Churchill v Concepcion
GR No 11572, September 22, 1916
FACTS:
Section 100 of Act 2339 imposed an annual tax of P4 per square meter upon electric
signs, billboards, and spaces used for posting or displaying temporary signs, and all signs
displayed on premises not occupied by buildings. The section was amended by Act 2432,
reducing the tax to P2 per square meter. Francis A. Churchill and Stewart Tait, co-partners
in Mercantile Advertising Agency, owned a billboard to which they were taxes at P104. The
tax was paid under protest. Churchill and Tait instituted the action to recover the amount.
ISSUE:
Is the statute and the tax imposed void for lack of uniformity?
RULING:
No, the tax is valid.
Uniformity in taxation means that all taxable articles or kinds of property, of the same class,
shall be taxed at the same rate. It does not mean that all lands, chattels, securities,
incomes, occupations, franchises, privileges, necessities, and luxuries shall all be
assessed at the same rate. Different articles may be taxed at different amounts provided
the rate is uniform on the same class everywhere, with all people, at all times.
Herein, the Act imposes a tax of P2 per square meter or a fraction thereof upon every
electric sign, billboard, etc. Wherever found in the Philippine Islands. The rule of taxation
upon such signs is uniform throughout the islands. The rule does not require taxes to be
graded according to the value of the subjects upon which they are imposed, especially
those levied as privilege or occupation taxes.
Sison v Ancheta G.R. No. L-59431. July 25, 1984.
C. J. Fernando
Declaratory Relief
Facts:
Petitioners challenged the constitutionality of Section 1 of Batas Pambansa Blg. 135. It
amended
Section 21 of the National Internal Revenue Code of 1977, which provides for rates of tax
on citizens or residents on (a) taxable compensation income, (b) taxable net income, (c)
royalties, prizes, and other winnings, (d) interest from bank deposits and yield or any other
monetary benefit from deposit substitutes and from trust fund and similar arrangements, (e)
dividends and share of individual partner in the net profits of taxable partnership, (f) adjusted
gross income.
Petitioner as taxpayer alleged that "he would be unduly discriminated against by the
imposition of higher rates of tax upon his income arising from the exercise of his profession
vis-a-vis those which are imposed upon fixed income or salaried individual taxpayers." He
characterizes the above section as arbitrary amounting to class legislation, oppressive and
capricious in character.
For petitioner, therefore, there is a transgression of both the equal protection and due
process clauses of the Constitution as well as of the rule requiring uniformity in taxation.
The OSG prayed for dismissal of the petition due to lack of merit.
Issue: Whether the imposition of a higher tax rate on taxable net income derived from
business or profession than on compensation is constitutionally infirm.
(WON there is a transgression of both the equal protection and due process clauses of the
Constitution as well as of the rule requiring uniformity in taxation)
Held: No. Petition dismissed
Ratio:
The need for more revenues is rationalized by the government's role to fill the gap not done
by public enterprise in order to meet the needs of the times. It is better equipped to administer
for the public welfare.
The power to tax, an inherent prerogative, has to be availed of to assure the performance of
vital state functions. It is the source of the bulk of public funds.
The power to tax is an attribute of sovereignty and the strongest power of the government.
There are restrictions, however, diversely affecting as it does property rights, both the due
process and equal protection clauses may properly be invoked, as petitioner does, to
invalidate in appropriate cases a revenue measure. If it were otherwise, taxation would be a
destructive power.
The petitioner failed to prove that the statute ran counter to the Constitution. He used
arbitrariness as basis without a factual foundation. This is merely to adhere to the
authoritative doctrine that where the due process and equal protection clauses are invoked,
considering that they are not fixed rules but rather broad standards, there is a need for proof
of such persuasive character as would lead to such a conclusion.
It is undoubted that the due process clause may be invoked where a taxing statute is so
arbitrary that it finds no support in the Constitution. An obvious example is where it can be
shown to amount to the confiscation of property. That would be a clear abuse of power.
It has also been held that where the assailed tax measure is beyond the jurisdiction of the
state, or is not for a public purpose, or, in case of a retroactive statute is so harsh and
unreasonable, it is subject to attack on due process grounds.
For equal protection, the applicable standard to determine whether this was denied in the
exercise of police power or eminent domain was the presence of the purpose of hostility or
unreasonable discrimination.
It suffices then that the laws operate equally and uniformly on all persons under similar
circumstances or that all persons must be treated in the same manner, the conditions not
being different, both in the privileges conferred and the liabilities imposed. Favoritism and
undue preference cannot be allowed. For the principle is that equal protection and security
shall be given to every person under circumstances, which if not identical are analogous. If
law be looks upon in terms of burden or charges, those that fall within a class should be
treated in the same fashion, whatever restrictions cast on some in the group equally binding
on the rest.
The equal protection clause is, of course, inspired by the noble concept of approximating
the ideal of the laws's benefits being available to all and the affairs of men being governed
by that serene and impartial uniformity, which is of the very essence of the idea of law.

