SC Upholds Legality of Senior Citizens 20% As Tax Deductions

SC upholds legality of senior citizens 20%
discount, tax deduction

December 16, 2013 12:18pm
9 61 4 620

Tags: Supreme Court
The Supreme Court has upheld the constitutionalit o! the 20"percent discount and ta# deduction
scheme !or senior citi$ens imposed on business establishments%

&otin' 13"1, the hi'h court (un)ed !or lac) o! merit a petition !or prohibition !iled b t*o !uneral
companies + ,anila ,emorial -ar), .nc% and /a 0uneraria -a$"Sucat + 1uestionin' the
constitutionalit o! 2epublic 3ct 4432, as amended b 23 9254, that 'ranted senior citi$ens
pri6ile'es%

The rulin' *as *ritten b 3ssociate 7ustice ,ariano del Castillo *ith Senior 3ssociate 7ustice
3ntonio Carpio bein' the lone dissenter% ,ean*hile, 3ssociate 7ustice 3rturo 8rion did not ta)e
part in the 6otin'%

Thirteen o! the 15 SC ma'istrates are senior citi$ens or 60 ears old or older, *hile Chie! 7ustice
,aria /ourdes Sereno is 53 ears old% 3ssociate 7ustice ,ar6ic /eonen *ill turn 51 on
December 29%

.n its rulin', the hi'h court said both the 20"percent discount and the ta# deduction scheme *ere
a 96alid e#ercise o! the police po*er o!the state%9

9There is no intention to sa that price and rate o! return on in6estment control la*s are the
(usti!ication !or the senior citi$en discount la*% :ot at all,9 the (ustices said%

.n its petition, the t*o !uneral homes clari!ied that the *ere contestin' not the le'alit o! the 20"
percent discount !or senior citi$ens but o! the ta# deduction scheme under the Senior Citi$ens
la*, as *ell as the implementin' rules and re'ulations issued b the Department o! Social ;el!are and
De6elopment <DS;D= and the Department o! 0inance <D>0=%

3ccordin' to the petitioners, under the ta# deduction scheme, the pri6ate sectors shoulder 65? o!
the discount because onl 35? o! it is actuall returned b the 'o6ernment to the companies%

The !irms said the ta# deduction and the .22 ran contrar to 3rticle ..., Section 9 o! the 1984
Constitution, *hich states that: 9@pAri6ate propert shall not be ta)en !or public use *ithout (ust
compensation%9

The memorial homes said because o! the ta# deduction scheme, the stateBs constitutional mandate
or dut o! impro6in' the *el!are o! the elderl to the pri6ate sector, in 6iolation o! 3rticle C&, Section 4
and 3rticle C..., Section 11 o! the Constitution%

.n their de!ense, the DS;D and the D>0 said the petitioners !ailed to pro6e that the ta#
deduction scheme *as not 9!air and !ull e1ui6alent o! the loss sustained9 b their companies%

.n its rulin', the SC ruled: 9The (usti!ication !or the senior citi$en discount la* is the plenar po*ers o!
Con'ress% The le'islati6e po*er to re'ulate business establishment is broad and co6ers a *ide arra o! areas
and sub(ects%9

The ma'istrates said: 9.t is *ell *ithin Con'ressB le'islati6e po*ers to re'ulate the pro!its or
incomeD'ross sales o! industries and enterprises, e6en those *ithout !ranchises% 0or *hat are
!ranchises but mere le'islati6e enactmentsE9 Mar Merue!as"#S$, %M& 'e(s
RA 7432, RA 9257, senior citizens - SC: 20% discount for elderly legl !
"edlines, #e$s, %&e '&ili((ine Str ! (&ilstr)co*
see - SC: 20% discount for elderly legal | Headlines, News, The Philiine Star |
hilstar!co"
#$ $ $!
MANILA, Philippines - The Supreme Court (SC) has upheld the legality of the tax
deduction sheme imposed on !usiness esta!lishments under the Senior Citizens
La"#
In a 38-page decision penned by Associate Justice Mariano del Castillo, the SC
held that the 2 percent discount pro!ided under Section " o# $epublic Act %"32,
as a&ended by $A '2(%, is constitutional)
It dismissed the petition filed !y funeral firms Manila Me&orial *ar+ In# and La
$uneraria Pa%-Suat In# &uestioning the sheme and its implementing rules !y the
'epartment of Soial (elfare and 'e)elopment and the ,epart&ent o# -inance#
*A la", "hih has !een in operation for many years and promotes the "elfare of a group
aorded speial onern !y the Constitution, annot and should not !e summarily
in)alidated on a mere allegation that it redues the inome or gross sales of !usiness
esta!lishments,+ read the SC ruling#
,nder the ta- dedution system, pri)ate esta!lishments shoulder ./ perent of the
disount "hile the go)ernment arries 0/ perent#
The petitioners said the sheme )iolates their right to 1ust ompensation under Artile III
of the Constitution#
2eadlines ( Artile M3e ), pagemath4 5, setionmath4 5
3A 6708, 3A 98/6, senior iti%ens - SC4 8:; disount for elderly legal < 2eadlines,
Ne"s, The Philippine Star < philstar#om
see - SC4 8:; disount for elderly legal < 2eadlines, Ne"s, The Philippine Star <
philstar#om
=- - -#
MANILA, Philippines - The Supreme Court (SC) has upheld the legality of the ta-
dedution sheme imposed on !usiness esta!lishments under the Senior Citi%ens La"#
In a 0>-page deision penned !y Assoiate ?ustie Mariano del Castillo, the SC held
that the 8: perent disount pro)ided under Setion 7 of 3epu!li At 6708, as
amended !y 3A 98/6, is onstitutional#
It dismissed the petition filed !y funeral firms Manila Memorial Par@ In# and La
$uneraria Pa%-Suat In# &uestioning the sheme and its implementing rules !y the
'epartment of Soial (elfare and 'e)elopment and the 'epartment of $inane#
*A la", "hih has !een in operation for many years and promotes the "elfare of a group
aorded speial onern !y the Constitution, annot and should not !e summarily
in)alidated on a mere allegation that it redues the inome or gross sales of !usiness
esta!lishments,+ read the SC ruling#
,nder the ta- dedution system, pri)ate esta!lishments shoulder ./ perent of the
disount "hile the go)ernment arries 0/ perent#
The petitioners said the sheme )iolates their right to 1ust ompensation under Artile III
of the Constitution#
2eadlines ( Artile M3e ), pagemath4 5, setionmath4 5
They insisted that the go)ernment should implement ta- redit sheme that "ould
diretly redue ta-es olleted !y the go)ernment on !usinesses granting the 8:-
perent pri)ilege to senior iti%ens#
They added that the sheme )iolates Artile AB Setion 7, and Artile AIII Setion 55 of
the Constitution as it passes to the pri)ate setor the duty of the go)ernment to impro)e
the "elfare of the elderly#
F%2% :o% 145356, December 03, 2013 " ,3:./3 ,G,>2.3/ -32H, .:C% 3:D /3
0I:G232.3 -3J"SIC3T, .:C%, -etitioners, 6% SGC2GT32K >0 TLG
DG-32T,G:T >0 S>C.3/ ;G/032G 3:D DG&G/>-,G:T 3:D TLG
SGC2GT32K >0 TLG DG-32T,G:T >0 0.:3:CG , 2espondent%
)' *&'C
%+#+ 'o+ ,-./.0, 1ece23er 0/, 20,/
M&'45& M)M6#4&5 7&#8, 4'C+ &'1 5& 9:')#&#4& 7&;<S:C&T, 4'C+,
Petitioners, v. S)C#)T&#= 69 T>) 1)7&#TM)'T 69 S6C4&5 ?)59&#)
&'1 1)@)567M)'T &'1 T>) S)C#)T&#= 69 T>) 1)7&#TM)'T 69
94'&'C) , Respondent%
1 ) C 4 S 4 6 '
1)5 C&ST4556, J.:
;hen a part challen'es the constitutionalit o! a la*, the burden o! proo! rests upon
him%
1
8e!ore us is a -etition !or -rohibition
2
under 2ule 65 o! the 2ules o! Court !iled b
petitioners ,anila ,emorial -ar), .nc% and /a 0uneraria -a$"Sucat, .nc%, domestic
corporations en'a'ed in the business o! pro6idin' !uneral and burial ser6ices, a'ainst
public respondents Secretaries o! the Department o! Social ;el!are and De6elopment
<DS;D= and the Department o! 0inance <D>0=%
-etitioners assail the constitutionalit o! Section 4 o! 2epublic 3ct <23= :o% 4432,
3
as
amended b 23 9254,
4
and the implementin' rules and re'ulations issued b the DS;D
and D>0 inso!ar as these allo* business establishments to claim the 20? discount
'i6en to senior citi$ens as a ta# deduction%
Factual Antecedents
>n 3pril 23, 1992, 23 4432 *as passed into la*, 'rantin' senior citi$ens the !ollo*in'
pri6ile'es:
SGCT.>: 4% -ri6ile'es !or the Senior Citi$ens% + The senior citi$ens shall be entitled to
the !ollo*in':
a= the 'rant o! t*ent percent <20?= discount !rom all establishments relati6e to
utili$ation o! transportation ser6ices, hotels and similar lod'in' establishment@sA,
restaurants and recreation centers and purchase o! medicine an*here in the countr:
-ro6ided, That pri6ate establishments ma claim the cost as ta# creditM
b= a minimum o! t*ent percent <20?= discount on admission !ees char'ed b theaters,
cinema houses and concert halls, circuses, carni6als and other similar places o! culture,
leisure, and amusementM
c= e#emption !rom the pament o! indi6idual income ta#es: -ro6ided, That their annual
ta#able income does not e#ceed the propert le6el as determined b the :ational
Gconomic and De6elopment 3uthorit <:GD3= !or that earM
d= e#emption !rom trainin' !ees !or socioeconomic pro'rams underta)en b the >SC3
as part o! its *or)M
e= !ree medical and dental ser6ices in 'o6ernment establishment@sA an*here in the
countr, sub(ect to 'uidelines to be issued b the Department o! Lealth, the Fo6ernment
Ser6ice .nsurance Sstem and the Social Securit SstemM
!= to the e#tent practicable and !easible, the continuance o! the same bene!its and
pri6ile'es 'i6en b the Fo6ernment Ser6ice .nsurance Sstem <FS.S=, Social Securit
Sstem <SSS= and -3F".8.F, as the case ma be, as are en(oed b those in actual
ser6ice%
>n 3u'ust 23, 1993, 2e6enue 2e'ulations <22= :o% 02"94 *as issued to implement 23
4432% Sections 2<i= and 4 o! 22 :o% 02"94 pro6ide:
Sec% 2% DG0.:.T.>:S% + 0or purposes o! these re'ulations:
i% Ta# Credit + re!ers to the amount representin' the 20? discount 'ranted to a 1uali!ied
senior citi$en b all establishments relati6e to their utili$ation o! transportation ser6ices,
hotels and similar lod'in' establishments, restaurants, dru'stores, recreation centers,
theaters, cinema houses, concert halls, circuses, carni6als and other similar places o!
culture, leisure and amusement, *hich discount shall be deducted b the said
establishments !rom their 'ross income !or income ta# purposes and !rom their 'ross
sales !or 6alue"added ta# or other percenta'e ta# purposes%
# # #
Sec% 4% 2GC>2D.:FD8>>HHGG-.:F 2GNI.2G,G:TS 0>2 -2.&3TG
GST38/.SL,G:TS% + -ri6ate establishments, i%e%, transport ser6ices, hotels and
similar lod'in' establishments, restaurants, recreation centers, dru'stores, theaters,
cinema houses, concert halls, circuses, carni6als and other similar places o! culture@,A
leisure and amusement, 'i6in' 20? discounts to 1uali!ied senior citi$ens are re1uired to
)eep separate and accurate record@sA o! sales made to senior citi$ens, *hich shall
include the name, identi!ication number, 'ross salesDreceipts, discounts, dates o!
transactions and in6oice number !or e6er transaction%
The amount o! 20? discount shall be deducted !rom the 'ross income !or income ta#
purposes and !rom 'ross sales o! the business enterprise concerned !or purposes o! the
&3T and other percenta'e ta#es%
.n Commissioner of Internal Revenue v. Central Luzon Drug Corporation,
5
the Court
declared Sections 2<i= and 4 o! 22 :o% 02"94 as erroneous because these contra6ene 23
4432,
6
thus:
23 4432 speci!icall allo*s pri6ate establishments to claim as ta# credit the amount o!
discounts the 'rant% .n turn, the .mplementin' 2ules and 2e'ulations, issued pursuant
thereto, pro6ide the procedures !or its a6ailment% To den such credit, despite the plain
mandate o! the la* and the re'ulations carrin' out that mandate, is inde!ensible%
0irst, the de!inition 'i6en b petitioner is erroneous% .t re!ers to ta# credit as the amount
representin' the 20 percent discount that Oshall be deducted b the said establishments
!rom their 'ross income !or income ta# purposes and !rom their 'ross sales !or 6alue"
added ta# or other percenta'e ta# purposes%P .n ordinar business lan'ua'e, the ta#
credit represents the amount o! such discount% Lo*e6er, the manner b *hich the
discount shall be credited a'ainst ta#es has not been clari!ied b the re6enue re'ulations%
8 ordinar acceptation, a discount is an Oabatement or reduction made !rom the 'ross
amount or 6alue o! anthin'%P To be more precise, it is in business parlance Oa deduction
or lo*erin' o! an amount o! moneMP or Oa reduction !rom the !ull amount or 6alue o!
somethin', especiall a price%P .n business there are man )inds o! discount, the most
common o! *hich is that a!!ectin' the income statement or !inancial report upon *hich
the income ta# is based%
# # #
Sections 2%i and 4 o! 2e6enue 2e'ulations :o% <22= 2"94 de!ine ta# credit as the 20
percent discount deductible !rom 'ross income !or income ta# purposes, or !rom 'ross
sales !or &3T or other percenta'e ta# purposes% .n e!!ect, the ta# credit bene!it under 23
4432 is related to a sales discount% This contri6ed de!inition is improper, considerin'
that the latter has to be deducted !rom 'ross sales in order to compute the 'ross income
in the income statement and cannot be deducted a'ain, e6en !or purposes o! computin'
the income ta#%
;hen the la* sas that the cost o! the discount ma be claimed as a ta# credit, it means
that the amount Q *hen claimed Q shall be treated as a reduction !rom an ta#
liabilit, plain and simple% The option to a6ail o! the ta# credit bene!it depends upon the
e#istence o! a ta# liabilit, but to limit the bene!it to a sales discount Q *hich is not
e6en identical to the discount pri6ile'e that is 'ranted b la* Q does not de!ine it at all
and ser6es no use!ul purpose% The de!inition must, there!ore, be stric)en do*n%
Laws Not Amended
by Regulations
Second, the la* cannot be amended b a mere re'ulation% .n !act, a re'ulation that
Ooperates to create a rule out o! harmon *ith the statute is a mere nullitMP it cannot
pre6ail%
.t is a cardinal rule that courts O*ill and should respect the contemporaneous
construction placed upon a statute b the e#ecuti6e o!!icers *hose dut it is to en!orce it
# # #%P .n the scheme o! (udicial ta# administration, the need !or certaint and
predictabilit in the implementation o! ta# la*s is crucial% >ur ta# authorities !ill in the
details that OCon'ress ma not ha6e the opportunit or competence to pro6ide%P The
re'ulations these authorities issue are relied upon b ta#paers, *ho are certain that
these *ill be !ollo*ed b the courts% Courts, ho*e6er, *ill not uphold these authoritiesR
interpretations *hen clearl absurd, erroneous or improper%
.n the present case, the ta# authorities ha6e 'i6en the term ta# credit in Sections 2%i and
4 o! 22 2"94 a meanin' utterl in contrast to *hat 23 4432 pro6ides% Their
interpretation has muddled # # # the intent o! Con'ress in 'rantin' a mere discount
pri6ile'e, not a sales discount% The administrati6e a'enc issuin' these re'ulations ma
not enlar'e, alter or restrict the pro6isions o! the la* it administersM it cannot en'ra!t
additional re1uirements not contemplated b the le'islature%
.n case o! con!lict, the la* must pre6ail% 3 Ore'ulation adopted pursuant to la* is la*%P
Con6ersel, a re'ulation or an portion thereo! not adopted pursuant to la* is no la*
and has neither the !orce nor the e!!ect o! la*%
4
>n 0ebruar 26, 2004, 23 9254
8
amended certain pro6isions o! 23 4432, to *it:
the !ollo*in':
<a= the 'rant o! t*ent percent <20?= discount !rom all establishments relati6e to the
utili$ation o! ser6ices in hotels and similar lod'in' establishments, restaurants and
recreation centers, and purchase o! medicines in all establishments !or the e#clusi6e use
or en(oment o! senior citi$ens, includin' !uneral and burial ser6ices !or the death o!
senior citi$ensM
# # #
The establishment ma claim the discounts 'ranted under <a=, <!=, <'= and <h= as ta#
deduction based on the net cost o! the 'oods sold or ser6ices rendered: -ro6ided, That
the cost o! the discount shall be allo*ed as deduction !rom 'ross income !or the same
ta#able ear that the discount is 'ranted% -ro6ided, !urther, That the total amount o! the
claimed ta# deduction net o! 6alue added ta# i! applicable, shall be included in their
'ross sales receipts !or ta# purposes and shall be sub(ect to proper documentation and to
the pro6isions o! the :ational .nternal 2e6enue Code, as amended%
To implement the ta# pro6isions o! 23 9254, the Secretar o! 0inance issued 22 :o% 4"
2006, the pertinent pro6ision o! *hich pro6ides:
SGC% 8% 3&3./,G:T 8K GST38/.SL,G:TS >0 S3/GS D.SC>I:TS 3S
DGDICT.>: 02>, F2>SS .:C>,G% + Gstablishments enumerated in subpara'raph
<6= hereunder 'rantin' sales discounts to senior citi$ens on the sale o! 'oods andDor
ser6ices speci!ied thereunder are entitled to deduct the said discount !rom 'ross income
sub(ect to the !ollo*in' conditions:
<1= >nl that portion o! the 'ross sales GCC/IS.&G/K ISGD, C>:SI,GD >2
G:7>KGD 8K TLG SG:.>2 C.T.JG: shall be eli'ible !or the deductible sales
discount%
<2= The 'ross sellin' price and the sales discount ,IST 8G SG-323TG/K
.:D.C3TGD .: TLG >00.C.3/ 2GCG.-T >2 S3/GS .:&>.CG issued b the
establishment !or the sale o! 'oods or ser6ices to the senior citi$en%
<3= >nl the actual amount o! the discount 'ranted or a sales discount not e#ceedin'
20? o! the 'ross sellin' price can be deducted !rom the 'ross income, net o! 6alue
added ta#, i! applicable, !or income ta# purposes, and !rom 'ross sales or 'ross
receipts o! the business enterprise concerned, !or &3T or other percenta'e ta#
purposes%
<4= The discount can onl be allo*ed as deduction !rom 'ross income !or the same
ta#able ear that the discount is 'ranted%
<5= The business establishment 'i6in' sales discounts to 1uali!ied senior citi$ens is
re1uired to )eep separate and accurate record@sA o! sales, *hich shall include the
name o! the senior citi$en, T.:, >SC3 .D, 'ross salesDreceipts, sales discount
'ranted, @dateA o! @transactionA and in6oice number !or e6er sale transaction to
senior citi$en%
<6= >nl the !ollo*in' business establishments *hich 'ranted sales discount to senior
citi$ens on their sale o! 'oods andDor ser6ices ma claim the said discount 'ranted
as deduction !rom 'ross income, namel:
# # #
<i= 0uneral parlors and similar establishments + The bene!iciar or an person *ho
shall shoulder the !uneral and burial e#penses o! the deceased senior citi$en shall
claim the discount, such as cas)et, embalmment, cremation cost and other related
ser6ices !or the senior citi$en upon pament and presentation o! @hisA death
certi!icate%
The DS;D li)e*ise issued its o*n 2ules and 2e'ulations .mplementin' 23 9254, to
*it:
2I/G &.
D.SC>I:TS 3S T3C DGDICT.>: >0 GST38/.SL,G:TS
3rticle 8% Ta# Deduction o! Gstablishments% + The establishment ma claim the
discounts 'ranted under 2ule &, Section 4 + Discounts !or Gstablishments, Section 9,
,edical and Dental Ser6ices in -ri6ate 0acilities and Sections 10 and 11 + 3ir, Sea and
/and Transportation as ta# deduction based on the net cost o! the 'oods sold or ser6ices
rendered% Provided, That the cost o! the discount shall be allo*ed as deduction !rom
'ross income !or the same ta#able ear that the discount is 'rantedM Provided, furter,
That the total amount o! the claimed ta# deduction net o! 6alue added ta# i! applicable,
shall be included in their 'ross sales receipts !or ta# purposes and shall be sub(ect to
proper documentation and to the pro6isions o! the :ational .nternal 2e6enue Code, as
amendedM -ro6ided, !inall, that the implementation o! the ta# deduction shall be sub(ect
to the 2e6enue 2e'ulations to be issued b the 8ureau o! .nternal 2e6enue <8.2= and
appro6ed b the Department o! 0inance <D>0=%
0eelin' a''rie6ed b the ta# deduction scheme, petitioners !iled the present recourse,
prain' that Section 4 o! 23 4432, as amended b 23 9254, and the implementin' rules
and re'ulations issued b the DS;D and the D>0 be declared unconstitutional inso!ar
as these allo* business establishments to claim the 20? discount 'i6en to senior
citi$ens as a ta# deductionM that the DS;D and the D>0 be prohibited !rom en!orcin'
the sameM and that the ta# credit treatment o! the 20? discount under the !ormer Section
4 <a= o! 23 4432 be reinstated%
4ssues
-etitioners raise the !ollo*in' issues:
3%
;LGTLG2 TLG -GT.T.>: -2GSG:TS 3: 3CTI3/ C3SG >2 C>:T2>&G2SK%
8%
;LGTLG2 SGCT.>: 4 >0 2G-I8/.C 3CT :>% 9254 3:D C C C .TS
.,-/G,G:T.:F 2I/GS 3:D 2GFI/3T.>:S, .:S>032 3S TLGK -2>&.DG
TL3T TLG T;G:TK -G2CG:T <20?= D.SC>I:T T> SG:.>2 C.T.JG:S ,3K
8G C/3.,GD 3S 3 T3C DGDICT.>: 8K TLG -2.&3TG GST38/.SL,G:TS,
32G .:&3/.D 3:D I:C>:ST.TIT.>:3/%
9
Petitioners Arguments
-etitioners emphasi$e that the are not 1uestionin' the 20? discount 'ranted to senior
citi$ens but are onl assailin' the constitutionalit o! the ta# deduction scheme
prescribed under 23 9254 and the implementin' rules and re'ulations issued b the
DS;D and the D>0%
10
-etitioners posit that the ta# deduction scheme contra6enes 3rticle ..., Section 9 o! the
Constitution, *hich pro6ides that: O@pAri6ate propert shall not be ta)en !or public use
*ithout (ust compensation%P
11
.n support o! their position, petitioners cite Central Luzon
Drug Corporation,
12
*here it *as ruled that the 20? discount pri6ile'e constitutes
ta)in' o! pri6ate propert !or public use *hich re1uires the pament o! (ust
compensation,
13
and Carlos !uperdrug Corporation v. Department of !o"ial #elfare
and Development,
14
*here it *as ac)no*led'ed that the ta# deduction scheme does not
meet the de!inition o! (ust compensation%
15
-etitioners li)e*ise see) a re6ersal o! the rulin' in Carlos !uperdrug Corporation
16
that
the ta# deduction scheme adopted b the 'o6ernment is (usti!ied b police po*er%
14
The
assert that O@aAlthou'h both police po*er and the po*er o! eminent domain ha6e the
'eneral *el!are !or their ob(ect, there are still traditional distinctions bet*een the t*oP
18

