City
Cebu, and that upon protest of the taxpayers, the Cebu Board of Assessment
Appeals reduced the assessments. It also shows he took the matter to the Court of
Tax Appeals insisting on his valuation; but said Court refused to entertain the appeal
saying it was late, and, besides, the assessor had no personality to bring the matter
before it under section 11 of Republic Act No.1125, which reads as follows:

SEC. 11. Who may appeal; effect of appeal

Any person, association or corporation adversely affected by a decision or ruling of
the Collector of Internal Revenue, the Collector of Customs or any provincial or city
Board of
Assessment Appeals may file an appeal in the Court of Tax Appeals within thirty
days after the receipt of such decision or ruling.

ISSUE:
Whether or not Genaro Ursal as City Assessor of Cebu have the personality to resort
to the Court of Tax Appeals on his valuation on the taxes of Consuelo and Jesusa
Samson.

HELD:
The Supreme Court affirmed the decision of the Court of Tax Appeals, the petitioner
has no personality to bring before the CTA. Supreme Court stressed out
that The rulings of the Board of Assessment Appeals did not "adversely
aff ect" him. At most it was the City of Cebu that had been adversely
aff ected in the sense that it could not thereafter collect higher realty taxes
from the abovementioned property owners. His opinion, it is true had been
overruled; but the overruling inflicted no material damage upon him or his office.
And the Court of Tax Appeals was not created to decide mere conflicts of opinion
between administrative officers or agencies. Republic Act No. 1125 creating
the Court of Tax Appeals did not grant it blanket authority to decide any
and all tax disputes. Defi ning such special court's jurisdiction, the Act
necessarily limited its authority to those matters enumerated therein.
Far East Bank and Trust Company vs. Court of Tax Appeals

FACTS:
Far East Bank and Trust Company herein referred to as the petitioner is a domestic
banking corporation duly organized and existing under and by virtue of Philippine
laws. In the early part of 1992, the Cavite Development Bank [CDB], also a domestic
banking corporation, was merged with Petitioner with the latter as its surviving
entity under the merger. Petitioner being the surviving entity, acquired all assets of
CDB During the period from 1990 to1991, CDB sold some acquired assets in the
course of which it allegedly withheld the creditable tax from the sales proceeds
which amounted to P755,715.00. In said years, CDB filed income tax returns which
reflected that CDB incurred negative taxable income or losses for both years. Since
there was no tax against which to credit or off set the taxes withheld by
CDB, the result was that CDB, according to petitioner, had excess creditable
withholding tax. Thus, petitioner, being the surviving entity of the merger,
fi led this Petition for Review after its administrative claim for refund was not
acted upon.

ISSUE:
Whether or not the decision of the Court of Appeals and Court of Tax
Appeals are not based on Facts and the Law.

HELD:
The petition is denied and the Decision of the Court of Appeals is affirmed. The Court stressed out
that The findings of fact of the CTA, a special court exercising particular expertise on the subject
of tax, are generally regarded as final, binding and conclusive upon this Court, especially if these
are substantially similar to the findings of the CA which is normally the final arbiter of questions of
fact. The findings shall not be reviewed nor disturbed on appeal unless a party can show that
these are not supported by evidence, or when the judgment is premised on a misapprehension
of facts, or when the lower courts failed to notice certain relevant facts which if considered would
justify a different conclusion
Montes vs. Civil Service Board of Appeals

FACTS:
Petitioner-appellant was on and before January, 1953, a watchman of the
Floating Equipment Section, Ports and Harbors Division, Bureau of Public Works. In
Administrative Case No. R-8182 instituted against him for negligence in the
performance of duty Dredge No. 6 under him had sunk because of water in
the bilge, which he did not pump out while under his care, the
Commissioner of Civil Service exonerated him, on the basis of fi ndings
made by committee. But the Civil Service Board of Appeals modified the decision,
finding petitioner guilty of contributory negligence in not pumping the water
from the bilge, and ordered that he be considered resigned effective his last
day of duty with pay, without prejudice to reinstatement at the discretion of the
appointing officer. Petitioner filed an action in the Court of First Instance of Manila to
review the decision, but the said court dismissed the action on a motion to dismiss,
on the ground that petitioner had not exhausted all his administrative remedies
before he instituted the action.
ISSUE:
Whether or not there is a necessity to exhaust administrative remedies
before seeking for affirmative relief in court?

HELD:

The doctrine of exhaustion, of administrative remedies requires where an

administrative remedy is provided by statute, as in this case, relief must be sought
by exhausting this remedy before the courts will act. The doctrine is a device based
on considerations of comity and convenience. If a remedy is still available within the
administrative machinery, this should be resorted to before resort can be made to
the courts, not only to give the administrative agency opportunity to decide the
matter by itself correctly, but also to prevent unnecessary and premature resort to
the courts.