The equality at which the 'equal protection' clause aims is not a disembodied equality. The
Fourteenth Amendment enjoins 'the equal protection of the laws,' and laws are not abstract
propositions. They do not relate to abstract units A, B and C, but are expressions of policy
arising out of specific difficulties, addressed to the attainment of specific ends by the use of
specific remedies. The Constitution does not require things which are different in fact or
opinion to be treated in law as though they were the same.
Lutz v Araneta- it is inherent in the power to tax that a state be free to select the subjects of
taxation, and it has been repeatedly held that 'inequalities which result from a singling out of
one particular class for taxation, or exemption infringe no constitutional limitation.
Petitioner- kindred concept of uniformity- Court- Philippine Trust Company- The rule of
uniformity does not call for perfect uniformity or perfect equality, because this is hardly
attainable
Equality and uniformity in taxation means that all taxable articles or kinds of property of the
same class shall be taxed at the same rate. The taxing power has the authority to make
reasonable and natural classifications for purposes of taxation
There is quite a similarity then to the standard of equal protection for all that is required is
that the tax "applies equally to all persons, firms and corporations placed in similar situation"
There was a difference between a tax rate and a tax base. There is no legal objection to a
broader tax base or taxable income by eliminating all deductible items and at the same time
reducing the applicable tax rate.
The discernible basis of classification is the susceptibility of the income to the application of
generalized rules removing all deductible items for all taxpayers within the class and fixing
a set of reduced tax rates to be applied to all of them. As there is practically no overhead
expense, these taxpayers are not entitled to make deductions for income tax purposes
because they are in the same situation more or less.
Taxpayers who are recipients of compensation income are set apart as a class.
On the other hand, in the case of professionals in the practice of their calling and
businessmen, there is no uniformity in the costs or expenses necessary to produce their
income. It would not be just then to disregard the disparities by giving all of them zero
deduction and indiscriminately impose on all alike the same tax rates on the basis of gross
income.
There was a lack of a factual foundation, the forcer of doctrines on due process and equal
protection, and he reasonableness of the distinction between compensation and taxable net
income of professionals and businessmen not being a dubious classification.
Case Digest: Chamber of Real Estate and Builders v. Executive Secretary, et al.
G.R.No.160756 : March 9, 2010
CHAMBER OF REAL ESTATE AND BUILDERS ASSOCIATIONS, INC., Petitioner, v.
THE HON. EXECUTIVE SECRETARY ALBERTO ROMULO, THE HON. ACTING
SECRETARY OF FINANCE JUANITA D. AMATONG, and THE HON. COMMISSIONER
OF INTERNAL REVENUE GUILLERMO PARAYNO, JR., Respondents.
CORONA, J.:
FACTS:
Petitioner is an association of real estate developers and builders in the Philippines.It
impleaded former Executive Secretary Alberto Romulo, then acting Secretary of Finance
Juanita D. Amatong and then Commissioner of Internal Revenue Guillermo Parayno, Jr. as
respondents.
Petitioner assails the validity of the imposition of minimum corporate income tax (MCIT) on
corporations and creditable withholding tax (CWT) on sales of real properties classified as
ordinary assets.
Section 27(E) of RA 8424 provides for MCIT on domestic corporations and is implemented
by RR 9-98.Petitioner argues that the MCIT violates the due process clause because it
levies income tax even if there is no realized gain.
Petitioner also seeks to nullify Sections 2.57.2(J) (as amended by RR 6-2001) and 2.58.2
of RR 2-98, and Section 4(a)(ii) and (c)(ii) of RR 7-2003, all of which prescribe the rules
and procedures for the collection of CWT on the sale of real properties categorized as
ordinary assets.Petitioner contends that these revenue regulations are contrary to law for
two reasons:first, they ignore the different treatment by RA 8424 of ordinary assets and
capital assets andsecond, respondent Secretary of Finance has no authority to collect
CWT, much less, to base the CWT on the gross selling price or fair market value of the
real properties classified as ordinary assets.
Petitioner also asserts that the enumerated provisions of the subject revenue regulations
violate the due process clause because, like the MCIT, the government collects income tax
even when the net income has not yet been determined. They contravene the equal
protection clause as well because the CWT is being levied upon real estate enterprises but
not on other business enterprises, more particularly those in the manufacturing sector.
ISSUES:
Whether or not the imposition of the MCIT on domestic corporations is unconstitutional?
Whether or not the imposition of CWT on income from sales of real properties classified as
ordinary assets under RRs 2-98, 6-2001 and 7-2003, is unconstitutional?
Whether or not this Court should take cognizance of the present case?
HELD:
The petition is dismissed.
POLITICAL LAW: constitutionality of MCIT
Petitioner claims that the MCIT under Section 27(E) of RA 8424 is unconstitutional
because it is highly oppressive, arbitrary and confiscatory which amounts to deprivation of
property without due process of law.It explains that gross income as defined under said
provision only considers the cost of goods sold and other direct expenses; other major
expenditures, such as administrative and interest expenses which are equally necessary to
produce gross income, were not taken into account.[31]Thus, pegging the tax base of the
MCIT to a corporations gross income is tantamount to a confiscation of capital because
gross income, unlike net income, is not realized gain. The Court disagress.