and that Oeminent domain cannot be made less supreme than police po*er%P
19
-etitioners
!urther claim that the le'islature, in amendin' 23 4432, relied on an erroneous
contemporaneous construction that prior pament o! ta#es is re1uired !or ta# credit%
20
-etitioners also contend that the ta# deduction scheme 6iolates 3rticle C&, Section 4
21

and 3rticle C..., Section 11
22
o! the Constitution because it shi!ts the StateRs
constitutional mandate or dut o! impro6in' the *el!are o! the elderl to the pri6ate
sector%
23
Inder the ta# deduction scheme, the pri6ate sector shoulders 65? o! the
discount because onl 35?
24
o! it is actuall returned b the 'o6ernment%
25

Conse1uentl, the implementation o! the ta# deduction scheme prescribed under Section
4 o! 23 9254 a!!ects the businesses o! petitioners%
26
Thus, there e#ists an actual case or
contro6ers o! transcendental importance *hich deser6es (udicious disposition on the
merits b the hi'hest court o! the land%
24
Chan2obles&irtuala*librar
Respondents Arguments
2espondents, on the other hand, 1uestion the !ilin' o! the instant -etition directl *ith
the Supreme Court as this disre'ards the hierarch o! courts%
28
The li)e*ise assert that
there is no (usticiable contro6ers as petitioners !ailed to pro6e that the ta# deduction
treatment is not a O!air and !ull e1ui6alent o! the loss sustainedP b them%
29
3s to the
constitutionalit o! 23 9254 and its implementin' rules and re'ulations, respondents
contend that petitioners !ailed to o6erturn its presumption o! constitutionalit%
30
,ore
important, respondents maintain that the ta# deduction scheme is a le'itimate e#ercise
o! the StateRs police po*er%
31
chanrobles6irtuala*librar
6ur #uling
The -etition lac)s merit%
There exists an actual case or controversy.
;e shall !irst resol6e the procedural issue%
;hen the constitutionalit o! a la* is put in issue, (udicial re6ie* ma be a6ailed o!
onl i! the !ollo*in' re1uisites concur: O<1= the e#istence o! an actual and appropriate
caseM <2= the e#istence o! personal and substantial interest on the part o! the part raisin'
the @1uestion o! constitutionalitAM <3= recourse to (udicial re6ie* is made at the earliest
opportunitM and <4= the @1uestion o! constitutionalitA is the lis mota o! the case%P
32
.n this case, petitioners are challen'in' the constitutionalit o! the ta# deduction scheme
pro6ided in 23 9254 and the implementin' rules and re'ulations issued b the DS;D
and the D>0% 2espondents, ho*e6er, oppose the -etition on the 'round that there is no
actual case or contro6ers% ;e do not a'ree *ith respondents%
3n actual case or contro6ers e#ists *hen there is Oa con!lict o! le'al ri'htsP or Oan
assertion o! opposite le'al claims susceptible o! (udicial resolution%P
33
The -etition must
there!ore sho* that Othe 'o6ernmental act bein' challen'ed has a direct ad6erse e!!ect
on the indi6idual challen'in' it%P
34
.n this case, the ta# deduction scheme challen'ed b
petitioners has a direct ad6erse e!!ect on them% Thus, it cannot be denied that there e#ists
an actual case or contro6ers%
The validity of the 20 senior citi!en discount and tax deduction scheme under RA
"2#$% as an exercise of police po&er of the 'tate% has already (een settled in )arlos
'uperdrug )orporation.
-etitioners posit that the resolution o! this case lies in the determination o! *hether the
le'all mandated 20? senior citi$en discount is an e#ercise o! police po*er or eminent
domain% .! it is police po*er, no (ust compensation is *arranted% 8ut i! it is eminent
domain, the ta# deduction scheme is unconstitutional because it is not a peso !or peso
reimbursement o! the 20? discount 'i6en to senior citi$ens% Thus, it constitutes ta)in'
o! pri6ate propert *ithout pament o! (ust compensation%
3t the outset, *e note that this 1uestion has been settled in Carlos !uperdrug
Corporation%
35
.n that case, *e ruled:
-etitioners assert that Section 4<a= o! the la* is unconstitutional because it constitutes
depri6ation o! pri6ate propert% Compellin' dru'store o*ners and establishments to
'rant the discount *ill result in a loss o! pro!it and capital because 1= dru'stores impose
a mar)"up o! onl 5? to 10? on branded medicinesM and 2= the la* !ailed to pro6ide a
scheme *hereb dru'stores *ill be (ustl compensated !or the discount%
G#aminin' petitionersR ar'uments, it is apparent that *hat petitioners are ultimatel
1uestionin' is the 6alidit o! the ta# deduction scheme as a reimbursement mechanism
!or the t*ent percent <20?= discount that the e#tend to senior citi$ens%
8ased on the a!ore"stated D>0 >pinion, the ta# deduction scheme does not !ull
reimburse petitioners !or the discount pri6ile'e accorded to senior citi$ens% This is
because the discount is treated as a deduction, a ta#"deductible e#pense that is
subtracted !rom the 'ross income and results in a lo*er ta#able income% Stated
other*ise, it is an amount that is allo*ed b la* to reduce the income prior to the
application o! the ta# rate to compute the amount o! ta# *hich is due% 8ein' a ta#
deduction, the discount does not reduce ta#es o*ed on a peso !or peso basis but merel
o!!ers a !ractional reduction in ta#es o*ed%
Theoreticall, the treatment o! the discount as a deduction reduces the net income o! the
pri6ate establishments concerned% The discounts 'i6en *ould ha6e entered the co!!ers
and !ormed part o! the 'ross sales o! the pri6ate establishments, *ere it not !or 2%3% :o%
9254%
The permanent reduction in their total re6enues is a !orced subsid correspondin' to the
ta)in' o! pri6ate propert !or public use or bene!it% This constitutes compensable ta)in'
!or *hich petitioners *ould ordinaril become entitled to a (ust compensation%
7ust compensation is de!ined as the !ull and !air e1ui6alent o! the propert ta)en !rom its
o*ner b the e#propriator% The measure is not the ta)erRs 'ain but the o*nerRs loss% The
*ord Aust is used to intensi! the meanin' o! the *ord co2pensation, and to con6e the
idea that the e1ui6alent to be rendered !or the propert to be ta)en shall be real,
substantial, !ull and ample%
3 ta# deduction does not o!!er !ull reimbursement o! the senior citi$en discount% 3s
such, it *ould not meet the de!inition o! (ust compensation%
La6in' said that, this raises the 1uestion o! *hether the State, in promotin' the health
and *el!are o! a special 'roup o! citi$ens, can impose upon pri6ate establishments the
burden o! partl subsidi$in' a 'o6ernment pro'ram%
The Court belie6es so%
The Senior Citi$ens 3ct *as enacted primaril to ma#imi$e the contribution o! senior
citi$ens to nation"buildin', and to 'rant bene!its and pri6ile'es to them !or their
impro6ement and *ell"bein' as the State considers them an inte'ral part o! our societ%
The priorit 'i6en to senior citi$ens !inds its basis in the Constitution as set !orth in the
la* itsel!% Thus, the 3ct pro6ides:
SGC% 2% 2epublic 3ct :o% 4432 is hereb amended to read as !ollo*s:
SGCT.>: 1% De"laration of Poli"ies and $b%e"tives% Q -ursuant to 3rticle C&, Section
4 o! the Constitution, it is the dut o! the !amil to ta)e care o! its elderl members
*hile the State ma desi'n pro'rams o! social securit !or them% .n addition to this,
Section 10 in the Declaration o! -rinciples and State -olicies pro6ides: OThe State shall
pro6ide social (ustice in all phases o! national de6elopment%P 0urther, 3rticle C...,
Section 11, pro6ides: OThe State shall adopt an inte'rated and comprehensi6e approach
to health de6elopment *hich shall endea6or to ma)e essential 'oods, health and other
social ser6ices a6ailable to all the people at a!!ordable cost% There shall be priorit !or
the needs o! the underpri6ile'ed sic), elderl, disabled, *omen and children%P
Consonant *ith these constitutional principles the !ollo*in' are the declared policies o!
this 3ct:
S S S
<!= To recognize the i2portant role of the priBate sector in the i2proBe2ent of the
(elfare of senior citizens and to actiBely see their partnership+
To implement the abo6e polic, the la* 'rants a t*ent percent discount to senior
citi$ens !or medical and dental ser6ices, and dia'nostic and laborator !eesM admission
!ees char'ed b theaters, concert halls, circuses, carni6als, and other similar places o!
culture, leisure and amusementM !ares !or domestic land, air and sea tra6elM utili$ation o!
ser6ices in hotels and similar lod'in' establishments, restaurants and recreation centersM
and purchases o! medicines !or the e#clusi6e use or en(oment o! senior citi$ens% 3s a
!orm o! reimbursement, the la* pro6ides that business establishments e#tendin' the
t*ent percent discount to senior citi$ens ma claim the discount as a ta# deduction%
The la* is a le'itimate e#ercise o! police po*er *hich, similar to the po*er o! eminent
domain, has 'eneral *el!are !or its ob(ect% -olice po*er is not capable o! an e#act
de!inition, but has been purposel 6eiled in 'eneral terms to underscore its
comprehensi6eness to meet all e#i'encies and pro6ide enou'h room !or an e!!icient and
!le#ible response to conditions and circumstances, thus assurin' the 'reatest bene!its%
3ccordin'l, it has been described as Othe most essential, insistent and the least
limitable o! po*ers, e#tendin' as it does to all the 'reat public needs%P .t is O@tAhe po*er
6ested in the le'islature b the constitution to ma)e, ordain, and establish all manner o!
*holesome and reasonable la*s, statutes, and ordinances, either *ith penalties or
*ithout, not repu'nant to the constitution, as the shall (ud'e to be !or the 'ood and
*el!are o! the common*ealth, and o! the sub(ects o! the same%P
0or this reason, *hen the conditions so demand as determined b the le'islature,
propert ri'hts must bo* to the primac o! police po*er because propert ri'hts, thou'h
sheltered b due process, must ield to 'eneral *el!are%
-olice po*er as an attribute to promote the common 'ood *ould be diluted
considerabl i! on the mere plea o! petitioners that the *ill su!!er loss o! earnin's and
capital, the 1uestioned pro6ision is in6alidated% ,oreo6er, in the absence o! e6idence
demonstratin' the alle'ed con!iscator e!!ect o! the pro6ision in 1uestion, there is no
basis !or its nulli!ication in 6ie* o! the presumption o! 6alidit *hich e6er la* has in
its !a6or%
Fi6en these, it is incorrect !or petitioners to insist that the 'rant o! the senior citi$en
discount is undul oppressi6e to their business, because petitioners ha6e not ta)en time
to calculate correctl and come up *ith a !inancial report, so that the ha6e not been
able to sho* properl *hether or not the ta# deduction scheme reall *or)s 'reatl to
their disad6anta'e%
.n treatin' the discount as a ta# deduction, petitioners insist that the *ill incur losses
because, re!errin' to the D>0 >pinion, !or e6er -1%00 senior citi$en discount that
petitioners *ould 'i6e, -0%68 *ill be shouldered b them as onl -0%32 *ill be re!unded
b the 'o6ernment b *a o! a ta# deduction%
To illustrate this point, petitioner Carlos Super Dru' cited the anti"hpertensi6e
maintenance dru' Norvas" as an e#ample% 3ccordin' to the latter, it ac1uires Norvas"
!rom the distributors at -34%54 per tablet, and retails it at -39%60 <or at a mar'in o! 5?=%
.! it 'rants a 20? discount to senior citi$ens or an amount e1ui6alent to -4%92, then it
*ould ha6e to sell Norvas" at -31%68 *hich translates to a loss !rom capital o! -5%89 per
tablet% G6en i! the 'o6ernment *ill allo* a ta# deduction, onl -2%53 per tablet *ill be
re!unded and not the !ull amount o! the discount *hich is -4%92% .n short, onl 32? o!
the 20? discount *ill be reimbursed to the dru'stores%
-etitionersR computation is !la*ed% 0or purposes o! reimbursement, the la* states that
the cost o! the discount shall be deducted !rom 'ross income, the amount o! income
deri6ed !rom all sources be!ore deductin' allo*able e#penses, *hich *ill result in net
income% Lere, petitioners tried to sho* a loss on a per transaction basis, *hich should
not be the case% 3n income statement, sho*in' an accountin' o! petitionersR sales,
e#penses, and net pro!it <or loss= !or a 'i6en period could ha6e accuratel re!lected the
e!!ect o! the discount on their income% 3bsent an !inancial statement, petitioners cannot
substantiate their claim that the *ill be operatin' at a loss should the 'i6e the
discount% .n addition, the computation *as erroneousl based on the assumption that
their customers consisted *holl o! senior citi$ens% /astl, the 32? ta# rate is to be
imposed on income, not on the amount o! the discount%
0urthermore, it is un!air !or petitioners to critici$e the la* because the cannot raise the
prices o! their medicines 'i6en the cutthroat nature o! the plaers in the industr% .t is a
business decision on the part o! petitioners to pe' the mar)"up at 5?% Sellin' the
medicines belo* ac1uisition cost, as alle'ed b petitioners, is merel a result o! this
decision% .nasmuch as pricin' is a propert ri'ht, petitioners cannot reproach the la* !or
bein' oppressi6e, simpl because the cannot a!!ord to raise their prices !or !ear o!
losin' their customers to competition%
The Court is not obli6ious o! the retail side o! the pharmaceutical industr and the
competiti6e pricin' component o! the business% ;hile the Constitution protects propert
ri'hts, petitioners must accept the realities o! business and the State, in the e#ercise o!
police po*er, can inter6ene in the operations o! a business *hich ma result in an
impairment o! propert ri'hts in the process%
,oreo6er, the ri'ht to propert has a social dimension% ;hile 3rticle C... o! the
Constitution pro6ides the precept !or the protection o! propert, 6arious la*s and
(urisprudence, particularl on a'rarian re!orm and the re'ulation o! contracts and public
utilities, continuousl ser6e as # # # reminder@sA that the ri'ht to propert can be
relin1uished upon the command o! the State !or the promotion o! public 'ood%
Indeniabl, the success o! the senior citi$ens pro'ram rests lar'el on the support
imparted b petitioners and the other pri6ate establishments concerned% This bein' the
case, the means emploed in in6o)in' the acti6e participation o! the pri6ate sector, in
order to achie6e the purpose or ob(ecti6e o! the la*, is reasonabl and directl related%
;ithout su!!icient proo! that Section 4 <a= o! 2%3% :o% 9254 is arbitrar, and that the
continued implementation o! the same *ould be unconscionabl detrimental to
petitioners, the Court *ill re!rain !rom 1uashin' a le'islati6e act%
36
<8old in the ori'inalM
underline supplied=
;e, thus, !ound that the 20? discount as *ell as the ta# deduction scheme is a 6alid
e#ercise o! the police po*er o! the State%
*o compelling reason has (een proffered to overturn% modify or a(andon the ruling
in )arlos 'uperdrug )orporation.
-etitioners ar'ue that *e ha6e pre6iousl ruled in Central Luzon Drug Corporation
34