Section 2 of Commonwealth Act No. 598 above-quoted is a clear expression of the

policy or principle of exhaustion of administrative remedies. If the President, under
whom the Civil Service directly falls in our administrative system as head of the
executive department, may be able to grant the remedy that petitioner pursues,
reasons of comity and orderly procedure demand that resort be made to him before
recourse can be had to the courts.

Liban vs. Gordon

FACTS: Respondent filed a motion for partial recommendation on a Supreme Court

decision which ruled that being chairman of the Philippine National Red Cross
(PNRC) did not disqualify him from being a Senator, and that the charter creating
PNRC is unconstitutional as the PNRC is a private corporation and the Congress is
precluded by the Constitution to create such.The Court then ordered the PNRC to
incorporate itself with the SEC as a private corporation. Respondent takes exception
to the second part of the ruling, which addressed the constitutionality of the statute
creating the PNRC as a private corporation. Respondent avers that the issue of
constitutionality was only touched upon in the issue of locus standi. It is a rule that
the constitutionality will not be touched upon if it is not the lis mota of the case.

ISSUE: Whether or not it was proper for the Court to have ruled on the
constitutionality of the PNRC statute.

HELD:
The constitutionality of the PNRC statute was raised in the issue of standing. As
such, the Court should not have declared certain provisions of such as
unconstitutional. On the substantive issue, the PNRC is sui generis. It is unlike the
private corporations that the Constitution wants to prevent Congress from creating.
First, the PNRC is not organized for profit. It is an organization dedicated to assist
victims of war and administer relief to those who have been devastated by
calamities, among others. It is entirely devoted to public service. It is not covered by
the prohibition since the Constitution aims to eliminate abuse by the Congress,
which tend to favor personal gain. Secondly, the PNRC was created in order to
participate in the mitigation of the effects of war, as embodied in the Geneva
Convention. The creation of the PNRC is compliance with international treaty
obligations. Lastly, the PNRC is a National Society, an auxiliary of the government. It
is not like government instrumentalities and GOCC. The PNRC is regulated directly
by international humanitarian law, as opposed to local law regulating the other
mentioned entities. As such, it was improper for the Court to have declared certain
portions of the PNRC statute as unconstitutional.

However, it is the stand of Justice Carpio that there is no mandate for the
Government to create a National Society to this effect. He also raises the fact that
the PNRC is not sui generis in being a private corporation organized for public
needs. Justice Abad is of the opinion that the PNRC is neither private or
governmental, hence it was within the power of Congress to create.

Banda vs. Ermita

FACTS:

The present controversy arose from a Petition for Certiorari and prohibition
challenging the constitutionality of Executive Order No. 378 dated October 25,
2004, issued by President Gloria Macapagal
Arroyo (President Arroyo). Petitioners characterize their action as a class suit filed on
their own behalf and on behalf of all their co-employees at the National Printing
Office (NPO).The NPO during the term of former President Corazon C. Aquino
(President Aquino), by virtue of Executive Order No. 285which provided, among
others, the creation of the NPO from the merger of the Government Printing Office
and the relevant printing units of the Philippine Information Agency (PIA).Section 6
of Executive Order No. 285 reads: SECTION 6. Creation of the National Printing
Office. There is hereby created a National Printing Office out of the merger of the
Government Printing Office and the relevant printing units of the Philippine
Information Agency. The Office shall have exclusive printing jurisdiction over the
following:
a. Printing, binding and distribution of all standard and accountable forms of
national, provincial, city and municipal governments, including government
corporations;
b. Printing of officials ballots;
c. Printing of public documents such as the Official Gazette, General Appropriations
Act, Philippine Reports, and development information materials of the Philippine
Information Agency. The Office may also accept other government printing jobs,
including government publications, aside from those enumerated above, but not in
an exclusive basis. The details of the organization, powers, functions, authorities,
and related management aspects of the Office shall be provided in the
implementing details which shall be prepared and promulgated in accordance with
Section II of this Executive Order. The Office shall be attached to the Philippine
Information Agency. On October 25, 2004, President Arroyo issued the herein
assailed Executive Order No. 378, amending Section 6 of Executive Order No. 285
by, inter alia, removing the exclusive jurisdiction of the NPO over the printing
services requirements of government agencies and instrumentalities. Pursuant to
Executive Order No. 378, government agencies and instrumentalities are allowed to
source their printing services from the private sector through competitive bidding,
subject to the condition that the services offered by the private supplier be of
superior quality and lower in cost compared to what was offered by the NPO.
Executive Order No. 378 also limited NPOs appropriation in the General
Appropriations Act to its income. Perceiving Executive Order No. 378 as a threat to
their security of tenure as employees of the NPO, petitioners now challenge its
constitutionality, contending that: (1) it is beyond the executive powers of President
Arroyo to amend or repeal Executive Order No. 285 issued by former President
Aquino when the latter still exercised legislative powers; and (2) Executive Order
No. 378 violates petitioners security of tenure, because it paves the way for the
gradual abolition of the NPO.