Taxes are the lifeblood of the government.Without taxes, the government can neither exist
nor endure. The exercise of taxing power derives its source from the very existence of the
State whose social contract with its citizens obliges it to promote public interest and the
common good.
Taxation is an inherent attribute of sovereignty.It is a power that is purely
legislative.Essentially, this means that in the legislature primarily lies the discretion to
determine the nature (kind), object (purpose), extent (rate), coverage (subjects) and situs
(place) of taxation.It has the authority to prescribe a certain tax at a specific rate for a
particular public purpose on persons or things within its jurisdiction.In other words, the
legislature wields the power to define what tax shall be imposed, why it should be imposed,
how much tax shall be imposed, against whom (or what) it shall be imposed and where it
shall be imposed.
As a general rule, the power to tax is plenary and unlimited in its range, acknowledging in
its very nature no limits, so that the principal check against its abuse is to be found only in
the responsibility of the legislature (which imposes the tax) to its constituency who are to
pay it.Nevertheless, it is circumscribed by constitutional limitations.At the same time, like
any other statute, tax legislation carries a presumption of constitutionality.
The constitutional safeguard of due process is embodied in the fiat [no] person shall be
deprived of life, liberty or property without due process of law.
Income means all the wealth which flows into the taxpayer other than a mere return on
capital.Capital is a fund or property existing at one distinct point in time while income
denotes a flow of wealth during a definite period of time.Income is gain derived and
severed from capital. For income to be taxable, the following requisites must exist: (1)
there must be gain; (2) the gain must be realized or received and (3)the gain must not be
excluded by law or treaty from taxation.
Certainly, an income tax is arbitrary and confiscatory if it taxes capital because capital is
not income.In other words, it is income, not capital, which is subject to income
tax.However, the MCIT is not a tax on capital.
The MCIT is imposed on gross income which is arrived at by deducting the capital spent by
a corporation in the sale of its goods,i.e., the cost of goodsand other direct expenses from
gross sales.Clearly, the capital is not being taxed.
Furthermore, the MCIT is not an additional tax imposition. It is imposedin lieuofthe normal
net income tax, and only if the normal income tax is suspiciously low.The MCIT merely
approximates the amount of net income tax due from a corporation, pegging the rate at a
very much reduced 2% and uses as the base the corporations gross income.
The United States has a similar alternative minimum tax (AMT) system which is generally
characterized by a lower tax rate but a broader tax base.Since our income tax laws are of
American origin, interpretations by American courts of our parallel tax laws have
persuasive effect on the interpretation of these laws.Although our MCIT is not exactly the
same as the AMT, the policy behind them and the procedure of their implementation are
comparable. American courts have also emphasized that Congress has the power to
condition, limit or deny deductions from gross income in order to arrive at the net that it
chooses to tax.This is because deductions are a matter of legislative grace.
Absent any other valid objection, the assignment of gross income, instead of net income,
as the tax base of the MCIT, taken with the reduction of the tax rate from 32% to 2%, is not
constitutionally objectionable.
Moreover, petitioner does not cite any actual, specific and concrete negative experiences
of its members nor does it present empirical data to show that the implementation of the
MCIT resulted in the confiscation of their property.
In sum, petitioner failed to support, by any factual or legal basis, its allegation that the
MCIT is arbitrary and confiscatory.The Court cannot strike down a law as unconstitutional
simply because of its yokes. Taxation is necessarily burdensome because, by its nature, it
adversely affects property rights. The party alleging the laws unconstitutionality has the
burden to demonstrate the supposed violations in understandable terms.
On the other hand, RR 9-98, in declaring that MCIT should be imposed whenever such
corporation has zero or negative taxable income, merely defines the coverage of Section
27(E).This means that even if a corporation incurs a net loss in its business operations or
reports zero income after deducting its expenses, it is still subject to an MCIT of 2% of its
gross income.This is consistent with the law which imposes the MCIT on gross income
notwithstanding the amount of the net income.But the law also states that the MCIT is to
be paid only if it is greater than the normal net income.Obviously, it may well be the case
that the MCIT would be less than the net income of the corporation which posts a zero or
negative taxable income.
The withholding tax system is a procedure through which taxes (including income taxes)
are collected. Under Section 57 of RA 8424, the types of income subject to withholding tax
are divided into three categories: (a) withholding of final tax on certain incomes; (b)
withholding of creditable tax at source and (c) tax-free covenant bonds.
TAXATION LAW: authority of the secretary f finance
The Secretary of Finance is granted, under Section 244 of RA 8424, the authority to
promulgate the necessary rules and regulations for the effective enforcement of the
provisions of the law.Such authority is subject to the limitation that the rules and
regulations must not override, but must remain consistent and in harmony with, the law
they seek to apply and implement. It is well-settled that an administrative agency cannot
amend an act of Congress.
It has been recognized that the method of withholding tax at source is a procedure of
collecting income tax which is sanctioned by our tax laws.The withholding tax system was
devised for three primary reasons: first, to provide the taxpayer a convenient manner to
meet his probable income tax liability; second, to ensure the collection of income tax which
can otherwise be lost or substantially reduced through failure to file the corresponding
returns and third, to improve the governments cash flow.This results in administrative
savings, prompt and efficient collection of taxes, prevention of delinquencies and reduction
of governmental effort to collect taxes through more complicated means and remedies.
Respondent Secretary has the authority to require the withholding of a tax on items of
income payable to any person, national or juridical, residing in the Philippines.Such
authority is derived from Section 57(B) of RA 8424
The questioned provisions of RR 2-98, as amended, are well within the authority given by
Section 57(B) to the Secretary,i.e., the graduated rate of 1.5%-5% is between the 1%-32%
range; the withholding tax is imposed on the income payable and the tax is creditable
against the income tax liability of the taxpayer for the taxable year.
POLITICAL LAW: constitutionality of RR 2-98 as amended