that the 20? discount is an e#ercise o! the po*er o! eminent domain, thus, re1uirin' the
pament o! (ust compensation% The ur'e us to re"e#amine our rulin' in Carlos
!uperdrug Corporation
38
*hich alle'edl re6ersed the rulin' in Central Luzon Drug
Corporation%
39
The also point out that Carlos !uperdrug Corporation
40
reco'ni$ed that
the ta# deduction scheme under the assailed la* does not pro6ide !or su!!icient (ust
compensation%
;e a'ree *ith petitionersR obser6ation that there are statements in Central Luzon Drug
Corporation
41
des"ribing the 20? discount as an e#ercise o! the po*er o! eminent
domain, viz%:
@TAhe pri6ile'e en(oed b senior citi$ens does not come dire"tly !rom the State, but
rather !rom the pri6ate establishments concerned% 3ccordin'l, the ta& "redit bene!it
'ranted to these establishments can 3e dee2ed as their %ust "ompensation !or pri6ate
propert ta)en b the State !or public use%
The concept o! publi" use is no lon'er con!ined to the traditional notion o! use by te
publi", but held snonmous *ith publi" interest, publi" benefit, publi" welfare, and
publi" "onvenien"e% The discount pri6ile'e to *hich our senior citi$ens are entitled is
actuall a bene!it en(oed b the 'eneral public to *hich these citi$ens belon'% The
discounts 'i6en *ould ha6e entered the co!!ers and !ormed part o! the gross sales o! the
pri6ate establishments concerned, *ere it not !or 23 4432% The permanent reduction in
their total re6enues is a !orced subsid correspondin' to the ta)in' o! pri6ate propert
!or publi" use or benefit%
3s a result o! the 20 percent discount imposed b 23 4432, respondent becomes
entitled to a %ust "ompensation% This term re!ers not onl to the issuance o! a ta& "redit
certi!icate indicatin' the correct amount o! the discounts 'i6en, but also to the
promptness in its release% G1ui6alent to the pament o! propert ta)en b the State, such
issuance Q *hen not done *ithin a reasonable time !rom the 'rant o! the discounts Q
cannot be considered as %ust "ompensation% .n e!!ect, respondent is made to su!!er the
conse1uences o! bein' immediatel depri6ed o! its re6enues *hile a*aitin' actual
receipt, throu'h the certi!icate, o! the e1ui6alent amount it needs to cope *ith the
reduction in its re6enues%
8esides, the ta#ation po*er can also be used as an implement !or the e#ercise o! the
po*er o! eminent domain% Ta# measures are but Oen!orced contributions e#acted on pain
o! penal sanctionsP and Oclearl imposed !or a publi" purpose%P .n recent ears, the
po*er to ta# has indeed become a most e!!ecti6e tool to reali$e social (ustice, publi"
welfare, and the e1uitable distribution o! *ealth%
;hile it is a declared commitment under Section 1 o! 23 4432, social (ustice Ocannot be
in6o)ed to trample on the ri'hts o! propert o*ners *ho under our Constitution and
la*s are also entitled to protection% The social (ustice consecrated in our @CAonstitution
@isA not intended to ta)e a*a ri'hts !rom a person and 'i6e them to another *ho is not
entitled thereto%P 0or this reason, a (ust compensation !or income that is ta)en a*a
!rom respondent becomes necessar% .t is in the ta& "redit that our le'islators !ind
support to reali$e social (ustice, and no administrati6e bod can alter that !act%
To put it di!!erentl, a pri6ate establishment that merel brea)s e6en Q *ithout the
discounts et Q *ill surel start to incur losses because o! such discounts% The same
e!!ect is e#pected i! its mar)"up is less than 20 percent, and i! all its sales come !rom
retail purchases b senior citi$ens% 3side !rom the obser6ation *e ha6e alread raised
earlier, it *ill also be 'rossl un!air to an establishment i! the discounts *ill be treated
merel as deductions !rom either its gross in"ome or its gross sales% >peratin' at a loss
throu'h no !ault o! its o*n, it *ill reali$e that the ta& "redit limitation under 22 2"94 is
inutile, i! not improper% ;orse, pro!it"'eneratin' businesses *ill be put in a better
position i! the a6ail themsel6es o! ta# credits denied those that are losin', because no
ta#es are due !rom the latter%
42
<.talics in the ori'inalM emphasis supplied=
The abo6e *as partl incorporated in our rulin' in Carlos !uperdrug Corporation
43

*hen *e stated preliminarily thatQ
-etitioners assert that Section 4<a= o! the la* is unconstitutional because it constitutes
depri6ation o! pri6ate propert% Compellin' dru'store o*ners and establishments to
'rant the discount *ill result in a loss o! pro!it and capital because 1= dru'stores impose
a mar)"up o! onl 5? to 10? on branded medicinesM and 2= the la* !ailed to pro6ide a
scheme *hereb dru'stores *ill be (ustl compensated !or the discount%
G#aminin' petitionersR ar'uments, it is apparent that *hat petitioners are ultimatel
1uestionin' is the 6alidit o! the ta# deduction scheme as a reimbursement mechanism
!or the t*ent percent <20?= discount that the e#tend to senior citi$ens%
8ased on the a!ore"stated D>0 >pinion, the ta# deduction scheme does not !ull
reimburse petitioners !or the discount pri6ile'e accorded to senior citi$ens% This is
because the discount is treated as a deduction, a ta#"deductible e#pense that is
subtracted !rom the 'ross income and results in a lo*er ta#able income% Stated
other*ise, it is an amount that is allo*ed b la* to reduce the income prior to the
application o! the ta# rate to compute the amount o! ta# *hich is due% 8ein' a ta#
deduction, the discount does not reduce ta#es o*ed on a peso !or peso basis but merel
o!!ers a !ractional reduction in ta#es o*ed%
9254%
44
This, not*ithstandin', *e *ent on to rule in Carlos !uperdrug Corporation
45
that the
20? discount and ta# deduction scheme is a 6alid e#ercise o! the police po*er o! the
State%
The present case, thus, a!!ords an opportunit !or us to clari! the abo6e"1uoted
statements in Central Luzon Drug Corporation
46
and Carlos !uperdrug Corporation%
44
0irst, *e note that the abo6e"1uoted dis1uisition on eminent domain in Central Luzon
Drug Corporation
48
is obiter dicta and, thus, not bindin' precedent% 3s stated earlier, in
Central Luzon Drug Corporation,
49
*e ruled that the 8.2 acted ultra vires *hen it
e!!ecti6el treated the 20? discount as a ta# deduction, under Sections 2%i and 4 o! 22
:o% 2"94, despite the clear *ordin' o! the pre6ious la* that the same should be treated
as a ta# credit% ;e *ere, there!ore, not con!ronted in that case *ith the issue as to
*hether the 20? discount is an e#ercise o! police po*er or eminent domain%
Second, althou'h *e ad6erted to Central Luzon Drug Corporation
50
in our rulin' in
Carlos !uperdrug Corporation,
51
this re!erred onl to preliminar matters% 3 !air
readin' o! Carlos !uperdrug Corporation
52
*ould sho* that *e cate'oricall ruled
therein that the 20? discount is a 6alid e#ercise o! police po*er% Thus, e6en i! the
current la*, throu'h its ta# deduction scheme <*hich abandoned the ta# credit scheme
under the pre6ious la*=, does not pro6ide !or a peso !or peso reimbursement o! the 20?
discount 'i6en b pri6ate establishments, no constitutional in!irmit obtains because,
bein' a 6alid e#ercise o! police po*er, pament o! (ust compensation is not *arranted%
;e ha6e care!ull re6ie*ed the basis o! our rulin' in Carlos !uperdrug Corporation
53

and *e !ind no co'ent reason to o6erturn, modi! or abandon it% ;e also note that
petitionersR ar'uments are a mere reiteration o! those raised and resol6ed in Carlos
!uperdrug Corporation%
54
Thus, *e sustain Carlos !uperdrug Corporation%
55
:onetheless, *e deem it proper, in *hat !ollo*s, to ampli! our e#planation in Carlos
56
as to *h the 20? discount is a 6alid e#ercise o! police po*er
and *h it ma not, under te spe"ifi" "ir"umstan"es of tis "ase, be considered as an
e#ercise o! the po*er o! eminent domain contrar to the obiter in Central Luzon Drug
Corporation%
54
Police po&er versus eminent domain.
-olice po*er is the inherent po*er o! the State to re'ulate or to restrain the use o!
libert and propert !or public *el!are%
58
The onl limitation is that the restriction
imposed should be reasonable, not oppressi6e%
59
.n other *ords, to be a 6alid e#ercise o!
police po*er, it must ha6e a la*!ul sub(ect or ob(ecti6e and a la*!ul method o!
accomplishin' the 'oal%
60
Inder the police po*er o! the State, Opropert ri'hts o!
indi6iduals ma be sub(ected to restraints and burdens in order to !ul!ill the ob(ecti6es o!
the 'o6ernment%P
61
The State Oma inter!ere *ith personal libert, propert, la*!ul
businesses and occupations to promote the 'eneral *el!are @as lon' asA the inter!erence
@isA reasonable and not arbitrar%P
62
Gminent domain, on the other hand, is the inherent
po*er o! the State to ta)e or appropriate pri6ate propert !or public use%
63
The
Constitution, ho*e6er, re1uires that pri6ate propert shall not be ta)en *ithout due
process o! la* and the pament o! (ust compensation%
64
Traditional distinctions e#ist bet*een police po*er and eminent domain%
.n the e#ercise o! police po*er, a propert ri'ht is impaired b re'ulation,
65
or the use o!
propert is merel prohibited, re'ulated or restricted
66
to promote public *el!are% .n
such cases, there is no compensable ta)in', hence, pament o! (ust compensation is not
re1uired% G#amples o! these re'ulations are propert condemned !or bein' no#ious or
intended !or no#ious purposes <e%'%, a buildin' on the 6er'e o! collapse to be demolished
!or public sa!et, or obscene materials to be destroed in the interest o! public morals=
64