ISSUE: Whether the E.O no. 378 is Constitutional

.
HELD:
Yes. Involving neither an abolition nor transfer of offices, the assailed action is a
mere reorganization under the general provisions of the law consisting mainly of
streamlining the NTA in the interest of simplicity, economy and efficiency. It is an act
well within the authority of the President motivated and carried out, according to
the findings of the appellate court, in good faith, a factual assessment that this
Court could only but accept.
SEC. 31. Continuing Authority of the President to Reorganize his Office - The
President, subject to the policy in the Executive Office and in order to achieve
simplicity, economy and efficiency, shall have continuing authority to reorganize the
administrative structure of the Office of the President. The Administrative Code
provides that the Office of the President consists of the Office of the President
Proper and the agencies under it. The agencies under the Office of the President are
identified in Section 23, Chapter 8, Title II of the Administrative Code:
Sec. 23. The Agencies under the Office of the President. The agencies under the
Office of the President refer to those offices placed under the chairmanship of the
President, those under the supervision and control of the President, those under the
administrative supervision of the Office of the President, those attached to it for
policy and program coordination, and those that are not placed by law or order
creating them under any specific department. The power of the President to
reorganize the executive department is likewise recognized in general
appropriations laws. Clearly, Executive Order No. 102 is well within the
constitutional power of the President to issue. The President did not usurp any
legislative prerogative in issuing Executive Order No. 102. It is an exercise of the
Presidents constitutional power of control over the executive department, supported
by the provisions of the Administrative Code, recognized by other statutes, and
consistently affirmed by this Court. In establishing an executive department, bureau
or office, the legislature necessarily ordains an executive agencies position in the
scheme of administrative structure. Such determination is primary, but subject to
the Presidents continuing authority to reorganize the administrative structure. As far
as bureaus, agencies or offices in the executive department are concerned, the
power of control may justify the President to deactivate the functions of a particular
office.
The issuance of Executive Order No. 378 by President Arroyo is an exercise of a
delegated legislative power granted by the aforementioned Section 31, Chapter 10,
Title III, Book III of the Administrative Code of 1987, which provides for the
continuing authority of the President to reorganize the Office of the President, "in
order to achieve simplicity, economy and efficiency."

Pichay vs. Office of the deputy executive secretary

FACTS
On November 15, 2010, President Benigno Simeon Aquino III issued Executive Order No. 13
(E.O. 13), abolishing the PAGC and transferring its functions to the Office of the Deputy
Executive Secretary for Legal Affairs(ODESLA), more particularly to its newly-
established Investigative and Adjudicatory Division (IAD).On April 6, 2011, respondent
Finance Secretary Cesar V. Purisima filed before the IAD-ODESLA a complaint-
affidavit for grave misconduct against petitioner Prospero A. Pichay, Jr., Chairman of
the Board of Trustees of the Local Water Utilities Administration (LWUA), as well as the
incumbent members of the LWUA Board of Trustees, namely, Renato Velasco, Susana Dumlao
Vargas, Bonifacio Mario M. Pena, Sr. and Daniel Landingin, which arose from the
purchase by the LWUA of Four Hundred Forty-FiveThousand Three Hundred Seventy
Seven (445,377) shares of stock of Express Savings Bank, Inc.On April 14, 2011,
petitioner received an Order3 signed by Executive Secretary Paquito N. Ochoa, Jr.
requiring him and his co-respondents to submit their respective written explanations under
oath. In compliance therewith, petitioner filed a Motion to Dismiss Ex Abundante Ad Cautelam
manifesting that a case involving the same transaction and charge of grave
misconduct entitled, "Rustico B. Tutol, et al. v. Prospero Pichay, et al.", and docketed
as OMB-C-A-10-0426-I, is already pending before the Office of the Ombudsman.

ISSUE
Whether E.O. 13 is unconstitutional for abrogating unto an administrative office a quasi-judicial
function through and E.O. and not through legislativeenactment by Congress.