Under RR 2-98, the tax base of the income tax from the sale of real property classified as
ordinary assets remains to be the entitys net income imposed under Section 24 (resident
individuals) or Section 27 (domestic corporations) in relation to Section 31 of RA
8424,i.e.gross income less allowable deductions.The CWT is to be deducted from the net
income tax payable by the taxpayer at the end of the taxable year.Precisely, Section
4(a)(ii) and (c)(ii) of RR 7-2003 reiterate that the tax base for the sale of real property
classified as ordinary assets remains to be the net taxable income
Accordingly, at the end of the year, the taxpayer/seller shall file its income tax return and
credit the taxes withheld (by the withholding agent/buyer) against its tax due.If the tax due
is greater than the tax withheld, then the taxpayer shall pay the difference.If, on the other
hand, the tax due is less than the tax withheld, the taxpayer will be entitled to a refund or
tax credit.Undoubtedly, the taxpayer is taxed on its net income.
The use of the GSP/FMV as basis to determine the withholding taxes is evidently for
purposes of practicality and convenience.Obviously, the withholding agent/buyer who is
obligated to withhold the tax does not know, nor is he privy to, how much the
taxpayer/seller will have as its net income at the end of the taxable year.Instead, said
withholding agents knowledge and privity are limited only to the particular transaction in
which he is a party.In such a case, his basis can only be the GSP or FMV as these are the
only factors reasonably known or knowable by him in connection with the performance of
his duties as a withholding agent.
RR 2-98 imposes a graduated CWT on income based on the GSP or FMV of the real
property categorized as ordinary assets. On the other hand, Section 27(D)(5) of RA 8424
imposes a final tax and flat rate of 6% on the gain presumed to be realized from the sale of
a capital asset based on its GSP or FMV.This final tax is also withheld at source.
As previously stated, FWT is imposed on the sale of capital assets. On the other hand,
CWT is imposed on the sale of ordinary assets.The inherent and substantial differences
between FWT and CWT disprove petitioners contention that ordinary assets are being
lumped together with, and treated similarly as, capital assets in contravention of the
pertinent provisions of RA 8424.
The fact that the tax is withheld at source does not automatically mean that it is treated
exactly the same way as capital gains.As aforementioned, the mechanics of the FWT are
distinct from those of the CWT. The withholding agent/buyers act of collecting the tax at
the time of the transaction by withholding the tax due from the income payable is the
essence of the withholding tax method of tax collection.
Section 57(A) expressly states that final tax can be imposed on certain kinds of income
and enumerates these as passive income.
Passive income generated by the taxpayers assets. These assets can be in the form of
real properties that return rental income, shares of stock in a corporation that earn
dividends or interest income received from savings.
On the other hand, Section 57(B) provides that the Secretary can require a CWT on
income payable to natural or juridical persons, residing in the Philippines.There is no
requirement that this income be passive income.If that were the intent of Congress, it could
have easily said so.
Indeed, Section 57(A) and (B) are distinct.Section 57(A) refers to FWT while Section 57(B)
pertains to CWT.The former covers the kinds of passive income enumerated therein and
the latter encompassesany income other than those listed in 57(A).Since the law itself
makes distinctions, it is wrong to regard 57(A) and 57(B) in the same way.
To repeat, the assailed provisions of RR 2-98, as amended, do not modify or deviate from
the text of Section 57(B).RR 2-98 merely implements the law by specifying what income is
subject to CWT.It has been held that, where a statute does not require any particular
procedure to be followed by an administrative agency, the agency may adopt any
reasonable method to carry out its functions.Similarly, considering that the law uses the
general term income, the Secretary and CIR may specify the kinds of income the rules will
apply to based on what is feasible.In addition, administrative rules and regulations
ordinarily deserve to be given weight and respect by the courts in view of the rule-making
authority given to those who formulate them and their specific expertise in their respective
fields.
POLITICAL LAW: no deprivation of due process
CWT is creditable against the tax due from the seller of the property at the end of the
taxable year.The seller will be able to claim a tax refund if its net income is less than the
taxes withheld.Nothing is taken that is not due so there is no confiscation of property
repugnant to the constitutional guarantee of due process.More importantly, the due
process requirement applies to the power to tax. The CWT does not impose new taxes nor
does it increase taxes.It relates entirely to the method and time of payment.
The practical problems encountered in claiming a tax refund, as claimed by the petitioner,
do not affect the constitutionality and validity of the CWT as a method of collecting the tax.
Petitioners lamentations will not support its attack on the constitutionality of the
CWT.Petitioners complaints are essentially matters of policy best addressed to the
executive and legislative branches of the government.Besides, the CWT is applied only on
the amounts actually received or receivable by the real estate entity.Sales on installment
are taxed on a per-installment basis. Petitioners desire to utilize for its operational and
capital expenses money earmarked for the payment of taxes may be a practical business
option but it is not a fundamental right which can be demanded from the court or from the
government.
POLITICAL LAW: no violation of equal protection clause
The equal protection clause under the Constitution means that no person or class of
persons shall be deprived of the same protection of laws which is enjoyed by other
persons or other classes in the same place and in like circumstances.Stated differently,all
persons belonging to the same class shall be taxed alike.It follows that the guaranty of the
equal protection of the laws is not violated by legislation based on a reasonable
classification.Classification, to be valid, must (1) rest on substantial distinctions; (2) be
germane to the purpose of the law; (3) not be limited to existing conditions only and (4)
apply equally to all members of the same class.
The taxing power has the authority to make reasonable classifications for purposes of
taxation. Inequalities which result from a singling out of one particular class for taxation, or
exemption, infringe no constitutional limitation. The real estate industry is, by itself, a class
and can be validly treated differently from other business enterprises.
Petitioner, in insisting that its industry should be treated similarly as manufacturing
enterprises, fails to realize that what distinguishes the real estate business from other
manufacturing enterprises, for purposes of the imposition of the CWT, is not their
production processes but the prices of their goods sold and the number of transactions
involved. The income from the sale of a real property is bigger and its frequency of
transaction limited, making it less cumbersome for the parties to comply with the
withholding tax scheme.