as *ell as $onin' ordinances prohibitin' the use o! propert !or purposes in(urious to the
health, morals or sa!et o! the communit <e%'%, di6idin' a citRs territor into residential
and industrial areas=%
68
.t has, thus, been obser6ed that, in the e#ercise o! police po*er
<as distin'uished !rom eminent domain=, althou'h the re'ulation a!!ects the ri'ht o!
o*nership, none o! the bundle o! ri'hts *hich constitute o*nership is appropriated !or
use b or !or the bene!it o! the public%
69
>n the other hand, in the e#ercise o! the po*er o! eminent domain, propert interests
are appropriated and applied to some public purpose *hich necessitates the pament o!
(ust compensation there!or% :ormall, the title to and possession o! the propert are
trans!erred to the e#propriatin' authorit% G#amples include the ac1uisition o! lands !or
the construction o! public hi'h*as as *ell as a'ricultural lands ac1uired b the
'o6ernment under the a'rarian re!orm la* !or redistribution to 1uali!ied !armer
bene!iciaries% Lo*e6er, it is a settled rule that the ac1uisition o! title or total destruction
o! the propert is not essential !or Ota)in'P under the po*er o! eminent domain to be
present%
40
G#amples o! these include establishment o! easements such as *here the land
o*ner is perpetuall depri6ed o! his proprietar ri'hts because o! the ha$ards posed b
electric transmission lines constructed abo6e his propert
41
or the compelled
interconnection o! the telephone sstem bet*een the 'o6ernment and a pri6ate
compan%
42
.n these cases, althou'h the pri6ate propert o*ner is not di6ested o!
o*nership or possession, pament o! (ust compensation is *arranted because o! the
burden placed on the propert !or the use or bene!it o! the public%
The 20 senior citi!en discount is an exercise of police po&er.
.t ma not al*as be eas to determine *hether a challen'ed 'o6ernmental act is an
e#ercise o! police po*er or eminent domain% The 6er nature o! police po*er as elastic
and responsi6e to 6arious social conditions
43
as *ell as the e6ol6in' meanin' and scope
o! public use
44
and (ust compensation
45
in eminent domain e6inces that these are not
static concepts% 8ecause o! the e#i'encies o! rapidl chan'in' times, Con'ress ma be
compelled to adopt or e#periment *ith di!!erent measures to promote the 'eneral
*el!are *hich ma not !all s1uarel *ithin the traditionall reco'ni$ed cate'ories o!
police po*er and eminent domain% The (udicious approach, there!ore, is to loo) at the
nature and e!!ects o! the challen'ed 'o6ernmental act and decide, on the basis thereo!,
*hether the act is the e#ercise o! police po*er or eminent domain% Thus, *e no* loo) at
the nature and e!!ects o! the 20? discount to determine i! it constitutes an e#ercise o!
police po*er or eminent domain%
The 20? discount is intended to impro6e the *el!are o! senior citi$ens *ho, at their a'e,
are less li)el to be 'ain!ull emploed, more prone to illnesses and other disabilities,
and, thus, in need o! subsid in purchasin' basic commodities% .t ma not be amiss to
mention also that the discount ser6es to honor senior citi$ens *ho presumabl spent the
producti6e ears o! their li6es on contributin' to the de6elopment and pro'ress o! the
nation% This distinct cultural 0ilipino practice o! honorin' the elderl is an inte'ral part
o! this la*%
3s to its nature and e!!ects, the 20? discount is a re'ulation a!!ectin' the abilit o!
pri6ate establishments to price their products and ser6ices relati6e to a special class o!
indi6iduals, senior citi$ens, !or *hich the Constitution a!!ords pre!erential concern%
46
.n
turn, this a!!ects the amount o! pro!its or incomeD'ross sales that a pri6ate establishment
can deri6e !rom senior citi$ens% .n other *ords, the sub(ect re'ulation a!!ects the pricin',
and, hence, the pro!itabilit o! a pri6ate establishment% Lo*e6er, it does not purport to
appropriate or burden speci!ic properties, used in the operation or conduct o! the
business o! pri6ate establishments, !or the use or bene!it o! the public, or senior citi$ens
!or that matter, but merel re'ulates the pricin' o! 'oods and ser6ices relati6e to, and the
amount o! pro!its or incomeD'ross sales that such pri6ate establishments ma deri6e
!rom, senior citi$ens%
The sub(ect re'ulation ma be said to be similar to, but *ith substantial distinctions
!rom, price control or rate o! return on in6estment control la*s *hich are traditionall
re'arded as police po*er measures%
44
These la*s 'enerall re'ulate public utilities or
industriesDenterprises imbued *ith public interest in order to protect consumers !rom
e#orbitant or unreasonable pricin' as *ell as temper corporate 'reed b controllin' the
rate o! return on in6estment o! these corporations considerin' that the ha6e a
monopol o6er the 'oods or ser6ices that the pro6ide to the 'eneral public% The sub(ect
re'ulation di!!ers there!rom in that <1= the discount does not pre6ent the establishments
!rom ad(ustin' the le6el o! prices o! their 'oods and ser6ices, and <2= the discount does
not appl to all customers o! a 'i6en establishment but onl to the class o! senior
citi$ens% :onetheless, to the de'ree material to the resolution o! this case, the 20?
discount ma be properl 6ie*ed as belon'in' to the cate'or o! price re'ulator
measures *hich a!!ect the pro!itabilit o! establishments sub(ected thereto%
>n its !ace, there!ore, the sub(ect re'ulation is a police po*er measure%
The obiter in Central Luzon Drug Corporation,
48
ho*e6er, describes the 20? discount
as an e#ercise o! the po*er o! eminent domain and the ta# credit, under the pre6ious
la*, e1ui6alent to the amount o! discount 'i6en as the (ust compensation there!or% The
reason is that <1= the discount *ould ha6e !ormed part o! the 'ross sales o! the
establishment *ere it not !or the la* prescribin' the 20? discount, and <2= the
permanent reduction in total re6enues is a !orced subsid correspondin' to the ta)in' o!
pri6ate propert !or public use or bene!it%
The !la* in this reasonin' is in its premise% .t presupposes that the sub(ect re'ulation,
*hich impacts the pricin' and, hence, the pro!itabilit o! a pri6ate establishment,
automati"ally amounts to a depri6ation o! propert *ithout due process o! la*% .! this
*ere so, then all price and rate o! return on in6estment control la*s *ould ha6e to be
in6alidated because the impact, at some le6el, the re'ulated establishmentRs pro!its or
incomeD'ross sales, et there is no pro6ision !or pament o! (ust compensation% .t *ould
also mean that 'o6ernment cannot set price or rate o! return on in6estment limits, *hich
reduce the pro!its or incomeD'ross sales o! pri6ate establishments, i! no (ust
compensation is paid e6en i! the measure is not con!iscator% The obiter is, thus, at odds
*ith the settled doctrine that the State can emplo police po*er measures to re'ulate the
pricin' o! 'oods and ser6ices, and, hence, the pro!itabilit o! business establishments in
order to pursue le'itimate State ob(ecti6es !or the common 'ood, pro6ided that the
re'ulation does not 'o too !ar as to amount to Ota)in'%P
49
.n City of 'anila v. Laguio, (r.,
80
*e reco'ni$ed thatQ
# # # a ta)in' also could be !ound i! 'o6ernment re'ulation o! the use o! propert *ent
Otoo !ar%P ;hen re'ulation reaches a certain ma'nitude, in most i! not in all cases there
must be an e#ercise o! eminent domain and compensation to support the act% ;hile
propert ma be re'ulated to a certain e#tent, i! re'ulation 'oes too !ar it *ill be
reco'ni$ed as a ta)in'%
:o !ormula or rule can be de6ised to ans*er the 1uestions o! *hat is too !ar and *hen
re'ulation becomes a ta)in'% .n 'aon, 7ustice Lolmes reco'ni$ed that it *as Oa
1uestion o! de'ree and there!ore cannot be disposed o! b 'eneral propositions%P >n
man other occasions as *ell, the I%S% Supreme Court has said that the issue o! *hen
re'ulation constitutes a ta)in' is a matter o! considerin' the !acts in each case% The
Court as)s *hether (ustice and !airness re1uire that the economic loss caused b public
action must be compensated b the 'o6ernment and thus borne b the public as a *hole,
or *hether the loss should remain concentrated on those !e* persons sub(ect to the
public action%
81
The impact or e!!ect o! a re'ulation, such as the one under consideration, must, thus, be
determined on a case"to"case basis% ;hether that line bet*een permissible re'ulation
under police po*er and Ota)in'P under eminent domain has been crossed must, under
the speci!ic circumstances o! this case, be sub(ect to proo! and the one assailin' the
constitutionalit o! the re'ulation carries the hea6 burden o! pro6in' that the measure
is unreasonable, oppressi6e or con!iscator% The time"honored rule is that the burden o!
pro6in' the unconstitutionalit o! a la* rests upon the one assailin' it and Othe burden
becomes hea6ier *hen police po*er is at issue%P
82
The 20 senior citi!en discount has not (een sho&n to (e unreasona(le% oppressive
or confiscatory.
.n Alalayan v. National Power Corporation,
83
petitioners, *ho *ere !ranchise holders o!
electric plants, challen'ed the 6alidit o! a la* limitin' their allo*able net pro!its to no
more than 12? per annum o! their in6estments plus t*o"month operatin' e#penses% .n
re(ectin' their plea, *e ruled that, in an earlier case, it *as !ound that 12? is a
reasonable rate o! return and that petitioners !ailed to pro6e that the a!oresaid rate is
con!iscator in 6ie* o! the presumption o! constitutionalit%
84
;e adopted a similar line o! reasonin' in Carlos !uperdrug Corporation
85
*hen *e
ruled that petitioners therein !ailed to pro6e that the 20? discount is arbitrar,
oppressi6e or con!iscator% ;e noted that no e6idence, such as a !inancial report , to
establish the impact o! the 20? discount on the o6erall pro!itabilit o! petitioners *as
presented in order to sho* that the *ould be operatin' at a loss due to the sub(ect
re'ulation or that the continued implementation o! the la* *ould be unconscionabl
detrimental to the business operations o! petitioners% .n the case at bar, petitioners
proceeded *ith a hpothetical computation o! the alle'ed loss that the *ill su!!er
similar to *hat the petitioners in Carlos !uperdrug Corporation
86
did% -etitioners *ent
directl to this Court *ithout !irst establishin' the !actual bases o! their claims% Lence,
the present recourse must, li)e*ise, !ail%
8ecause all la*s en(o the presumption o! constitutionalit, courts *ill uphold a la*Rs
6alidit i! an set o! !acts ma be concei6ed to sustain it%
84
>n its !ace, *e !ind that there
are at least t*o concei6able bases to sustain the sub(ect re'ulationRs 6alidit absent clear
and con6incin' proo! that it is unreasonable, oppressi6e or con!iscator% Con'ress ma
ha6e le'itimatel concluded that business establishments ha6e the capacit to absorb a
decrease in pro!its or incomeD'ross sales due to the 20? discount *ithout substantiall
a!!ectin' the reasonable rate o! return on their in6estments considerin' <1= not all
customers o! a business establishment are senior citi$ens and <2= the le6el o! its pro!it
mar'ins on 'oods and ser6ices o!!ered to the 'eneral public% Concurrentl, Con'ress
ma ha6e, li)e*ise, le'itimatel concluded that the establishments, *hich *ill be
re1uired to e#tend the 20? discount, ha6e the capacit to re6ise their pricin' strate' so
that *hate6er reduction in pro!its or incomeD'ross sales that the ma sustain because o!
sales to senior citi$ens, can be recouped throu'h hi'her mar)"ups or !rom other products
not sub(ect o! discounts% 3s a result, the discounts resultin' !rom sales to senior citi$ens
*ill not be con!iscator or undul oppressi6e%
.n sum, *e sustain our rulin' in Carlos !uperdrug Corporation
88
that the 20? senior
citi$en discount and ta# deduction scheme are 6alid e#ercises o! police po*er o! the
State absent a clear sho*in' that it is arbitrar, oppressi6e or con!iscator%
)onclusion
.n closin', *e note that petitioners hpothesi$e, consistent *ith our pre6ious
ratiocinations, that the discount *ill !orce establishments to raise their prices in order to
compensate !or its impact on o6erall pro!its or incomeD'ross sales% The 'eneral public,
or those not belon'in' to the senior citi$en class, are, thus, made to e!!ecti6el shoulder
the subsid !or senior citi$ens% This, in petitionersR 6ie*, is un!air%
3s alread mentioned, Con'ress ma be reasonabl assumed to ha6e !oreseen this
e6entualit% 8ut, more importantl, this 'oes into the *isdom, e!!icac and e#pedienc
o! the sub(ect la* *hich is not proper !or (udicial re6ie*% .n a *a, this la* pursues its
social e1uit ob(ecti6e in a non"traditional manner unli)e past and e#istin' direct
subsid pro'rams o! the 'o6ernment !or the poor and mar'inali$ed sectors o! our
societ% &eril, Con'ress must be 'i6en su!!icient lee*a in !ormulatin' *el!are
le'islations 'i6en the enormous challen'es that the 'o6ernment !aces relati6e to, amon'
others, resource ade1uac and administrati6e capabilit in implementin' social re!orm
measures *hich aim to protect and uphold the interests o! those most 6ulnerable in our
societ% .n the process, the indi6idual, *ho en(os the ri'hts, bene!its and pri6ile'es o!
li6in' in a democratic polit, must bear his share in supportin' measures intended !or
the common 'ood% This is onl !air%
.n !ine, *ithout the re1uisite sho*in' o! a clear and une1ui6ocal breach o! the
Constitution, the 6alidit o! the assailed la* must be sustained%
Refutation of the +issent
The main points o! 7ustice CarpioRs Dissent ma be summari$ed as !ollo*s: <1= the
discussion on eminent domain in Central Luzon Drug Corporation
89
is not obiter di"taM
<2= allo*able ta)in', in police po*er, is limited to propert that is destroed or placed
outside the commerce o! man !or public *el!areM <3= the amount o! mandator discount
is pri6ate propert *ithin the ambit o! 3rticle ..., Section 9
90
o! the ConstitutionM and <4=
the permanent reduction in a pri6ate establishmentRs total re6enue, arisin' !rom the
mandator discount, is a ta)in' o! pri6ate propert !or public use or bene!it, hence, an
e#ercise o! the po*er o! eminent domain re1uirin' the pament o! (ust compensation%
.
;e maintain that the discussion on eminent domain in Central Luzon Drug
Corporation
91
is obiter di"ta%
3s pre6iousl discussed, in Central Luzon Drug Corporation,
92
the 8.2, pursuant to
Sections 2%i and 4 o! 22 :o% 2"94, treated the senior citi$en discount in the pre6ious
la*, 23 4432, as a ta# deduction instead o! a ta# credit despite the clear pro6ision in
that la* *hich stated +
SGCT.>: 4% Privileges for te !enior Citizens% + The senior citi$ens shall be entitled to
the !ollo*in':
a= The 'rant o! t*ent percent <20?= discount !rom all establishments relati6e to
utili$ation o! transportation ser6ices, hotels and similar lod'in' establishment,
restaurants and recreation centers and purchase o! medicines an*here in the countr:
-ro6ided, That pri6ate establishments ma claim the cost as tax creditM <)mpasis
supplied=
Thus, the Court ruled that the sub(ect re6enue re'ulation 6iolated the la*, viz:
The 20 percent discount re1uired b the la* to be 'i6en to senior citi$ens is a ta# credit,
not merel a ta# deduction !rom the 'ross income or 'ross sale o! the establishment
concerned% 3 ta# credit is used b a pri6ate establishment onl a!ter the ta# has been
computedM a ta# deduction, be!ore the ta# is computed% 23 4432 unconditionall 'rants
a ta# credit to all co6ered entities% Thus, the pro6isions o! the re6enue re'ulation that
*ithdra* or modi! such 'rant are 6oid% 8asic is the rule that administrati6e re'ulations
cannot amend or re6o)e the la*%
93
3s can be readil seen, the discussion on eminent domain *as not ne"essary in order to
arri6e at this conclusion% 3ll that *as needed *as to point out that the re6enue
re'ulation contra6ened the la* *hich it sou'ht to implement% 3nd, precisel, this *as
done in Central Luzon Drug Corporation
94
b comparin' the *ordin' o! the pre6ious
la* 6is"T"6is the re6enue re'ulationM emploin' the rules o! statutor constructionM and
applin' the settled principle that a re'ulation cannot amend the la* it see)s to
implement%
3 close readin' o! Central Luzon Drug Corporation
95
*ould sho* that the Court went
on to state that the ta# credit Ocan be deemedP as (ust compensation onl to e#plain wy
the pre6ious la* pro6ides !or a ta# credit instead o! a ta# deduction% The Court surmised
that the ta# credit *as a !orm o! (ust compensation 'i6en to the establishments co6ered
b the 20? discount% Lo*e6er, the reason *h the pre6ious la* pro6ided !or a ta#
credit and not a ta# deduction *as not ne"essary to resol6e the issue as to *hether the
re6enue re'ulation contra6enes the la*% Lence, the discussion on eminent domain is
obiter di"ta%
3 court, in resol6in' cases be!ore it, ma loo) into the possible purposes or reasons that
impelled the enactment o! a particular statute or le'al pro6ision% Lo*e6er, statements
made relati6e thereto are not al*as necessar in resol6in' the actual contro6ersies
presented be!ore it% This *as the case in Central Luzon Drug Corporation
96
resultin' in
that un!ortunate statement that the ta# credit Ocan be deemedP as (ust compensation%
This, in turn, led to the erroneous conclusion, b deducti6e reasonin', that the 20?
discount is an e#ercise o! the po*er o! eminent domain% The Dissent essentiall adopts
this theor and reasonin' *hich, as *ill be sho*n belo*, is contrar to settled principles
in police po*er and eminent domain analsis%
..
The Dissent discusses at len'th the doctrine on Ota)in'P in police po*er *hich occurs
*hen pri6ate propert is destroed or placed outside the commerce o! man% .ndeed,
there is a *hole class o! police po*er measures *hich (usti! the destruction o! pri6ate
propert in order to preser6e public health, morals, sa!et or *el!are% 3s earlier
mentioned, these *ould include a buildin' on the 6er'e o! collapse or con!iscated
obscene materials as *ell as those mentioned b the Dissent *ith re'ard to propert
used in 6iolatin' a criminal statute or one *hich constitutes a nuisance% .n such cases,
no compensation is re1uired%
Lo*e6er, it is e1uall true that there is another class o! police po*er measures *hich do
not in6ol6e the destruction o! pri6ate propert but merel re'ulate its use% The minimum
*a'e la*, $onin' ordinances, price control la*s, la*s re'ulatin' the operation o! motels
and hotels, la*s limitin' the *or)in' hours to ei'ht, and the li)e *ould !all under this
cate'or% The e#amples cited b the Dissent, li)e*ise, !all under this cate'or: 3rticle
154 o! the /abor Code, Sections 19 and 18 o! the Social Securit /a*, and Section 4 o!
the -a'".8.F 0und /a*% These la*s merel re'ulate or, to use the term o! the Dissent,
burden the conduct o! the a!!airs o! business establishments% .n such cases, pament o!
(ust compensation is not re1uired because the !all *ithin the sphere o! permissible
police po*er measures% The senior citi$en discount la* !alls under this latter cate'or%
...
The Dissent proceeds !rom the theor that the permanent reduction o! pro!its or
incomeD'ross sales, due to the 20? discount, is a Ota)in'P o! pri6ate propert !or public
purpose *ithout pament o! (ust compensation%
3t the outset, it must be emphasi$ed that petitioners neBer presented any eBidence to
establish that the *ere !orced to su!!er enormous losses or operate at a loss due to the
e!!ects o! the assailed la*% The came directl to this Court and pro6ided a hpothetical
computation o! the loss the *ould alle'edl su!!er due to the operation o! the assailed
la*% The central premise o! the DissentRs ar'ument that the 20? discount results in a
permanent reduction in pro!its or incomeD'ross sales, or !orces a business establishment
to operate at a loss is, thus, (holly unsupported b competent e6idence% To be sure, the
Court can in6alidate a la* *hich, on its !ace, is arbitrar, oppressi6e or con!iscator%
94

8ut this is not the case here%
.n the case at bar, e6idence is indispensable be!ore a determination o! a constitutional
6iolation can be made because o! the !ollo*in' reasons%
0irst, the assailed la*, b imposin' the senior citi$en discount, does not ta)e an o! the
properties used b a business establishment li)e, sa, the land on *hich a manu!acturin'
plant is constructed or the e1uipment bein' used to produce 'oods or ser6ices%
Second, rather than ta)in' speci!ic properties o! a business establishment, the senior
citi$en discount la* merely regulates the prices o! the 'oods or ser6ices bein' sold to
senior citi$ens b mandatin' a 20? discount% Thus, i! a product is sold at -10%00 to the
'eneral public, then it shall be sold at -8%00 <i.e., -10%00 less 20?= to senior citi$ens%
:ote that the la* does not impose at *hat spe"ifi" price the product shall be sold, onl
that a 20? discount shall be 'i6en to senior citi$ens based on the price set b the
business establishment% 3 business establishment is, thus, !ree to ad(ust the prices o! the
'oods or ser6ices it pro6ides to the 'eneral public% 3ccordin'l, it can increase the price
o! the abo6e product to -20%00 but is re1uired to sell it at -16%00 <i.e., -20%00 less 20?=
to senior citi$ens%
Third, because the la* impacts the prices o! the 'oods or ser6ices o! a particular
establishment relati6e to its sales to senior citi$ens, its pro!its or incomeD'ross sales are
a!!ected% The e#tent o! the impact *ould, ho*e6er, depend on the pro!it mar'in o! the
business establishment on a particular 'ood or ser6ice% .! a product costs -5%00 to
produce and is sold at -10%00, then the pro!it
98
is -5%00
99
or a pro!it mar'in
100
o! 50?%
101