HELD:
NO.The President has Continuing Authority to Reorganize the Executive Department under E.O.
292 "The President, subject to the policy of the Executive Office and in order to achieve
simplicity, economy and efficiency, shall have the continuing authority to reorganize the
administrative structure of the Office of the President. "The law grants the President
this power in recognition of the recurring need of every President to reorganize his
office "to achieve simplicity, economy and efficiency." The Office of the President is
the nerve center of the Executive Branch. To remain effective and efficient, the
Office of the President must be capable of being shaped and reshaped by the
President in the manner he deems fit to carry out his directives and policies. After all, the Office
of the President is the command post of the President. The President's power to reorganize
the Office of the President under Section31 (2) and (3) of EO 292 should be distinguished
from his power to reorganize the Office of the President Proper. Under Section 31 (1) of
EO292, the President can reorganize the Office of the President Proper by abolishing,
consolidating or merging units, or by transferring functions from one unit to another. In contrast,
under Section 31 (2) and (3) of EO 292, the President's power to reorganize offices
outside the Office of the President Proper but still within the Office of the President
is limited to merely transferring functions or agencies from the Office of the
President to Departments or agencies, and vice versa. The distinction between the
allowable organizational actions under Section31(1) on the one hand and Section 31
(2) and (3) on the other is crucial not only as it affects employees' tenurial security
but also insofar as it touches upon the validity of the reorganization, that
is, whether the executive actions undertaken fall within the limitations prescribed under E.O.
292. When the PAGC was created under E.O. 12, it was composed of a Chairman and two (2)
Commissioners who held the ranks of Presidential Assistant II and I, respectively,9 and
was placed directly under the Office of the President.
CIR vs. General Foods Inc.

Facts:
Respondent corporation General Foods (Phils), which is engaged in the manufacture
of Tang, Calumet and Kool-Aid, filed its income tax return for the fiscal year
ending February 1985 and claimed as deduction, among other business expenses,
P9,461,246 for media advertising for Tang.The Commissioner disallowed 50% of
the deduction claimed and assessed deficiency income taxes of P2,635,141.42
against General Foods, prompting the latter to file an MR which was denied.General
Foods later on filed a petition for review at CA, which reversed and set aside an
earlier decision by CTA dismissing the companys appeal.

Issue:
Whether or not the subject media advertising expense for Tang was ordinary and
necessary expense fully deductible under the NIRC.

Held:
No. Tax exemptions must be construed in stricissimi juris against the taxpayer and
liberally in favor of the taxing authority, and he who claims an exemption must be
able to justify his claim by the clearest grant of organic or statute law. Deductions
for income taxes partake of the nature of tax exemptions; hence, if tax exemptions
are strictly construed, then deductions must also be strictly construed.
To be deductible from gross income, the subject advertising expense must comply
with the following requisites: (a) the expense must be ordinary and necessary; (b) it
must have been paid or incurred during the taxable year; (c) it must have been paid
or incurred in carrying on the trade or business of the taxpayer; and (d) it must be
supported by receipts, records or other pertinent papers.

While the subject advertising expense was paid or incurred within the corresponding
taxable year and was incurred in carrying on a trade or business, hence necessary,
the parties views conflict as to whether or not it was ordinary. To be deductible, an
advertising expense should not only be necessary but also ordinary.

The Commissioner maintains that the subject advertising expense was not ordinary
on the ground that it failed the two conditions set by U.S. jurisprudence: first,
reasonableness of the amount incurred and second, the amount incurred must not
be a capital outlay to create goodwill for the product and/or private respondents
business. Otherwise, the expense must be considered a capital expenditure to be
spread out over a reasonable time.

There is yet to be a clear-cut criteria or fixed test for determining the

reasonableness of an advertising expense. There being no hard and fast rule on the
matter, the right to a deduction depends on a number of factors such as but not
limited to: the type and size of business in which the taxpayer is engaged; the
volume and amount of its net earnings; the nature of the expenditure itself; the
intention of the taxpayer and the general economic conditions. It is the interplay of
these, among other factors and properly weighed, that will yield a proper
evaluation. The Court finds the subject expense for the advertisement of a single
product to be inordinately large. Therefore, even if it is necessary, it cannot be
considered an ordinary expense deductible under then Section 29 (a) (1) (A) of the
NIRC.

Advertising is generally of two kinds: (1) advertising to stimulate the current sale of
merchandise or use of services and (2) advertising designed to stimulate
the future sale of merchandise or use of services. The second type involves
expenditures incurred, in whole or in part, to create or maintain some form of
goodwill for the taxpayers trade or business or for the industry or profession of
which the taxpayer is a member. If the expenditures are for the advertising of the
first kind, then, except as to the question of the reasonableness of amount, there is
no doubt such expenditures are deductible as business expenses. If, however, the
expenditures are for advertising of the second kind, then normally they should be
spread out over a reasonable period of time.The companys media advertising
expense for the promotion of a single product is doubtlessly unreasonable
considering it comprises almost one-half of the companys entire claim for
marketing expenses for that year under review. Petition granted, judgment reversed
and set aside.