On the other hand, each manufacturing enterprise may have tens of thousands of
transactions with several thousand customers every month involving both minimal and
substantial amounts. To require the customers of manufacturing enterprises, at present, to
withhold the taxes on each of their transactions with their tens or hundreds of suppliers
may result in an inefficient and unmanageable system of taxation and may well defeat the
purpose of the withholding tax system.

REMEDIAL LAW: justiciable controversy

Courts will not assume jurisdiction over a constitutional question unless the following
requisites are satisfied: (1) there must be an actual case calling for the exercise of judicial
review; (2) the question before the court must be ripe for
adjudication;(3)thepersonchallengingthevalidityofthe act must have standing to do so; (4)
the question of constitutionality must have been raised at the earliest opportunity and (5)
the issue of constitutionality must be the verylis motaof the case.

An actual case or controversy involves a conflict of legal rights or an assertion of opposite

legal claims which is susceptible of judicial resolution as distinguished from a hypothetical
or abstract difference or dispute.On the other hand, a question is considered ripe for
adjudication when the act being challenged has a direct adverse effect on the individual
challenging it.

Contrary to respondents assertion, it no longer has to be waited until petitioners members

have shut down their operations as a result of the MCIT or CWT.The assailed provisions
are already being implemented.

If the assailed provisions are indeed unconstitutional, there is no better time than the
present to settle such question once and for all.

Legal standing orlocus standiis a partys personal and substantial interest in a case such
that it has sustained or will sustain direct injury as a result of the governmental act being
challenged.

In any event, this Court has the discretion to take cognizance of a suit which does not
satisfy the requirements of an actual case, ripeness or legal standing when paramount
public interest is involved.The questioned MCIT and CWT affect not only petitioners but
practically all domestic corporate taxpayers in our country. The transcendental importance
of the issues raised and their overreaching significance to society make it proper for the
Court to take cognizance of this petition.

MCIT and CWT are constitutional.

ABAKADA GURO PARTY LIST VS EXECUTIVE SECRETARY

G.R. No. 168056 September 1, 2005

ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S.