Inder the assailed la*, the a!oresaid product *ould ha6e to be sold at -8%00 to senior
citi$ens et the business *ould still earn -3%00
102
or a 30?
103
pro!it mar'in% >n the other
hand, i! the product costs -9%00 to produce and is re1uired to be sold at -8%00 to senior
citi$ens, then the business *ould e#perience a loss o! -1%00%
104
8ut note that since not all
customers o! a business establishment are senior citi$ens, the business establishment
ma continue to earn -1%00 !rom non"senior citi$ens *hich, in turn, can o!!set an loss
arisin' !rom sales to senior citi$ens%
0ourth, *hen the la* imposes the 20? discount in !a6or o! senior citi$ens, it does not
pre6ent the business establishment !rom re6isin' its pricin' strate'% 8 re6isin' its
pricin' strate', a business establishment can recoup an reduction o! pro!its or
incomeD'ross sales *hich *ould other*ise arise !rom the 'i6in' o! the 20? discount%
To illustrate, suppose 3 has t*o customers: C, a senior citi$en, and K, a non"senior
citi$en% -rior to the la*, 3 sells his products at -10%00 a piece to C and K resultin' in
incomeD'ross sales o! -20%00 <-10%00 U -10%00=% ;ith the passa'e o! the la*, 3 must
no* sell his product to C at -8%00 <i%e%, -10%00 less 20?= so that his incomeD'ross sales
*ould be -18%00 <-8%00 U -10%00= or lo*er b -2%00% To pre6ent this !rom happenin', 3
decides to increase the price o! his products to -11%11 per piece% Thus, he sells his
product to C at -8%89 <i%e%, -11%11 less 20?= and to K at -11%11% 3s a result, his
incomeD'ross sales *ould still be -20%00
105
<-8%89 U -11%11=% The capacit, then, o!
business establishments to re6ise their pricin' strate' ma)es it possible !or them not to
su!!er an reduction in pro!its or incomeD'ross sales, or, in the alternati6e, miti'ate the
reduction o! their pro!its or incomeD'ross sales e6en a!ter the passa'e o! the la*% .n
other *ords, business establishments ha6e the capacit to ad(ust their prices so that the
ma remain pro!itable e6en under the operation o! the assailed la*%
The Dissent, ho*e6er, states that +
The e#planation b the ma(orit that pri6ate establishments can al*as increase their
prices to reco6er the mandator discount *ill onl encoura'e pri6ate establishments to
ad(ust their prices up*ards to the pre(udice o! customers *ho do not en(o the 20?
discount% .t *as li)e*ise su''ested that i! a compan increases its prices, despite the
application o! the 20? discount, the establishment becomes more pro!itable than it *as
be!ore the implementation o! 2%3% 4432% Such an economic (usti!ication is sel!"
de!eatin', !or more consumers *ill su!!er !rom the price increase than *ill bene!it !rom
the 20? discount% G6en then, such abilit to increase prices cannot le'all 6alidate a
6iolation o! the eminent domain clause%
106
8ut, i! it is possible that the business establishment, b ad(ustin' its prices, *ill su!!er
no reduction in its pro!its or incomeD'ross sales <or su!!er some reduction but continue
to operate pro!itabl= despite 'i6in' the discount, *hat *ould be the basis to stri)e
do*n the la*E .! it is possible that the business establishment, b ad(ustin' its prices,
*ill not be undul burdened, ho* can there be a !indin' that the assailed la* is an
unconstitutional e#ercise o! police po*er or eminent domainE
That there ma be a burden placed on business establishments or the consumin' public
as a result o! the operation o! the assailed la* is not, b itsel!, a 'round to declare it
unconstitutional !or this 'oes into the *isdom and e#pedienc o! the la*% The cost o!
most, i! not all, re'ulator measures o! the 'o6ernment on business establishments is
ultimatel passed on to the consumers but that, b itsel!, does not (usti! the *holesale
nulli!ication o! these measures% .t is a basic postulate o! our democratic sstem o!
'o6ernment that the Constitution is a social contract *hereb the people ha6e
surrendered their so6erei'n po*ers to the State !or the common 'ood%
104
3ll persons
ma be burdened b re'ulator measures intended !or the common 'ood or to ser6e
some important 'o6ernmental interest, such as protectin' or impro6in' the *el!are o! a
special class o! people !or *hich the Constitution a!!ords pre!erential concern%
.ndubitabl, the one assailin' the la* has the hea6 burden o! pro6in' that the
re'ulation is unreasonable, oppressi6e or con!iscator, or has 'one Otoo !arP as to
amount to a Ota)in'%P Ket, here, the Dissent *ould ha6e this Court nulli! the la*
*ithout an proo! o! such nature%
0urther, this Court is not the proper !orum to debate the economic theories or realities
that impelled Con'ress to shi!t !rom the ta# credit to the ta# deduction scheme% .t is not
*ithin our po*er or competence to (ud'e *hich scheme is more or less burdensome to
business establishments or the consumin' public and, therea!ter, to choose *hich
scheme the State should use or pursue% The shi!t !rom the ta# credit to ta# deduction
scheme is a polic determination b Con'ress and the Court *ill respect it !or as lon' as
there is no sho*in', as here, that the sub(ect re'ulation has trans'ressed constitutional
limitations%
Ina6oidabl, the lac) o! e6idence constrains the Dissent to rel on spe"ulative and
ypoteti"al ar'umentation *hen it states that the 20? discount is a si'ni!icant amount
and not a minimal loss <*hich erroneousl assumes that the discount automaticall
results in a loss *hen it is possible that the pro!it mar'in is 'reater than 20? andDor the
pricin' strate' can be re6ised to pre6ent or miti'ate an reduction in pro!its or
incomeD'ross sales as illustrated abo6e=,
108
and not all pri6ate establishments ma)e a
20? pro!it mar'in <*hich con6ersel implies that there are those *ho ma)e more and,
thus, *ould not be 'reatl a!!ected b this re'ulation=%
109
.n !ine, because o! the possible scenarios discussed abo6e, *e cannot assume that the
20? discount results in a permanent reduction in pro!its or incomeD'ross sales, much
less that business establishments are !orced to operate at a loss under the assailed la*%
3nd, e6en i! *e 'ratuitousl assume that the 20? discount results in some de'ree o!
reduction in pro!its or incomeD'ross sales, *e cannot assume that such reduction is
arbitrar, oppressi6e or con!iscator% To repeat, there is no actual proo! to bac) up this
claim, and it could be that the loss su!!ered b a business establishment *as occasioned
throu'h its !ault or ne'li'ence in not adaptin' to the e!!ects o! the assailed la*% The la*
uni!orml applies to all business establishments co6ered thereunder% There is, there!ore,
no un(ust discrimination as the a!oresaid business establishments are !aced *ith the
same constraints%
The necessit o! proo! is all the more pertinent in this case because, as similarl
obser6ed b 7ustice &elasco in his Con"urring $pinion, the la* has been in operation
!or o6er nine ears no*% Lo*e6er, the 'rim picture painted b petitioners on the
unconscionable losses to be indiscriminatel su!!ered b business establishments, *hich
should ha6e led to the closure o! numerous business establishments, has not come to
pass%
&eril, *e cannot in6alidate the assailed la* based on assumptions and con(ectures%
;ithout ade1uate proo!, the presumption o! constitutionalit must pre6ail%
.&
3t this (uncture, *e note that the Dissent modi!ied its ori'inal ar'uments b includin' a
ne* para'raph, to *it:
Section 9, 3rticle ... o! the 1984 Constitution spea)s o! pri6ate propert *ithout an
distinction% .t does not state that there should be pro!it be!ore the ta)in' o! propert is
sub(ect to (ust compensation% The pri6ate propert re!erred to !or purposes o! ta)in'
could be inherited, donated, purchased, mort'a'ed, or as in this case, part o! the 'ross
sales o! pri6ate establishments% The are all pri6ate propert and an ta)in' should be
attended b correspondin' pament o! (ust compensation% The 20? discount 'ranted to
senior citi$ens belon' to pri6ate establishments, *hether these establishments ma)e a
pro!it or su!!er a loss% .n !act, the 20? discount applies to non<profit esta3lish2ents
li)e countr, social, or 'ol! clubs *hich are open to the public and not onl !or e#clusi6e
membership% The issue o! pro!it or loss to the establishments is immaterial%
110
T*o thin's ma be said o! this ar'ument%
0irst, it contradicts the rest o! the ar'uments o! the Dissent% 3!ter it states that the issue
o! pro!it or loss is immaterial, the Dissent proceeds to ar'ue that the 20? discount is not
a minimal loss
111
and that the 20? discount !orces business establishments to operate at
a loss%
112
G6en the obiter in Central Luzon Drug Corporation,
113
*hich the Dissent
essentiall adopts and relies on, is premised on the permanent reduction o! total
re6enues and the loss that business establishments *ill be !orced to su!!er in ar'uin'
that the 20? discount constitutes a Ota)in'P under the po*er o! eminent domain% Thus,
*hen the Dissent no* ar'ues that the issue o! pro!it or loss is immaterial, it contradicts
itsel! because it later ar'ues, in order to (usti! that there is a Ota)in'P under the po*er
o! eminent domain in this case, that the 20? discount !orces business establishments to
su!!er a si'ni!icant loss or to operate at a loss%
Second, this ar'ument su!!ers !rom the same !la* as the DissentRs ori'inal ar'uments% .t
is an erroneous characteri$ation o! the 20? discount%
3ccordin' to the Dissent, the 20? discount is part o! the 'ross sales and, hence, pri6ate
propert belon'in' to business establishments% Lo*e6er, as pre6iousl discussed, the
20? discount is not pri6ate propert actuall o*ned andDor used b the business
establishment% .t should be distin'uished !rom properties li)e lands or buildin's actuall
used in the operation o! a business establishment *hich, i! appropriated !or public use,
*ould amount to a Ota)in'P under the po*er o! eminent domain%
.nstead, the 20? discount is a re'ulator measure *hich impacts the pricin' and, hence,
the pro!itabilit o! business establishments% 3t the time the discount is imposed, no
particular propert o! the business establishment can be said to be Ota)en%P That is, the
State does not ac1uire or ta)e anthin' !rom the business establishment in the *a that
it ta)es a piece o! pri6ate land to build a public road% ;hile the 20? discount ma !orm
part o! the potential pro!its or incomeD'ross sales
114
o! the business establishment, as
similarl characteri$ed b 7ustice 8ersamin in his Concurrin' >pinion, potential pro!its
or incomeD'ross sales are not pri6ate propert, speci!icall cash or mone, alread
belon'in' to the business establishment% The are a mere e#pectanc because the are
potential !ruits o! the success!ul conduct o! the business%
-rior to the sale o! 'oods or ser6ices, a business establishment ma be sub(ect to State
re'ulations, such as the 20? senior citi$en discount, *hich ma impact the le6el or
amount o! pro!its or incomeD'ross sales that can be 'enerated b such establishment% 0or
this reason, the 6alidit o! the discount is to be determined based on its o6erall e!!ects
on the operations o! the business establishment%
3'ain, as pre6iousl discussed, the 20? discount does not automaticall result in a 20?
reduction in pro!its, or, to ali'n it *ith the term used b the Dissent, the 20? discount
does not mean that a 20? reduction in 'ross sales necessaril results% 8ecause <1= the
pro!it mar'in o! a product is not necessaril less than 20?, <2= not all customers o! a
business establishment are senior citi$ens, and <3= the establishment ma re6ise its
pricin' strate', such reduction in pro!its or incomeD'ross sales ma be pre6ented or, in
the alternati6e, miti'ated so that the business establishment continues to operate
pro!itabl% Thus, e6en i! *e 'ratuitousl assume that some de'ree o! reduction in pro!its
or incomeD'ross sales occurs because o! the 20? discount, it does not !ollo* that the
re'ulation is unreasonable, oppressi6e or con!iscator because the business
establishment ma ma)e the necessar ad(ustments to continue to operate pro!itabl% :o
e6idence *as presented b petitioners to sho* other*ise% .n !act, no e6idence *as
presented b petitioners at all%
7ustice /eonen, in his Con"urring and Dissenting $pinion, characteri$es Opro!itsP <or
incomeD'ross sales= as an inchoate ri'ht% 3nother *a to 6ie* it, as stated b 7ustice
&elasco in his Concurrin' >pinion, is that the business establishment merel has a ri'ht
to pro!its% The Constitution ad6erts to it as the ri'ht o! an enterprise to a reasonable
return on in6estment%
115
Indeniabl, this ri'ht, li)e an other ri'ht, ma be re'ulated
under the police po*er o! the State to achie6e important 'o6ernmental ob(ecti6es li)e
protectin' the interests and impro6in' the *el!are o! senior citi$ens%
.t should be noted thou'h that potential pro!its or incomeD'ross sales are rele6ant in
police po*er and eminent domain analses because the ma, in appropriate cases,
ser6e as an indicia *hen a re'ulation has 'one Otoo !arP as to amount to a Ota)in'P
under the po*er o! eminent domain% ;hen the depri6ation or reduction o! pro!its or
incomeD'ross sales is sho*n to be unreasonable, oppressi6e or con!iscator, then the
challen'ed 'o6ernmental re'ulation ma be nulli!ied !or bein' a Ota)in'P under the
po*er o! eminent domain% .n such a case, it is not pro!its or incomeD'ross sales *hich
are actuall ta)en and appropriated !or public use% 2ather, *hen the re'ulation causes an
establishment to incur losses in an unreasonable, oppressi6e or con!iscator manner,
*hat is actuall ta)en is capital and the ri'ht o! the business establishment to a
reasonable return on in6estment% .! the business losses are not halted because o! the
continued operation o! the re'ulation, this e6entuall leads to the destruction o! the
business and the total loss o! the capital in6ested therein% 8ut, a'ain, petitioners in this
case !ailed to pro6e that the sub(ect re'ulation is unreasonable, oppressi6e or
con!iscator%
&%
The Dissent !urther ar'ues that *e erroneousl used price and rate o! return on
in6estment control la*s to (usti! the senior citi$en discount la*% 3ccordin' to the
Dissent, onl pro!its !rom industries imbued *ith public interest ma be re'ulated
because this is a condition o! their !ranchises% -ro!its o! establishments *ithout
!ranchises cannot be re'ulated permanentl because there is no la* re'ulatin' their
pro!its% The Dissent concludes that the permanent reduction o! total re6enues or 'ross
sales o! business establishments *ithout !ranchises is a ta)in' o! pri6ate propert under
the po*er o! eminent domain%
.n ma)in' this ar'ument, it is un!ortunate that the Dissent 1uotes onl a portion o! the
ponen"ia +
re'arded as police po*er measures% These la*s 'enerall re'ulate public utilities or
citi$ens% # # #
116
The abo6e para'raph, in !ull, states +
citi$ens% 'onetheless, to the degree 2aterial to the resolution of this case, the 20%
discount 2ay 3e properly Bie(ed as 3elonging to the category of price regulatory
2easures (hich affects the profita3ility of esta3lish2ents su3Aected thereto+
<)mpasis supplied=
The point o! this para'raph is to simpl sho* that the State has, in the past, re'ulated
prices and pro!its o! business establishments% .n other *ords, this tpe o! re'ulator
measures is traditionall reco'ni$ed as police po*er measures so that the senior citi$en
discount ma be considered as a police po*er measure as *ell% ;hat is more, the
substantial distinctions bet*een price and rate o! return on in6estment control la*s 6is"
T"6is the senior citi$en discount la* pro6ide greater reason to uphold the 6alidit o! the
senior citi$en discount la*% 3s pre6iousl discussed, the abilit to ad(ust prices allo*s
the establishment sub(ect to the senior citi$en discount to pre6ent or miti'ate an
reduction o! pro!its or incomeD'ross sales arisin' !rom the 'i6in' o! the discount% .n
contrast, establishments sub(ect to price and rate o! return on in6estment control la*s
cannot ad(ust prices accordin'l%
Certainl, there is no intention to sa that price and rate o! return on in6estment control
la*s are the (usti!ication !or the senior citi$en discount la*% :ot at all% The (usti!ication
!or the senior citi$en discount la* is the plenar po*ers o! Con'ress% The le'islati6e
po*er to re'ulate business establishments is broad and co6ers a *ide arra o! areas and
sub(ects% .t is *ell *ithin Con'ressR le'islati6e po*ers to re'ulate the pro!its or
incomeD'ross sales o! industries and enterprises, even tose witout fran"ises% 0or *hat
are !ranchises but mere le'islati6e enactmentsE
There is nothin' in the Constitution that prohibits Con'ress !rom re'ulatin' the pro!its
or incomeD'ross sales o! industries and enterprises *ithout !ranchises% >n the contrar,
the social (ustice pro6isions o! the Constitution en(oin the State to re'ulate the
Oac1uisition, o*nership, use, and dispositionP o! propert and its increments%
114
This
ma co6er the re'ulation o! pro!its or incomeD'ross sales o! all businesses, *ithout
1uali!ication, to attain the ob(ecti6e o! di!!usin' *ealth in order to protect and enhance
the ri'ht o! all the people to human di'nit%
118
Thus, under the social (ustice polic o! the
Constitution, business establishments ma be compelled to contribute to upli!tin' the
pli'ht o! 6ulnerable or mar'inali$ed 'roups in our societ pro6ided that the re'ulation is
not arbitrar, oppressi6e or con!iscator, or is not in breach o! some speci!ic
constitutional limitation%
;hen the Dissent, there!ore, states that the Opro!its o! pri6ate establishments *hich are
non"!ranchisees cannot be re'ulated per2anently, and there is no such la* re'ulatin'
their pro!its permanentl,P
119
it is assumin' *hat it ou'ht to pro6e% 0irst, there are la*s
*hich, in e!!ect, permanentl re'ulate pro!its or incomeD'ross sales o! establishments
*ithout !ranchises, and 23 9254 is one such la*% 3nd, second, Con'ress "an re'ulate
such pro!its or incomeD'ross sales because, as pre6iousl noted, there is nothin' in the
Constitution to pre6ent it !rom doin' so% Lere, a'ain, it must be emphasi$ed that
petitioners !ailed to present an proo! to sho* that the e!!ects o! the assailed la* on
their operations has been unreasonable, oppressi6e or con!iscator%
The permanent re'ulation o! pro!its or incomeD'ross sales o! business establishments,
e6en those *ithout !ranchises, is not as uncommon as the Dissent depicts it to be%
0or instance, the minimum *a'e la* allo*s the State to set the minimum *a'e o!
emploees in a 'i6en re'ion or 'eo'raphical area% 8ecause o! the added labor costs
arisin' !rom the minimum *a'e, a permanent reduction o! pro!its or incomeD'ross sales
*ould result, assumin' that the emploer does not increase the prices o! his 'oods or
ser6ices% To illustrate, suppose it costs a compan -5%00 to produce a product and it sells
the same at -10%00 *ith a 50? pro!it mar'in% /ater, the State increases the minimum
*a'e% 3s a result, the compan incurs 'reater labor costs so that it no* costs -4%00 to
produce the same product% The pro!it per product o! the compan *ould be reduced to
-3%00 *ith a pro!it mar'in o! 30?% The net e!!ect *ould be the same as in the earlier
e#ample o! 'rantin' a 20? senior citi$en discount% 3s can be seen, the minimum *a'e
la* could, li)e*ise, lead to a permanent reduction o! pro!its% Does this mean that the
minimum *a'e la* should, li)e*ise, be declared unconstitutional on the mere plea that
it results in a permanent reduction o! pro!itsE Ta)in' it a step !urther, suppose the
compan decides to increase the price o! its product in order to o!!set the e!!ects o! the
increase in labor costM does this mean that the minimum *a'e la*, !ollo*in' the
reasonin' o! the Dissent, is unconstitutional because the consumin' public is e!!ecti6el
made to subsidi$e the *a'e o! a 'roup o! laborers, i%e%, minimum *a'e earnersE
The same reasonin' can be adopted relati6e to the e#amples cited b the Dissent *hich,
accordin' to it, are 6alid police po*er re'ulations% 3rticle 154 o! the /abor Code,
Sections 19 and 18 o! the Social Securit /a*, and Section 4 o! the -a'".8.F 0und /a*
*ould e!!ecti6el increase the labor cost o! a business establishment% This *ould, in
turn, be inte'rated as part o! the cost o! its 'oods or ser6ices% 3'ain, i! the establishment
does not increase its prices, the net e!!ect *ould be a permanent reduction in its pro!its
or incomeD'ross sales% 0ollo*in' the reasonin' o! the Dissent that Oan !orm o!
per2anent ta)in' o! pri6ate propert <includin' pro!its or incomeD'ross sales=
120
is an
e#ercise o! eminent domain that re1uires the State to pa (ust compensation,P
121
then
these statutor pro6isions *ould, li)e*ise, ha6e to be declared unconstitutional% .t does
not matter that these bene!its are deemed part o! the emploeesR le'islated *a'es
because the net e!!ect is the same, that is, it leads to hi'her labor costs and a permanent
reduction in the pro!its or incomeD'ross sales o! the business establishments%
122
The point then is this + most, i! not all, re'ulator measures imposed b the State on
business establishments impact, at some le6el, the latterRs prices andDor pro!its or
incomeD'ross sales%
123
.! the Court *ere to sustain the DissentRs theor, then a *holesale
nulli!ication o! such measures *ould ine6itabl result% The police po*er o! the State and
the social (ustice pro6isions o! the Constitution *ould, thus, be rendered nu'ator%
There is nothin' sacrosanct about pro!its or incomeD'ross sales% This, *e made clear in
Carlos !uperdrug Corporation:
124
its !a6or%
# # #
The Court is not obli6ious o! the retail side o! the pharmaceutical industr and the
competiti6e pricin' component o! the business% ;hile the Constitution protects propert
ri'hts, petitioners must accept the realities o! business and the State, in the e#ercise o!
police po*er, can inter6ene in the operations o! a business *hich ma result in an
impairment o! propert ri'hts in the process%
,oreo6er, the ri'ht to propert has a social dimension% ;hile 3rticle C... o! the
Constitution pro6ides the precept !or the protection o! propert, 6arious la*s and
(urisprudence, particularl on a'rarian re!orm and the re'ulation o! contracts and public
utilities, continuousl ser6e as a reminder that the ri'ht to propert can be relin1uished
upon the command o! the State !or the promotion o! public 'ood%
Indeniabl, the success o! the senior citi$ens pro'ram rests lar'el on the support
imparted b petitioners and the other pri6ate establishments concerned% This bein' the
case, the means emploed in in6o)in' the acti6e participation o! the pri6ate sector, in
order to achie6e the purpose or ob(ecti6e o! the la*, is reasonabl and directl related%
;ithout su!!icient proo! that Section 4<a= o! 2%3% :o% 9254 is arbitrar, and that the
continued implementation o! the same *ould be unconscionabl detrimental to
petitioners, the Court *ill re!rain !rom 1uashin' a le'islati6e act%
125
.n conclusion, *e maintain that the correct rule in determinin' *hether the sub(ect
re'ulator measure has amounted to a Ota)in'P under the po*er o! eminent domain is
the one laid do*n in Alalayan v. National Power Corporation
126
and !ollo*ed in Carlos
124
consistent *ith lon' standin' principles in police po*er and
eminent domain analsis% Thus, the depri6ation or reduction o! pro!its or incomeD'ross
sales must be clearl sho*n to be unreasonable, oppressi6e or con!iscator% Inder the
speci!ic circumstances o! this case, such determination can onl be made upon the
presentation o! competent proo! *hich petitioners !ailed to do% 3 la*, *hich has been in
operation !or man ears and promotes the *el!are o! a 'roup accorded special concern
b the Constitution, cannot and should not be summaril in6alidated on a mere
alle'ation that it reduces the pro!its or incomeD'ross sales o! business establishments%
?>)#)96#), the -etition is hereb 14SM4SS)1 !or lac) o! merit%chan2obles6irtual/a*librar
S6 6#1)#)1+
!ereno, C.(., Abad, *illarama, (r., Perez, 'endoza, Reyes, and Perlas+,ernabe, ((.,
concur%
Carpio, (., see dissentin' opinion%
*elas"o, (r., ,ersamin, and Leonen, ((., see concurrin' opinion%
Leonardo+De Castro, (., . certi! that (% De Castro le!t her 6ote concurrin' o! ponencia
o! (. Del Castillo%
,rion, (., no part%
Peralta, (., . certi! that (% -eralta le!t his 6ote concurrin' o! ponencia o! (% Del Castillo%
,ndnotes:
1
Cordillera ,road Coalition v. Commission on Audit, 260 -hil% 528, 535 <1990=%
2
Rollo, pp% 3"36%
3
3: 3CT T> ,3C.,.JG TLG C>:T2.8IT.>: >0 SG:.>2 C.T.JG:S T>
:3T.>: 8I./D.:F, F23:T 8G:G0.TS 3:D S-GC.3/ -2.&./GFGS 3:D 0>2
>TLG2 -I2->SGS, other*ise )no*n as the Senior Citi$ens 3ct% 3ppro6ed 3pril 23,
1992%
4
3: 3CT F23:T.:F 3DD.T.>:3/ 8G:G0.TS 3:D -2.&./GFGS T> SG:.>2
C.T.JG:S 3,G:D.:F 0>2 TLG -I2->SG 2G-I8/.C 3CT :>% 4432,
>TLG2;.SG H:>;: 3S O3: 3CT T> ,3C.,.JG TLG C>:T2.8IT.>: >0
SG:.>2 C.T.JG:S T> :3T.>: 8I./D.:F, F23:T 8G:G0.TS 3:D S-GC.3/
-2.&./GFGS 3:D 0>2 >TLG2 -I2->SGS,P other*ise )no*n as the G#panded
Senior Citi$ens 3ct o! 2003% 3ppro6ed 0ebruar 26, 2004%
5
496 -hil 304 <2005=%
6
.d% at 325"326 and 332"333%
4
.d% at 325"333%
8
3mended b 2epublic 3ct :o% 9994 <0ebruar 15, 2010=, 3: 3CT F23:T.:F
3DD.T.>:3/ 8G:G0.TS 3:D -2.&./GFGS T> SG:.>2 C.T.JG:S, 0I2TLG2
3,G:D.:F 2G-I8/.C 3CT :>% 4432, 3S 3,G:DGD, >TLG2;.SG H:>;:
3S O3: 3CT T> ,3C.,.JG TLG C>:T2.8IT.>: >0 SG:.>2 C.T.JG:S T>
:3T.>: 8I./D.:F, F23:T 8G:G0.TS 3:D S-GC.3/ -2.&./GFGS 3:D 0>2
>TLG2 -I2->SGS%P
9
Rollo, p% 392%
10
.d% at 383%
11
.d% at 401"420%
12
Supra note 5%
13
Rollo, pp% 402"403%
14
553 -hil% 120 <2004=%
15
Rollo, pp% 405"409%
16
Supra%
14
Rollo, pp% 410"420%
18
.d% at 411"412%
19
.d% at 413%
20
.d% at 424"436%
21
Sec% 4% The !amil has the dut to care !or its elderl members but the State ma also
do so throu'h (ust pro'rams o! social securit%
22
Sec% 11% The State shall adopt an inte'rated and comprehensi6e approach to health
de6elopment *hich shall endea6or to ma)e essential 'oods, health and other social
ser6ices a6ailable to all the people at a!!ordable cost% There shall be priorit !or the
needs o! the underpri6ile'ed sic), elderl, disabled, *omen, and children% The State
shall endea6or to pro6ide !ree medical care to paupers%
23
Rollo, pp% 421"424%
24
:o* 30? < Section 24 o! the :ational .nternal 2e6enue Code, as amended b
2epublic 3ct :o% 9334, 3: 3CT 3,G:D.:F SGCT.>:S 24, 28, 34, 106, 104, 108,
109, 110, 111, 112, 113, 114, 116, 114, 119, 121, 148, 151, 236, 234 3:D 228 >0 TLG
:3T.>:3/ .:TG2:3/ 2G&G:IG C>DG >0 1994, 3S 3,G:DGD, 3:D 0>2
>TLG2 -I2->SGS%=
25
Rollo, p% 425%
26
.d% at 424%
24
.d% at 394"401%
28
.d% at 363"364%
29
.d% at 359"363%
30
.d% at 368"340%
31
.d% at 364"368%
32
-eneral v. .rro, F%2% :o% 191560, ,arch 29, 2011, 646 SC23 564, 544%
33
Republi" /ele"ommuni"ations 0oldings, In". v. !antiago, F%2% :o% 140338, 3u'ust 4,
2004, 529 SC23 232, 242%
34
Aba1ada -uro Party List v. Purisima, F%2% :o% 166415, 3u'ust 14, 2008, 562 SC23
251, 240%
35
Supra note 14%
36
.d% at 128"144%
34
Supra note 5%
38
Supra note 14%
39
Supra note 5%
40
Supra note 14%
41
Supra note 5%
42
.d% at 335"334%
43
Supra note 14%
44
.d% at 128"130%
45
Supra note 14%
46
Supra note 5%
44
Supra note 14%
48
Supra note 5%
49
.d%
50
.d%
51
Supra note 14%
52
.d%
53
.d%
54
.d%
55
.d%
56
.d%
54
Supra note 5%
58
-ero"i v. Department of )nergy, 554 -hil% 563, 549 <2004=%
59
'irasol v. Department of Publi" #or1s and 0igways, 523 -hil% 413, 444 <2006=%
60
Asso"iation of !mall Landowners in te Pils., In". v. !e"retary of Agrarian Reform,
256 -hil% 444, 808"809 <1989=%
61
!o"ial (usti"e !o"iety 2!(!3 v. Atienza, (r., F%2% :o% 156052, 0ebruar 13, 2008, 545
SC23 92, 139%
62
.d% at 139"140%
63
Apo 4ruits Corporation v. Land ,an1, F%2% :o% 164195, >ctober 12, 2010, 632 SC23
424, 439%
64
0eirs of !uguitan v. City of 'andaluyong, 384 -hil% 646, 688 <2000=%
65
8ernas, /e 5678 Constitution of te Republi" of te Pilippines9 A Commentary, at
420 <2003=%
66
De /eon and De /eon, 7r%, Pilippine Constitutional Law9 Prin"iples and Cases *ol.
5, at 696 <2012=%
64
Asso"iation of !mall Landowners in te Pils., In". v. !e"retary of Agrarian Reform,
supra note 60 at 804%
68
!eng :ee ; Co. v. )arnsaw, 56 -hil% 204 <1931= cited in 8ernas, supra%
69
8ernas, supra at 421%
40
.d% at 420%
41
National Power Corporation v. -utierrez, 241 -hil% 1 <1991= cited in 8ernas, supra at
422"423%
42
Republi" v. Pilippine Long Distan"e /elepone Co., 136 -hil% 20 <1969= cited in
8ernas, supra at 423"424%
43
Pilippine Long Distan"e /elepone Company v. City of Davao, 122 -hil% 448, 489
<1965=%
44
!ee 0eirs of Ardona v. Reyes, 210 -hil% 184, 194"201 <1983=%
45
!ee Asso"iation of !mall Landowners in te Pils., In". v. !e"retary of Agrarian
Reform, supra note 60 at 819"822%
46
3rticle C..., Section 11 o! the Constitution pro6ides:
The State shall adopt an inte'rated and comprehensi6e approach to health de6elopment
*hich shall endea6or to ma)e essential 'oods, health and other social ser6ices a6ailable
to all the people at a!!ordable cost% There shall be priorit !or the needs o! the
underpri6ile'ed sic), elderl, disabled, *omen, and children% The State shall endea6or
to pro6ide !ree medical care to paupers%
44
See 'unn v. Illinois, 94 I%S% 113 <1844=M People v. Cu Ci, 92 -hil% 944 <1953=M and
Alalayan v. National Power Corporation, 133 -hil% 249 <1968=% The rate"ma)in' or rate"
re'ulation b 'o6ernmental bodies o! public utilities is included in this cate'or o!
police po*er measures%
48
Supra note 5%
49
See 'unn v. Illinois, 94 I%S% 113 <1844=%
80
495 -hil% 289 <2005=%
81
.d% at 320"321%
82
'irasol v. Department of Publi" #or1s and 0igways, supra note 59%
83
133 -hil% 249 <1968=%
84
.d% at 292%
85
Supra note 14%
86
.d%
84
,as"o v. Pilippine Amusements and -aming Corporation, 244 -hil% 323, 335 <1991=%
88
Supra note 14%
89
Supra note 5%
90
Section 9% -ri6ate propert shall not be ta)en !or public use *ithout (ust
compensation%
91
Supra note 5%
92
.d%
93
.d% at 315%
94
.d%
95
.d%
96
.d%
94
See, !or instance, City of 'anila v. Laguio, (r., supra note 80%
98
-ro!itVsellin' price"cost price
99
10"5V5
100
-ro!it mar'inVpro!itDsellin' price%
101
5D10V%50
102
8"5V3
This e#ample merel illustrates the e!!ect o! the 20? discount on the sellin' price and
pro!it% To be more accurate, ho*e6er, the business *ill not onl earn a pro!it o! -3%00
but *ill also be entitled to a ta# deduction pertainin' to the 20? discount 'i6en% .n
short, the pro!it *ould be 'reater than -3%00%
103
3D10V%30
104
8 parit o! reasonin', as in supra note 102, the e#act loss *ill not necessaril be
-1%00 because the business ma claim the 20? discount as a ta# deduction so that the
loss ma be less than -1%00%
105
This merel illustrates ho* a compan can ad(ust its prices to recoup or miti'ate an
possible reduction o! pro!its or incomeD'ross sales under the operation o! the assailed
la*% Lo*e6er, to be more accurate, i! 3 *ere to raise the price o! his products to -11%11
a piece, he *ould not onl retain his pre6ious incomeD'ross sales o! -20%00 but *ould
be better o!! because he *ould be able to claim a ta# deduction e1ui6alent to the 20?
discount he 'a6e to C%
106
Dissentin' >pinion, p% 14%
104
'ar"os v. 'anglapus, 258 -hil% 449, 504 <1989=%
108
-arenthetical comment supplied%
109
.d%
110
111
.d% at 12%
112
.d% 3t 13%
113
Supra note 5%
114
The Dissent uses the term O'ross salesP instead o! OincomeP but OincomeP and O'ross
salesP are used in the same sense throu'hout this ponencia% That is, the are mone
deri6ed !rom the sale o! 'oods or ser6ices% The re!erence to or mention o!
OincomePDP'ross salesP, apart !rom Opro!its,P is intentionall made because the 20?
discount ma co6er more than the pro!its !rom the sale o! 'oods or ser6ices in cases
*here the pro!it mar'in is less than 20? and the business establishment does not ad(ust
its pricin' strate'%
.ncomeD'ross sales is a broader concept 6is"a"6is pro!its because incomeD'ross sales less
cost o! the 'oods or ser6ices e1uals pro!its% .! the sub(ect re'ulation a!!ects
incomeD'ross sales, then it !ollo*s that it a!!ects pro!its and 6ice 6ersa% The shi!t in the
use o! terms, i.e., !rom Opro!itsP to O'ross sales,P cannot erase or conceal the materialit
o! pro!its or losses in determinin' the 6alidit o! the sub(ect re'ulation in this case%
115
3rticle C..., Section 3%
116
114
3rticle C..., Section 1 o! the Constitution states:
The Con'ress shall 'i6e hi'hest priorit to the enactment o! measures that protect and
enhance the ri'ht o! all the people to human di'nit, reduce social, economic, and
political ine1ualities, and remo6e cultural ine1uities b e1uitabl di!!usin' *ealth and
political po*er !or the common 'ood%
To this end, the State shall re'ulate the ac1uisition, o*nership, use, and disposition o!
propert and its increments%
118
.d%
119
120
-arenthetical comment supplied%
121
122
3ccordin' to the Dissent, these statutoril mandated emploee bene!its are 6alid
police po*er measures because the emploer is deemed !ull compensated there!or as
the !orm part o! the emploeeRs le'islated *a'e%
The Dissent con!uses police po*er *ith eminent domain%
.n police po*er, no compensation is re1uired, and it is not necessar, as the Dissent
mista)enl assumes, to sho* that the emploer is deemed !ull compensated in order
!or the statutoril mandated bene!its to be a 6alid e#ercise o! police po*er% .t is
immaterial *hether the emploer is deemed !ull compensated because the (usti!ication
!or these statutoril mandated bene!its is the o6erridin' State interest to protect and
uphold the *el!are o! emploees% This State interest is principall rooted in the
historical abuses su!!ered b emploees *hen emploers solel determined the terms
and conditions o! emploment% 0urther, the direct or incidental bene!it deri6ed b the
emploer <i.e., healthier *or) en6ironment *hich presumabl translates to more
producti6e emploees= !rom these statutoril mandated bene!its is not a re1uirement to
ma)e them 6alid police po*er measures% 3'ain, it is the paramount State interest in
protectin' the *el!are o! emploees *hich (usti!ies these measures as 6alid e#ercises o!
police po*er sub(ect, o! course, to the test o! reasonableness as to the means adopted to
achie6e such le'itimate ends%
That the assailed la* bene!its senior citi$ens and not emploees o! a business
establishment ma)es no material di!!erence because, precisel, police po*er is
emploed to protect and uphold the *el!are o! mar'inali$ed and 6ulnerable 'roups in
our societ% -olice po*er *ould be a meanin'less State attribute i! an indi6idual, or a
business establishment !or that matter, can onl be compelled to accede to State
re'ulations pro6ided he <or it= is directl or incidentall bene!ited thereb% -recisel in
instances *hen the indi6idual resists or opposes a re'ulation because it burdens him or
her that the State e#ercises its police po*er in order to uphold the common 'ood% ,an
laudable e#istin' police po*er measures *ould ha6e to be in6alidated i!, as a condition
!or their 6alidit, the indi6idual sub(ected thereto should be directl or incidentall
bene!ited b such measures%
123
See De /eon and De /eon, 7r%, Pilippine Constitutional Law9 Prin"iples and Cases
*ol. 5, at 641"643 <2012=, !or a list o! police po*er measures upheld b this Court% 3
'ood number o! these measures impact, directl or indirectl, the pro!itabilit o!
business establishments et the same *ere upheld b the Court because the *ere not
sho*n to be unreasonable, oppressi6e or con!iscator%
124
Supra note 14%
125
.d% at 132"135%
126
Supra note 83%
124
Supra note 14%
D.SSG:T.:F >-.:.>:
C32-.>, (.:
The main issue in this case is the constitutionalit o! Section 4 o! 2epublic 3ct :o%
4432
1
<2%3% 4432=, as amended b 2epublic 3ct :o% 9254
2
<2%3% 9254=, *hich states
that establishments ma claim the 20? mandator discount to senior citi$ens as ta#
deduction, and thus no lon'er as ta# credit% ,anila ,emorial -ar), .nc% and /a
0uneraria -a$"Sucat, .nc% <petitioners= alle'e that the ta# deduction scheme under 2%3%
9254 6iolates Section 9, 3rticle ... o! the Constitution *hich pro6ides that O@pAri6ate
propert shall not be ta)en !or public use *ithout (ust compensation%P
Section 4 o! 2%3% 4432, as amended b 2%3% 9254, pro6ides:
SGC% 4% Privileges for te !enior Citizens% + The senior citi$ens shall be entitled to the
!ollo*in':
utili$ation o! ser6ices in hotels and similar lod'in' establishment, restaurants and
senior citi$ensM
# # #
deduction based on the net cost o! the 'oods sold or ser6ices rendered: 7roBided, That
the cost of the discount shall 3e allo(ed as deduction fro2 gross inco2e for the
sa2e taxa3le year that the discount is granted+ -ro6ided, !urther, That the total
amount o! the claimed ta# deduction net o! 6alue added ta# i! applicable, shall be
included in their 'ross sales receipts !or ta# purposes and shall be sub(ect to proper
documentation and to the pro6isions o! the :ational .nternal 2e6enue Code, as
amended% <)mpasis supplied=
The constitutionalit o! Section 4<a= o! 2%3% 4432, as amended b 2%3% 9254, had been
passed upon b the Court in Carlos !uperdrug Corporation v. Department of !o"ial
#elfare and Development%
3
.n Carlos !uperdrug Corporation, the Court made a distinction bet*een the ta# credit
scheme under Section 4 o! 2%3% 4432 <the old Senior Citi$ens 3ct= and the ta#
deduction scheme under 2%3% 9254 <the G#panded Senior Citi$ens 3ct=% Inder the ta#
credit scheme, the establishments are paid bac) 100? o! the discount the 'i6e to senior
citi$ens% Inder the ta# deduction scheme, the are onl paid bac) about 32? o! the 20?
discount 'ranted to senior citi$ens%
The Court cited in Carlos !uperdrug Corporation the clari!ication b the Department o!
0inance, throu'h Director .& ,a% /ourdes 8% 2ecente, *hich e#plained the di!!erence
bet*een ta# credit and ta# deduction, as !ollo*s:
1= The di!!erence bet*een the Ta# Credit <under the >ld Senior Citi$ens 3ct= and Ta#
Deduction <under the G#panded Senior Citi$ens 3ct=%
1%1% The pro6ision o! Section 4 o! 2%3% :o% 4432 <the old Senior Citi$ens 3ct= 'rants
t*ent percent <20?= discount !rom all establishments relati6e to the utili$ation o!
transportation ser6ices, hotels and similar lod'in' establishment, restaurants and
recreation centers and purchase o! medicines an*here in the countr, the costs o!
*hich ma be claimed b the pri6ate establishments concerned as tax credit%
G!!ecti6el, a tax credit is a peso"!or"peso deduction !rom a ta#paerRs ta# liabilit due
to the 'o6ernment o! the amount o! discounts such establishment has 'ranted to a senior
citi$en% The establishment reco6ers the !ull amount o! discount 'i6en to a senior citi$en
and hence, the 'o6ernment shoulders 100? o! the discounts 'ranted%
.t must be noted, ho*e6er, that conceptuall, a tax credit scheme under the -hilippine
ta# sstem, necessitates that prior paments o! ta#es ha6e been made and the ta#paer is
attemptin' to reco6er this ta# pament !rom hisDher income ta# due% The ta# credit
scheme under 2%3% :o% 4432 is, there!ore, inapplicable since no ta# paments ha6e
pre6iousl occurred%
1%2% The pro6ision under 2%3% :o% 9254, on the other hand, pro6ides that the
establishment concerned ma claim the discounts under Section 4<a=, <!=, <'= and <h= as
tax deduction !rom 'ross income, based on the net cost o! 'oods sold or ser6ices
rendered%
Inder this scheme, the establishment concerned is allo*ed to deduct !rom 'ross
income, in computin' !or its ta# liabilit, the amount o! discounts 'ranted to senior
citi$ens% G!!ecti6el, the 'o6ernment loses in terms o! !ore'one re6enues an amount
e1ui6alent to the mar'inal ta# rate the said establishment is liable to pa the
'o6ernment% This *ill be an amount e1ui6alent to 32? o! the t*ent percent <20?=
discounts so 'ranted% The establishment shoulders the remainin' portion o! the 'ranted
discounts%
4
<Gmphasis in the ori'inal=
Thus, under the ta# deduction scheme, there is no !ull compensation !or the 20?
discount that pri6ate establishments are !orced to 'i6e to senior citi$ens%
The (usti!ication !or the 6alidit o! the ta# deduction, *hich the ma(orit opinion adopts,
*as e#plained b the Court in Carlos !uperdrug Corporation as a la*!ul e#ercise o!
police po*er% The Court ruled:
its !a6or%
Fi6en these, it is incorrect !or petitioners to insist that the 'rant o! the senior citi$en
discount is undul oppressi6e to their business, because petitioners ha6e not ta)en time
to calculate correctl and come up *ith a !inancial report, so that the ha6e not been
able to sho* properl *hether or not the ta# deduction scheme reall *or)s 'reatl to
their disad6anta'e%
5
.n the case be!ore us, the ma(orit opinion declares that it !inds no reason to o6erturn or
modi! the rulin' in Carlos !uperdrug Corporation% The ma(orit opinion also declares
that the CourtRs earlier decision in Commissioner of Internal Revenue v. Central Luzon
Drug Corporation
6
<Central Luzon Drug Corporation= holdin' that Othe ta& "redit
bene!it 'ranted to these establishments can be deemed as their %ust "ompensation !or
pri6ate propert ta)en b the State !or public useP
4
and that the permanent reduction in
the total re6enues o! pri6ate establishments is Oa !orced subsid correspondin' to the
ta)in' o! pri6ate propert !or publi" use or benefitP
8
is an obiter di"tum and is not a
bindin' precedent% The ma(orit opinion reasons that the Court in Central Luzon Drug
Corporation *as not con!ronted *ith the issue o! *hether the 20? discount *as an
e#ercise o! police po*er or eminent domain%
The sole issue, accordin' to the CourtRs decision in Central Luzon Drug Corporation,
*as *hether a pri6ate establishment ma claim the cost o! the 20? discount 'ranted to
senior citi$ens as a ta# credit e6en thou'h an establishment operates at a loss% Lo*e6er,
a readin' o! the decision sho*s that petitioner raised the issue o! OC(Dhether the Court
of &ppeals erred in holding that respondent 2ay clai2 the 20% sales discount as a
tax credit instead of as a tax deduction fro2 gross inco2e or gross sales+P
9
.n that
case, the 8.2 erroneousl treated the 20? discount as a ta# deduction under Sections 2%i
and 4 o! 2e6enue 2e'ulations :o% 2"94 <22 2"94=, despite the pro6ision o! the la*
mandatin' that it should be treated as a ta# credit% The erroneous treatment b the 8.2
under 22 2"94 necessitated the discussion e#plainin' *h the ta# credit bene!it 'i6en to
pri6ate establishments should be deemed (ust compensation% The Court e#plained in
Central Luzon Drug Corporation:
4ourt, Sections 2%i and 4 o! 22 2"94 den the e#ercise b the State o! its po*er o!
eminent domain% 8e it stressed that the pri6ile'e en(oed b senior citi$ens does not
come dire"tly !rom the State, but rather !rom the pri6ate establishments concerned%
&ccordingly, the tax credit 3enefit granted to these esta3lish2ents can 3e dee2ed
as their -ust compensation for priBate property taen 3y the State for pu3lic use+
The concept o! publi" use is no lon'er con!ined to the traditional notion o! use by te
publi", but held snonmous *ith publi" interest, publi" benefit, publi" welfare, and
publi" "onvenien"e% The discount pri6ile'e to *hich our senior citi$ens are entitled is
actuall a bene!it en(oed b the 'eneral public to *hich these citi$ens belon'% The
discounts 'i6en *ould ha6e entered the co!!ers and !ormed part o! the gross sales o! the
pri6ate establishments concerned, *ere it not !or 23 4432% The per2anent reduction
in their total reBenues is a forced su3sidy corresponding to the taing of priBate
property for pu(lic use or (enefit+
&s a result of the 20 percent discount i2posed 3y #& -E/2, respondent 3eco2es
entitled to a -ust compensation+ This term re!ers not onl to the issuance o! a ta& "redit
certi!icate indicatin' the correct amount o! the discounts 'i6en, but also to the
promptness in its release% G1ui6alent to the pament o! propert ta)en b the State, such
issuance Q *hen not done *ithin a reasonable time !rom the 'rant o! the discounts Q
cannot be considered as %ust "ompensation% .n e!!ect, respondent is made to su!!er the
conse1uences o! bein' immediatel depri6ed o! its re6enues *hile a*aitin' actual
receipt, throu'h the certi!icate, o! the e1ui6alent amount it needs to cope *ith the
reduction in its re6enues%
8esides, the ta#ation po*er can also be used as an implement !or the e#ercise o! the
po*er o! eminent domain% Ta# measures are but Oen!orced contributions e#acted on pain
o! penal sanctionsP and Oclearl imposed !or a publi" purpose%P .n recent ears, the
po*er to ta# has indeed become a most e!!ecti6e tool to reali$e social (ustice, publi"
welfare, and the e1uitable distribution o! *ealth%
;hile it is a declared commitment under Section 1 o! 23 4432, social (ustice Ocannot be
in6o)ed to trample on the ri'hts o! propert o*ners *ho under our Constitution and
la*s are also entitled to protection% The social (ustice consecrated in our @CAonstitution
@isA not intended to ta)e a*a ri'hts !rom a person and 'i6e them to another *ho is not
entitled thereto%P 0or this reason, a (ust compensation !or income that is ta)en a*a
!rom respondent becomes necessar% .t is in the ta& "redit that our le'islators !ind
support to reali$e social (ustice, and no administrati6e bod can alter that !act%
To put it di!!erentl, a pri6ate establishment that merel brea)s e6en Q *ithout the
discounts et Q *ill surel start to incur losses because o! such discounts% The same
e!!ect is e#pected i! its mar)"up is less than 20 percent, and i! all its sales come !rom
retail purchases b senior citi$ens% 3side !rom the obser6ation *e ha6e alread raised
earlier, it *ill also be 'rossl un!air to an establishment i! the discounts *ill be treated
merel as deductions !rom either its gross in"ome or its gross sales% >peratin' at a loss
throu'h no !ault o! its o*n, it *ill reali$e that the ta& "redit limitation under 22 2"94 is
inutile, i! not improper% ;orse, pro!it"'eneratin' businesses *ill be put in a better
position i! the a6ail themsel6es o! ta& "redits denied those that are losin', because no
ta#es are due !rom the latter%
10
<)mpasis supplied=
The !ore'oin' discussion !ormed part o! the e#planation o! this Court in Central Luzon
Drug Corporation *h Sections 2%i and 4 o! 22 2"94 *ere erroneousl issued% The
!ore'oin' discussion *as certainl not unnecessar or immaterial in the resolution o!
the caseM
11
hence, the discussion is de!initel not obiter di"tum%
3s re'ards Carlos !uperdrug Corporation, a second loo) at the case sho*s that it barel
distin'uished bet*een police po*er and eminent domain% ;hile it is true that police
po*er is similar to the po*er o! eminent domain because both ha6e the 'eneral *el!are
o! the people !or their ob(ect, *e need to clari! the concept o! ta)in' in eminent
domain as a'ainst ta)in' in police po*er to pre6ent an claim o! police po*er *hen the
po*er actuall e#ercised is eminent domain% ;hen police po*er is e#ercised, there is no
(ust compensation to the citi$en *ho loses his pri6ate propert% ;hen eminent domain is
e#ercised, there must be (ust compensation% Thus, the Court must clari! ta)in' in police
po*er and ta)in' in eminent domain% Fo6ernment o!!icials cannot (ust in6o)e police
po*er *hen the act constitutes eminent domain%
.n the earl case o! People v. Pomar,
12
the Court ac)no*led'ed that O@bA reason o! the
constant 'ro*th o! public opinion in a de6elopin' ci6ili$ation, the term Wpolice po*erR
has ne6er been, and *e do not belie6e can be, clearl and de!initel de!ined and
circumscribed%P
13
The Court stated that the Ode!inition o! the police po*er o! the state
must depend upon the particular la* and the particular !acts to *hich it is to be
applied%P
14
>o(eBer, it (as considered eBen then that police po(er, (hen applied to
taing of property (ithout co2pensation, refers to property that are destroyed or
placed outside the co22erce of 2an+ The Court declared in Pomar:
4t is 3elieBed and confidently asserted that no case can 3e found, in ciBilized society
and (ell<organized goBern2ents, (here indiBiduals haBe 3een depriBed of their
property, under the police po(er of the state, (ithout co2pensation, except in cases
(here the property in Fuestion (as used for the purpose of Biolating so2e la(
legally adopted, or constitutes a nuisance+ 3mon' such cases ma be mentioned:
3pparatus used in counter!eitin' the mone o! the stateM !irearms ille'all possessedM
opium possessed in 6iolation o! la*M apparatus used !or 'amblin' in 6iolation o! la*M
buildin's and propert used !or the purpose o! 6iolatin' la*s prohibitin' the
manu!acture and sale o! into#icatin' li1uorsM and all cases in *hich the propert itsel!
has become a nuisance and dan'erous and detrimental to the public health, morals and
'eneral *el!are o! the state% .n all o! such cases, and in man more *hich mi'ht be
cited, the destruction o! the propert is permitted in the e#ercise o! the police po*er o!
the state% 8ut it must !irst be established that such propert *as used as the instrument
!or the 6iolation o! a 6alid e#istin' la*% <,u'ler 6s% Hansan, 123 I%S% 623M Slau'hter"
Louse Cases, 16 ;all% @I%S%A 36M 8utchersR Inion, etc%, Co% 6s% Crescent Cit, etc%, Co%,
111 I%S% 446M 7ohn Stuart ,ill " O>n /ibert,P 28, 29=
;ithout !urther attemptin' to de!ine *hat are the peculiar sub(ects or limits o! the police
po*er, it ma sa!el be a!!irmed, that e6er la* !or the restraint and punishment o!
crimes, !or the preser6ation o! the public peace, health, and morals, must come *ithin
this cate'or% 8ut the state, *hen pro6idin' b le'islation !or the protection o! the
public health, the public morals, or the public sa!et, is sub(ect to and is controlled b
the paramount authorit o! the constitution o! the state, and *ill not be permitted to
6iolate ri'hts secured or 'uaranteed b that instrument or inter!ere *ith the e#ecution o!
the po*ers and ri'hts 'uaranteed to the people under their la* + the constitution%
<,u'ler vs% Hansan, 123 I%S% 623=
15
<)mpasis supplied=
.n City -overnment of <uezon City v. 0on. (udge )ri"ta,
16
the Court 1uoted *ith
appro6al the trial courtRs decision declarin' null and 6oid Section 9 o! >rdinance :o%
6118, S"64, o! the Nue$on Cit Council, thus:
;e start the discussion *ith a restatement o! certain basic principles% >ccupin' the
!ore!ront in the bill o! ri'hts is the pro6ision *hich states that Wno person shall be
depri6ed o! li!e, libert or propert *ithout due process o! la*% <3rt% ..., Section 1
subpara'raph 1, Constitution=
>n the other hand, there are three inherent po*ers o! 'o6ernment b *hich the state
inter!eres *ith the propert ri'hts, namel+ <1= police po*er, <2= eminent domain, @andA
<3= ta#ation% These are said to e#ist independentl o! the Constitution as necessar
attributes o! so6erei'nt%
7olice po(er is defined 3y 9reund as Gthe po(er of pro2oting the pu3lic (elfare 3y
restraining and regulating the use of li3erty and property HIuoted in 7olitical 5a(
3y Ta!ada and Carreon, @<,,, p+ .0J+ 4t is usually exerted in order to 2erely
regulate the use and enAoy2ent of property of the o(ner+ .f he is deprived of his
property outright% it is not ta/en for pu(lic use (ut rather to destroy in order to
promote the general &elfare. 4n police po(er, the o(ner does not recoBer fro2 the
goBern2ent for inAury sustained in conseFuence thereof H,2 C+$+ 02/J+ .t has been
said that police po*er is the most essential o! 'o6ernment po*ers, at times the most
insistent, and al*as one o! the least limitable o! the po*ers o! 'o6ernment <2ub 6s%
-ro6incial 8oard, 39 -hil% 660M .chon' 6s% Lernande$, /"4995, ,a 31, 1954=% This
po*er embraces the *hole sstem o! public re'ulation <I%S% 6s% /insua 0an, 10 -hil%
104=% The Supreme Court has said that police po*er is so !ar"reachin' in scope that it
has almost become impossible to limit its s*eep% 3s it deri6es its e#istence !rom the
6er e#istence o! the state itsel!, it does not need to be e#pressed or de!ined in its scope%
8ein' coe#tensi6e *ith sel!"preser6ation and sur6i6al itsel!, it is the most positi6e and
acti6e o! all 'o6ernmental processes, the most essential insistent and illimitable%
Gspeciall it is so under the modern democratic !rame*or) *here the demands o!
societ and nations ha6e multiplied to almost unima'inable proportions% The !ield and
scope o! police po*er ha6e become almost boundless, (ust as the !ields o! public interest
and public *el!are ha6e become almost all embracin' and ha6e transcended human
!oresi'ht% Since the Court cannot !oresee the needs and demands o! public interest and
*el!are, the cannot delimit be!orehand the e#tent or scope o! the police po*er b
*hich and throu'h *hich the state see)s to attain or achie6e public interest and *el!are%
<.chon' 6s% Lernande$, /"4995, ,a 31, 1954=%
The police po*er bein' the most acti6e po*er o! the 'o6ernment and the due process
clause bein' the broadest limitation on 'o6ernmental po*er, the con!lict bet*een this
po*er o! 'o6ernment and the due process clause o! the Constitution is o!tentimes
ine6itable%
4t (ill 3e seen fro2 the foregoing authorities that police po(er is usually exercised
in the for2 of 2ere regulation or restriction in the use of li3erty or property for the
pro2otion of the general (elfare+ 4t does not inBolBe the taing or confiscation of
property (ith the exception of a fe( cases (here there is a necessity to confiscate
priBate property in order to destroy it for the purpose of protecting the peace and
order and of pro2oting the general (elfare as for instance, the confiscation of an
illegally possessed article, such as opiu2 and firear2s+
14
<8old!acin' and italici$ation
supplied=
Clearly, taing under the exercise of police po(er does not reFuire any
co2pensation 3ecause the property taen is either destroyed or placed outside the
co22erce of 2an+
>n the other hand, the po*er o! eminent domain has been described as +
# # # Wthe hi'hest and most e#act idea o! propert remainin' in the 'o6ernmentR that
ma be ac1uired !or some public purpose throu'h a method in the nature o! a !orced
purchase b the State% .t is a ri'ht to ta)e or reassert dominion o6er propert *ithin the
state !or public use or to meet public e#i'enc% .t is said to be an essential part o!
'o6ernance e6en in its most primiti6e !orm and thus inseparable !rom so6erei'nt% The
onl direct constitutional 1uali!ication is that Opri6ate propert should not be ta)en !or
public use *ithout (ust compensation%P This proscription is intended to pro6ide a
sa!e'uard a'ainst possible abuse and so to protect as *ell the indi6idual a'ainst *hose
propert the po*er is sou'ht to be en!orced%
18
.n order to be 6alid, the ta)in' o! pri6ate propert b the 'o6ernment under eminent
domain has to be !or public use and there must be (ust compensation%
19
0r% 7oa1uin F% 8ernas, S%7%, e#pounded:
8oth police po*er and the po*er o! eminent domain ha6e the 'eneral *el!are !or their
ob(ect% The !ormer achie6es its ob(ect b re'ulation *hile the latter b Ota)in'P% ;hen
propert ri'ht is impaired b re'ulation, compensation is not re1uiredM *hereas, *hen
propert is ta)en, the Constitution prescribes (ust compensation% >ence, a sharp
distinction 2ust 3e 2ade 3et(een regulation and taing+
;hen title to propert is trans!erred to the e#propriatin' authorit, there is a clear case
o! compensable ta)in'% Lo*e6er, as *ill be seen, it is a settled rule that neither
ac1uisition o! title nor total destruction o! 6alue is essential to ta)in'% .t is in cases
*here title remains *ith the pri6ate o*ner that in1uir must be made *hether the
impairment o! propert ri'ht is merel re'ulation or alread amounts to compensable
ta)in'%
&n analysis of existing Aurisprudence yields the rule that (hen a property interest
is appropriated and applied to so2e pu3lic purpose, there is co2pensa3le taing+
?here, ho(eBer, a property interest is 2erely restricted 3ecause continued
unrestricted use (ould 3e inAurious to pu3lic (elfare or (here property is
destroyed 3ecause continued existence of the property (ould 3e inAurious to pu3lic
interest, there is no co2pensa3le taing+
20
<)mpasis supplied=
.n Section 4 o! 2%3% 4432, it is undeniable that there is ta)in' o! propert !or public use%
-ri6ate propert is anthin' that is sub(ect to pri6ate o*nership% The propert ta)en !or
public use applies not onl to land but also to other proprietar propert, includin' the
mandator discounts 'i6en to senior citi$ens *hich !orm part o! the 'ross sales o! the
pri6ate establishments that are !orced to 'i6e them% The a2ount of 2andatory
discount is 2oney that 3elongs to the priBate esta3lish2ent+ 9or sure, 2oney or
cash is priBate property 3ecause it is so2ething of Balue that is su3Aect to priBate
o(nership+ The ta)in' o! propert under Section 4 o! 2%3% 4432 is an e#ercise o! the
po*er o! eminent domain and not an e#ercise o! the police po*er o! the State% & clear
and sharp distinction should 3e 2ade 3ecause priBate property o(ners (ill 3e left
at the 2ercy of goBern2ent officials if these officials are allo(ed to inBoe police
po(er (hen (hat is actually exercised is the po(er of e2inent do2ain+
Section 9, 3rticle ... o! the 1984 Constitution spea)s o! pri6ate propert *ithout an
distinction% .t does not state that there should be pro!it be!ore the ta)in' o! propert is
sub(ect to (ust compensation% The pri6ate propert re!erred to !or purposes o! ta)in'
could be inherited, donated, purchased, mort'a'ed, or as in this case, part o! the 'ross
sales o! pri6ate establishments% The are all pri6ate propert and an ta)in' should be
attended b a correspondin' pament o! (ust compensation% The 20? discount 'ranted
to senior citi$ens belon's to pri6ate establishments, *hether these establishments ma)e
a pro!it or su!!er a loss% .n !act, the 20? discount applies to non<profit esta3lish2ents
li)e countr, social, or 'ol! clubs *hich are open to the public and not onl !or e#clusi6e
membership%
21
The issue o! pro!it or loss to the establishments is immaterial%
7ust compensation is Othe !ull and !air e1ui6alent o! the propert ta)en !rom its o*ner
b the e#propriator%P
22
The Court e#plained:
# # #% The measure is not the ta)erRs 'ain, but the o*nerRs loss% The *ord W(ustR is used
to 1uali! the meanin' o! the *ord WcompensationR and to con6e thereb the idea that
the a2ount to 3e tendered for the property to 3e taen shall 3e real, su3stantial,
full and a2ple% # # #%
23
<)mpasis supplied=
The 32? o! the discount that the pri6ate establishments could reco6er under the ta#
deduction scheme cannot be considered real, substantial, !ull and ample compensation%
.n Carlos !uperdrug Corporation, the Court conceded that OCtDhe per2anent reduction
in CpriBate esta3lish2entsD total reBenue is a forced su3sidy corresponding to the
taing of priBate property for pu3lic use or 3enefit%P
24
The Court ruled that OCtDhis
constitutes co2pensa3le taing for (hich petitioners (ould ordinarily 3eco2e
entitled to a Aust co2pensation%P
25
Despite these pronouncements admittin' there *as
compensable ta)in', the Court still proceeded to rule that Kthe State, in pro2oting
the health and (elfare of a special group of citizens, can i2pose upon priBate
esta3lish2ents the 3urden of partly su3sidizing a goBern2ent progra2+L
There ma be 6alid instances *hen the State can impose burdens on pri6ate
establishments that e!!ecti6el subsidi$e a 'o6ernment pro'ram% Lo*e6er, the moment
a constitutional threshold is crossed + *hen the burden constitutes a ta)in' o! pri6ate
propert !or public use + then the burden becomes an e#ercise o! eminent domain !or
*hich (ust compensation is re1uired%
3n e#ample o! a burden that can be 6alidl imposed on pri6ate establishments is the
re1uirement under 3rticle 154 o! the /abor Code that emploers *ith a certain number
o! emploees should maintain a clinic and emplo a re'istered nurse, a phsician, and a
dentist, dependin' on the number o! emploees% 3rticle 154 o! the /abor Code pro6ides:
3rt% 154% Gmer'enc medical and dental ser6ices% + .t shall be the dut o! e6er
emploer to !urnish his emploees in an localit *ith !ree medical and dental
attendance and !acilities consistin' o!:
a% The ser6ices o! a !ull"time re'istered nurse *hen the number o! emploees
e#ceeds !i!t <50= but not more than t*o hundred <200= e#cept *hen the
emploer does not maintain ha$ardous *or)places, in *hich case, the ser6ices o!
a 'raduate !irst"aider shall be pro6ided !or the protection o! *or)ers, *here no
re'istered nurse is a6ailable% The Secretar o! /abor and Gmploment shall
pro6ide b appropriate re'ulations, the ser6ices that shall be re1uired *here the
number o! emploees does not e#ceed !i!t <50= and shall determine b
appropriate order, ha$ardous *or)places !or purposes o! this 3rticleM
b% The ser6ices o! a !ull"time re'istered nurse, a part"time phsician and dentist,
and an emer'enc clinic, *hen the number o! emploees e#ceeds t*o hundred
<200= but not more than three hundred <300=M and
c% The ser6ices o! a !ull"time phsician, dentist and a !ull"time re'istered nurse as
*ell as a dental clinic and an in!irmar or emer'enc hospital *ith one bed
capacit !or e6er one hundred <100= emploees *hen the number o! emploees
e#ceeds three hundred <300=%
# # #
3rticle 154 is a burden imposed b the State on pri6ate emploers to complement a
'o6ernment pro'ram o! promotin' a health *or)place% The emploer itsel!, ho*e6er,
bene!its !ull !rom this burden because the health o! its *or)ers *hile in the *or)place
is a le'itimate concern o! the pri6ate emploer% ,oreo6er, the cost o! maintainin' the
clinic and sta!! is part o! the legislated (ages !or *hich the pri6ate emploer is fully
co2pensated b the ser6ices o! the emploees% .n the case o! the senior citi$enRs
discount, the pri6ate establishment is compensated onl in the e1ui6alent amount o!
32? o! the mandator discount% There are no ser6ices rendered b the senior citi$ens, or
an other !orm o! pament, that could ma)e up !or the 68? balance o! the mandator
discount% Clearl, the pri6ate establishments cannot reco6er the !ull amount o! the
discount the 'i6e and thus there is ta)in' to the e#tent o! the amount that cannot be
reco6ered%
3nother e#ample o! a burden that can be 6alidl imposed on a pri6ate establishment is
the re1uirement under Section 19 in relation to Section 18 o! the Social Securit /a*
26