ALCANTARA and ED VINCENT S. ALBANO, Petitioners,
vs.
THE HONORABLE EXECUTIVE SECRETARY EDUARDO ERMITA; HONORABLE
SECRETARY OF THE DEPARTMENT OF FINANCE CESAR PURISIMA; and
 HONORABLE COMMISSIONER OF INTERNAL REVENUE GUILLERMO PARAYNO,
JR., Respondent.
Facts:
Petitioners ABAKADA GURO Party List challenged the constitutionality of R.A. No. 9337
particularly Sections 4, 5 and 6, amending Sections 106, 107 and 108, respectively, of the
National Internal Revenue Code (NIRC). These questioned provisions contain a uniform
proviso authorizing the President, upon recommendation of the Secretary of Finance, to
raise the VAT rate to 12%, effective January 1, 2006, after any of the following conditions
have been satisfied, to wit:
. . . That the President, upon the recommendation of the Secretary of Finance, shall,
effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after
any of the following conditions has been satisfied:
(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the
previous year exceeds two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of GDP of the previous year exceeds one
and one-half percent (1 ½%).
Petitioners argue that the law is unconstitutional, as it constitutes abandonment by
Congress of its exclusive authority to fix the rate of taxes under Article VI, Section 28(2) of
the 1987 Philippine Constitution. They further argue that VAT is a tax levied on the sale or
exchange of goods and services and cannot be included within the purview of tariffs under
the exemption delegation since this refers to customs duties, tolls or tribute payable upon
merchandise to the government and usually imposed on imported/exported goods. They
also said that the President has powers to cause, influence or create the conditions
provided by law to bring about the conditions precedent. Moreover, they allege that no
guiding standards are made by law as to how the Secretary of Finance will make the
recommendation. They claim, nonetheless, that any recommendation of the Secretary of
Finance can easily be brushed aside by the President since the former is a mere alter ego
of the latter, such that, ultimately, it is the President who decides whether to impose the
increased tax rate or not.
Issues:
1. Whether or not R.A. No. 9337 has violated the provisions in Article VI, Section 24, and
Article VI, Section 26 (2) of the Constitution.
2. Whether or not there was an undue delegation of legislative power in violation of Article VI
Sec 28 Par 1 and 2 of the Constitution.
3. Whether or not there was a violation of the due process and equal protection under Article
III Sec. 1 of the Constitution.
Discussions:
1. Basing from the ruling of Tolentino case, it is not the law, but the revenue bill which is
required by the Constitution to “originate exclusively” in the House of Representatives, but
Senate has the power not only to propose amendments, but also to propose its own
version even with respect to bills which are required by the Constitution to originate in the
House. the Constitution simply means is that the initiative for filing revenue, tariff or tax
bills, bills authorizing an increase of the public debt, private bills and bills of local
application must come from the House of Representatives on the theory that, elected as
they are from the districts, the members of the House can be expected to be more
sensitive to the local needs and problems. On the other hand, the senators, who are
elected at large, are expected to approach the same problems from the national
perspective. Both views are thereby made to bear on the enactment of such laws.
2. In testing whether a statute constitutes an undue delegation of legislative power or not, it
is usual to inquire whether the statute was complete in all its terms and provisions when it
left the hands of the legislature so that nothing was left to the judgment of any other
appointee or delegate of the legislature.
3. The equal protection clause under the Constitution means that “no person or class of
persons shall be deprived of the same protection of laws which is enjoyed by other
persons or other classes in the same place and in like circumstances.”
Ruling: No, the revenue bill exclusively originated in the House of Representatives, the
Senate was acting within its constitutional power to introduce amendments to the House
bill when it included provisions in Senate Bill No. 1950 amending corporate income taxes,
percentage, and excise and franchise taxes.
No, there is no undue delegation of legislative power but only of the discretion as to the
execution of a law. This is constitutionally permissible. Congress does not abdicate its
functions or unduly delegate power when it describes what job must be done, who must
do it, and what is the scope of his authority; in our complex economy that is frequently the
only way in which the legislative process can go forward. In this case, it is not a
delegation of legislative power but a delegation of ascertainment of facts upon which
enforcement and administration of the increased rate under the law is contingent.
No, the power of the State to make reasonable and natural classifications for the