and Section 4 o! the -a'".8.F 0und
24
!or the emploer to contribute a certain amount to
!und the bene!its o! its emploees% The amounts contributed b pri6ate emploers !orm
part o! the legislated (ages o! emploees% The pri6ate emploers are deemed fully
co2pensated !or these amounts b the ser6ices rendered b the emploees%
.n the present case, the pri6ate establishments are onl compensated about 32? o! the
20? discount 'ranted to senior citi$ens% The shoulder 68? o! the discount the are
!orced to 'i6e to senior citi$ens% The Court should correct this situation as it clearl
6iolates Section 9, 3rticle ... o! the Constitution *hich pro6ides that O@pAri6ate propert
shall not be ta)en !or public use *ithout (ust compensation%P Carlos !uperdrug
Corporation should be abandoned b this Court and Central Luzon Drug Corporation
re"a!!irmed%
Carlos !uperdrug Corporation admitted that the permanent reduction in the total
re6enues o! pri6ate establishments is a Oco2pensa3le taing for (hich petitioners
(ould ordinarily 3eco2e entitled to a Aust co2pensation%P
28
Lo*e6er, Carlos
!uperdrug Corporation considered that there *as su!!icient basis !or ta)in' *ithout
compensation b in6o)in' the e#ercise o! police po*er o! the State% .n doin' so, the
Court !ailed to consider that a per2anent ta)in' o! propert !or public use is an
e#ercise o! eminent domain !or *hich the 'o6ernment must pa compensation% Gminent
domain is a sub"class o! police po*er and its e#ercise is sub(ect to certain conditions,
that is, the ta)in' o! propert !or public use and pament o! (ust compensation%
.t is incorrect to sa that pri6ate establishments onl su!!er a minimal loss *hen the
'i6e a 20? discount to senior citi$ens% Inder 2%3% 9254, the 20? discount applies to
Oall esta3lish2ents relati6e to the utili$ation o! ser6ices in hotels and similar lod'in'
establishment, restaurants and recreation centers, and purchase o! medicines in all
establishments !or the e#clusi6e use or en(oment o! senior citi$ens, includin' !uneral
and burial ser6ices !or the death o! senior citi$ensMP
29
Oadmission !ees char'ed b
theaters, cinema houses and concert halls, circuses, carni6als, and other similar places o!
culture, leisure and amusement !or the e#clusi6e use or en(oment o! senior citi$ensMP
30