purposes of taxation has long been established. Whether it relates to the subject of
taxation, the kind of property, the rates to be levied, or the amounts to be raised, the
methods of assessment, valuation and collection, the State’s power is entitled to
presumption of validity. As a rule, the judiciary will not interfere with such power absent a
clear showing of unreasonableness, discrimination, or arbitrariness.
SLDC v. DSWD
SOUTHERN LUZON DRUG CORPORATION, Petitioner, vs. THE DEPARTMENT OF
SOCIAL WELFARE AND DEVELOPMENT, et al. Respondents
G.R. No. 199669
April 25, 2017
FACTS:
The case at bar is a Petition for Review on Certiorari assailing the Decision of the Court of
Appeals which dismissed the petition for prohibition filed by Southern Luzon Drug
Corporation (petitioner) against the Department of Social Welfare and Development , the
National Council for the Welfare of Disabled Persons (now National Council on Disability
Affairs or NCDA), the Department of Finance and the Bureau of Internal Revenue
(collectively, the respondents), which sought to prohibit the implementation of Section 4(a)
of Republic Act (R.A.) No. 9257, otherwise known as the "Expanded Senior Citizens Act of
2003" and Section 32 of R.A. No. 9442, which amends the "Magna Carta for Disabled
Persons," particularly the granting of 20% discount on the purchase of medicines by senior
citizens and persons with disability (PWD), respectively, and treating them as tax deduction.
which dismissed the petition for prohibition filed by Southern Luzon Drug Corporation
(petitioner) against the Department of Social Welfare and Development , the National
Council for the Welfare of Disabled Persons (now National Council on Disability Affairs or
NCDA), the Department of Finance and the Bureau of: Internal Revenue (collectively, the
respondents), which sought to prohibit the implementation of Section 4(a) of Republic Act
(R.A.) No. 9257, otherwise known as the "Expanded Senior Citizens Act of 2003" and
Section 32 of R.A. No. 9442, which amends the "Magna Carta for Disabled Persons,"
particularly the granting of 20% discount on the purchase of medicines by senior citizens
and persons with disability (PWD),: respectively, and treating them as tax deduction due to
the reason that claiming it affects the profitability of their business.
The petitioner is a domestic corporation engaged in the business of drugstore operation in
the Philippines while the respondents are government' agencies, office and bureau
tasked to monitor compliance with R.A. Nos. 9257 and 9442, promulgate implementing rules
and regulations for their effective implementation, as well as prosecute and revoke licenses
of erring establishments.
ISSUES:
1. Whether or not the Petition for Prohibition may be filed to question the constitutionality of
a law;
2. Whether or not the case constitute stare decisis
3. Whether or not the 20% Sales Discount for Senior Citizens PWDs does not violate the
petitioner’s right to equal
protection of the law
3. Yes. The subject laws do not violate the equal protection clause. The equal protection
clause is not infringed by legislation which applies only to those persons falling within a
specified class. If the groupings are characterized by substantial distinctions that make real
differences, one class may be treated and regulated differently from another." For a
classification to be valid, (1) it must be based upon substantial distinctions, (2) it must be
germane to the purposes of the law, (3) it must not be limited to existing conditions only, and
(4) it must apply equally to all members of the same class.
4. No. The definitions of "disabilities" and "PWDs" are clear and unequivocal. Section 4(a)
of R.A. No. 7277, the precursor of R.A. No. 94421 defines "disabled persons" as follows:
(a) Disabled persons are those suffering from restriction or different abilities, as a result of a
mental, physical or sensory impairment, to perform an activity in the manner or within the
range considered normal for a human being[.]
On the other hand, the term "PWDs" is defined in Section 5.1 of the IRR of R.A. No. 9442
as follows:
5.1. Persons with Disability are those individuals defined under Section 4 of [R.A. No.] 7277
[or] An Act Providing for the Rehabilitation, Self-Development and Self-Reliance of Persons
with Disability as amended and their integration into the Mainstream of Society and for Other
Purposes. This is defined as a person suffering from restriction or different abilities, as a
result of a mental, physical or sensory impairment, to perform an activity in a manner or
within the range considered normal for human being. Disability shall mean (1) a physical 1or
mental impairment that substantially limits one or more psychological, physiological or
anatomical function of an individual or activities of such individual; (2) a record of such an
impairment; or (3) being regarded as having such an impairment.
In view of the foregoing disquisition, Section 4(a) of Republic Act No. 9257 and Section 32
of Republic Act No. 9442 are hereby declared CONSTITUTIONAL.