Omedical and dental ser6ices, and dia'nostic and laborator !ees pro6ided under Section
4<e= includin' pro!essional !ees o! attendin' doctors in all pri6ate hospitals and medical
!acilities, in accordance *ith the rules and re'ulations to be issued b the Department o!
Lealth, in coordination *ith the -hilippine Lealth .nsurance CorporationMP
31
O!are !or
domestic air and sea tra6el !or the e#clusi6e use or en(oment o! senior citi$ensMP
32
and
Opublic rail*as, s)*as and bus !are !or the e#clusi6e use and en(oment o! senior
citi$ens%P
33
The 20% discount cannot 3e considered 2ini2al 3ecause not all priBate
esta3lish2ents 2ae a 20% 2argin of profit+ *esides, on its face alone, a 20%
2andatory discount 3ased on the gross selling price is huge+ The 20% 2andatory
discount is 2ore than the ,2% @alue &dded Tax, itself not an insignificant a2ount+
The ma(orit opinion states that the 'rant o! 20? discount to senior citi$ens is a
re'ulation o! businesses similar to the re'ulation o! public utilities and businesses
imbued *ith public interest% The ma(orit opinion states:
rate or return on in6estment o! these corporations considerin' that the ha6e a
not appl to all customers o! a 'i6en establishment but onl to a class o! senior citi$ens%
# # #%
34
Lo*e6er, the ma(orit opinion admits that the 20? mandator discount is only Osi2ilar
to, 3ut (ith su3stantial distinctions !rom price control or rate o! return on in6estment
control la*sP *hich Ore'ulate public utilities or industriesDenterprises imbued *ith
public interest%P Since there are admittedl Osu3stantial distinctions,P re'ulator la*s
on public utilities and industries imbued *ith public interest cannot be used as
(usti!ication !or the 20? mandator discount *ithout pament o! (ust compensation%
The pro!its o! public utilities are re'ulated because the operate under !ranchises
'ranted b the State% >nl those *ho are 'ranted !ranchises b the State can operate
public utilities, and these !ranchisees ha6e a'reed to limit their pro!its as condition !or
the 'rant o! the !ranchises% The pro!its o! industries imbued *ith public interest, but
*hich do not en(o !ranchises !rom the State, can onl be re'ulated te2porarily durin'
emer'encies li)e calamities% There has to be an emer'enc to tri''er price control on
businesses and onl !or the duration o! the emer'enc% The pro!its o! pri6ate
establishments *hich are non"!ranchisees cannot be re'ulated per2anently, and there
is no such la* re'ulatin' their pro!its permanentl% The ma(orit opinion cites a case
35