4. Whether or not the definitions of Disabilities and PWDs are vague and violates the
petitioners right to due process of law

RULING:

1. Yes. Prohibition may be filed to question the constitutionality of a law. Generally, the office
of prohibition is to prevent the unlawful and oppressive exercise of authority and is directed
against proceedings that are done without or in excess of jurisdiction, or with grave abuse
of discretion, there being no appeal or other plain, speedy, and adequate remedy in the
ordinary course of law. It is the remedy to prevent inferior courts, corporations, boards, or
persons from usurping or exercising a jurisdiction or power with which they have not been
vested by the law. This is, however, not the lone office of an action for prohibition. In Diaz,
et al. v. The Secretary of Finance, et al., prohibition was also recognized as a proper remedy
to prohibit or nullify acts of executive officials that amount to usurpation of legislative
authority. And, in a number of jurisprudence, prohibition was allowed as a proper action to
assail the constitutionality of a law or prohibit its implementation.

2. No. The Court agrees that the ruling in Carlos Superdrug does not constitute stare decisis
to the instant case, not because of the petitioner's submission of financial statements which
were wanting in the first case, but because it had the good sense of including questions that
had not been raised or deliberated in the former case of Carlos Superdrug, i.e., validity of
the 20% discount granted to PWDs, the supposed vagueness of the provisions of R.A. No.
9442 and violation of the equal protection clause.