that alle'edl allo*s the State to limit the net pro!its o! pri6ate establishments%
Lo*e6er, the case cited b the ma(orit opinion re!ers to franchise holders of electric
plants%
The State cannot compel pri6ate establishments *ithout !ranchises to 'rant discounts, or
to operate at a loss, because that constitutes ta)in' o! pri6ate propert !or public use
*ithout (ust compensation% The State can ta)e o6er pri6ate propert *ithout
compensation in times o! *ar or other national emer'enc under Section 23<2=, 3rticle
&. o! the 1984 Constitution 3ut only for a li2ited period and sub(ect to such
restrictions as Con'ress ma pro6ide% Inder its police po*er, the State ma also
te2porarily limit or suspend business acti6ities% >ne e#ample is the t*o"da li1uor ban
durin' elections under 3rticle 261 o! the >mnibus Glection Code but this, a'ain, is onl
for a li2ited period% This is a 6alid e#ercise o! police po*er o! the State%
Lo*e6er, an !orm o! per2anent ta)in' o! pri6ate propert is an e#ercise o! eminent
domain that re1uires the State to pa (ust compensation% The police po(er to regulate
3usiness cannot negate another proBision of the Constitution lie the e2inent
do2ain clause, (hich reFuires Aust co2pensation to 3e paid for the taing of
priBate property for pu3lic use+ The State has the po(er to regulate the conduct of
the 3usiness of priBate esta3lish2ents as long as the regulation is reasona3le, 3ut
(hen the regulation a2ounts to per2anent taing of priBate property for pu3lic
use, there 2ust 3e Aust co2pensation 3ecause the regulation no( reaches the leBel
of e2inent do2ain+
The e#planation b the ma(orit that pri6ate establishments can al*as increase their
prices to reco6er the mandator discount *ill onl encoura'e pri6ate establishments to
ad(ust their prices up*ards to the pre(udice o! customers *ho do not en(o the 20?
discount% .t *as li)e*ise su''ested that i! a compan increases its prices, despite the
application o! the 20? discount, the establishment becomes more pro!itable than it *as
be!ore the implementation o! 2%3% 4432% Such an economic (usti!ication is sel!"
de!eatin', !or more consumers *ill su!!er !rom the price increase than *ill bene!it !rom
the 20? discount% G6en then, such abilit to increase prices cannot le'all 6alidate a
6iolation o! the eminent domain clause%
0inall, the 20? discount 'ranted to senior citi$ens is not per se unreasonable% .t is the
pro6ision that the 20? discount ma be claimed b pri6ate establishments as ta#
deduction, and no lon'er as ta# credit, that is oppressi6e and con!iscator%
-rior to its amendment, Section 4 o! 2%3% 4432 reads:
SGC% 4% Privileges for te !enior Citizens% " The senior citi$ens shall be entitled to the
!ollo*in':
<a= the 'rant o! t*ent percent <20?= discount !rom all establishments, relati6e to
utili$ation o! transportation ser6ices, hotels and similar lod'in' establishment,
restaurants and recreation centers and purchase o! medicine an*here in the countr:
7roBided, That priBate esta3lish2ents 2ay clai2 the cost as tax creditM
# # # <)mpasis supplied=
Inder 2%3% 9254, the amendment reads:
SGC% 4% Privileges for te !enior Citizens% + The senior citi$ens shall be entitled to the
!ollo*in':
senior citi$ensM
# # #
deduction based on the net cost o! the 'oods sold or ser6ices rendered: 7roBided, That
the cost of the discount shall 3e allo(ed as deduction fro2 gross inco2e for the
sa2e taxa3le year that the discount is granted+ -ro6ided, !urther, That the total
amount o! the claimed ta# deduction net o! 6alue added ta# i! applicable, shall be
included in their 'ross sales receipts !or ta# purposes and shall be sub(ect to proper
documentation and to the pro6isions o! the :ational .nternal 2e6enue Code, as
amended% <)mpasis supplied=
Due to the patent unconstitutionalit o! Section 4 o! 2%3% 4432, as amended b 2%3%
9254, pro6idin' that pri6ate establishments ma claim the 20? discount to senior
citi$ens as ta# deduction, the old la*, or Section 4 o! 2%3% 4432, *hich allo*s the 20?
discount as ta# credit, is automaticall reinstated% ;here amendments to a statute are
declared unconstitutional, the ori'inal statute as it e#isted be!ore the amendment
remains in !orce%
36
3n amendator la*, i! declared null and 6oid, in le'al contemplation
does not e#ist%
34
The pri6ate establishments should there!ore be allo*ed to claim the
20? discount 'ranted to senior citi$ens as ta# credit%
&CC6#14'%5=, . 6ote to %#&'T the petition%
,ndnotes:
1
3n 3ct to ,a#imi$e the Contribution o! Senior Citi$ens to :ation 8uildin', Frant
8ene!its and Special -ri6ile'es and 0or >ther -urposes%
2
3n 3ct Frantin' 3dditional 8ene!its and -ri6ile'es to Senior Citi$ens 3mendin' !or
the -urpose 2epublic 3ct :o% 4432, >ther*ise Hno*n as O3n 3ct to ,a#imi$e the
Contribution o! Senior Citi$ens to :ation 8uildin', Frant 8ene!its and Special
-ri6ile'es and 0or >ther -urposes%P .t *as !urther amended b 2%3% :o% 9994, or the
OG#panded Senior Citi$ens 3ct o! 2010%
3
553 -hil% 120 <2004=%
4
.d% at 125"126%
5
.d% at 132"133% Citations omitted%
6
496 -hil% 304 <2005=%
4
.d% at 335%
8
.d%
9
.d% at 318%
10
.d% at 335"334% Citations omitted%
11
.n !ta. Lu"ia Realty and Development, In". v. Cabrigas, 411 -hil% 369, 382"383
<2001=, the Court de!ined obiter di"tum as O*ords o! a prior opinion entirel
unnecessar !or the decision o! the caseP <O8lac)Rs /a* DictionarP, p% 1222, citin' the
case o! ONoel v. $lds,P 48 I%S% 3pp% D%C% 155= or an incidental and collateral opinion
uttered b a (ud'e and there!ore not material to his decision or (ud'ment and not bindin'
<O;ebsterRs Third :e* .nternational Dictionar,P p% 1555=%
12
46 -hil% 440 <1924=%
13
.d% at 445%
14
.d%
15
.d% at 454"455%
16
204 -hil% 648 <1983=%
14
.d% at 654"655%
18
'anos"a v. CA, 322 -hil% 442, 448 <1996=%
19
'oday v. Court of Appeals, 335 -hil% 1054 <1994=%
20
7% 8ernas, S%7%, TLG 1984 C>:ST.TIT.>: >0 TLG -L./.--.:GS, 3
C>,,G:T32K 349 <1996 ed%=
21
See Section 4, 2ule .&, .mplementin' 2ules and 2e'ulations o! 2%3% :o% 9994%
22
National Power Corporation v. !pouses =abala, F%2% :o% 143520, 30 7anuar 2013,
689 SC23 554%
23
.d% at 562%
24
Supra note 3, at 129"130%
25
.d% at 130%
26
2epublic 3ct :o% 8282, other*ise )no*n as the Social Securit 3ct o! 1994, *hich
amended 2epublic 3ct :o% 1161%
24
2epublic 3ct :o% 9649, other*ise )no*n as the Lome De6elopment ,utual 0und
/a* o! 2009%
28
Supra note 3, at 130%
29
Section 4<a=%
30
Section 4<b=%
31
Section 4<!=%
32
Section 4<'=%
33
Section 4<h=%
34
Decision, p% 20%
35
Alalayan v. National Power Corporation, 133 -hil% 249 <1968=%
36
See -overnment of te Pilippine Islands v. Agon"illo, 50 -hil% 348 <1924=, citin'
)berle v. 'i"igan 232 I%S% 400 @1914A, People v. 'ens"ing, 184 :%K%S%, 8, 10 /%2%3%,
625 @1904A%
34
See Co"a+Cola ,ottlers Pils., In". v. City of 'anila, 526 -hil% 249 <2006=%
C>:CI22.:F >-.:.>:
&G/3SC>, 72%, (.:
The issue in the present case hin'es upon the conse1uence o! a reclassi!ication o! a
mandated discount as a deduction !rom the 'ross income instead o! a ta# credit
deductible !rom the ta# liabilit o! a!!ected ta#paers% .n particular, the petition
1uestions the constitutionalit o! Section 4 o! 2epublic 3ct :o% <23= 9254, and its
implementin' rules, *hich has allo*ed the amount representin' the 20? !orcible
discount to senior citi$ens as a deduction !rom 'ross income rather than a ta# credit%
3s cited b the ponen"ia, this Court had pre6iousl resol6ed the issue in Carlos
!uperdrug v. D!#D <Carlos !uperdrug= b sustainin' the reclassi!ication as a proper
implement o! the police po*er o! the State% 3 6ie*, ho*e6er, has been ad6anced that
;e should ta)e a second loo) at the doctrine laid do*n in Carlos !uperdrug and declare
Sec% 4 o! 23 9254 as an improper e#ercise o! the po*er o! eminent domain b the State
as it permits the depri6ation o! pri6ate propert *ithout (ust compensation%
.ndeed, the practice o! allo*in' ta)in' o! pri6ate propert *ithout (ust compensation is
an abhorrent polic% Lo*e6er, . do not a'ree that such polic underpins Sec% 4 o! 23
9254% 2ather, it is m humble opinion that Sec% 4 o! 23 9254 is no more than a
re'ulation o! the ri'ht to pro!its o! certain ta#paers in order to bene!it a si'ni!icant
sector o! societ% .t is, thus, a 6alid e#ercise o! the police po*er o! the State%
The ri'ht to pro!it, as distin'uished !rom pro!it itsel!, is not sub(ect to e#propriation as it
is o! a mercurial character that denies the possibilit o! ta)in' !or a public purpose% .t is
a ri'ht solel *ithin the discretion o! the ta#paers that cannot be appropriated b the
'o6ernment% The mandated 20? discount !or the bene!it o! senior citi$ens is not a
propert alread 6ested *ith the ta#paer be!ore the sale o! the product or ser6ice% Such
percenta'e o! the sale price ma include both the mar)up on the cost o! the 'ood or
ser6ice and the income to be 'ained !rom the sale% ;ithout the sale and correspondin'
purchase b senior citi$ens, there is no 'ain deri6ed b the ta#paer% This nebulous
nature o! the !inancial 'ain o! the seller deters the ac1uisition b the state o! the
OdomainP or o*nership o! the ri'ht to such !inancial 'ain throu'h e#propriation% 3t best,
the State is empo*ered to regulate this right to the acFuisition of this financial gain
to bene!it senior citi$ens b ensurin' that the 'ood or ser6ice be sold to them at a price
20? less than the re'ular sellin' price%
Time and a'ain, this Court has reco'ni$ed the !undamental police po*er o! the State to
re'ulate the e#ercise o! 6arious ri'hts holdin' that Oe1uall !undamental *ith the pri6ate
ri'ht is that o! the public to re'ulate it in the common interest%P
1
This Court has, !or
instance, reco'ni$ed the po*er o! the State to re'ulate and temper the ri'ht o!
emploers to dismiss their emploees%
2
Similarl, ;e ha6e sustained the StateRs po*er
to re'ulate the ri'ht to ac1uire and possess arms%
3
Contractual ri'hts are also sub(ect to
the re'ulator police po*er o! the State%
4
The ri'ht to pro!it is not immune !rom this
re'ulator po*er o! the State intended to promote the common 'ood and the attainment
o! social (ustice% 3s earl as the !irst hal! o! the past centur, this Court has re(ected the
doctrine o! laissez faire as an a#iom o! economic theor and has upheld the po*er o! the
State to re'ulate businesses e6en to the e#tent o! limitin' their pro!it%
5
Thus, the
imposition o! price control is reco'ni$ed as a 6alid e#ercise o! police po*er that does
not 'i6e businessmen the ri'ht to be compensated !or the amount o! *hat the could
ha6e earned considerin' the demand o! the mar)et% The e!!ect o! 23 9254 is not
dissimilar to a price control la*%
The !act that the State has not !i#ed an amount to be deducted !rom the sellin' price o!
certain 'oods and ser6ices to senior citi$ens indicates that 23 9254 is a re'ulator la*
under the police po*er o! the State% .t is an ac)no*led'ment that proprietors can and
*ill !actor in the potential deduction o! 20? o! the price 'i6en to some o! their
customers, i%e%, the senior citi$ens, in the o6erall pricin' strate' o! their products and
ser6ices% 23 9254 has to be sure not obliterated the ri'ht o! ta#paers to pro!it nor
di6ested them o! pro!its alread earnedM it simpl re'ulated the ri'ht to the attainment o!
these pro!its% The en!orcement o! the 20? discount in !a6or o! senior citi$ens does not,
there!ore, parta)e the nature o! Ota)in'P in the conte#t o! eminent domain% 3s such,
proprietors li)e petitioners cannot insist that the are entitled to a peso"!or"peso
compensation !or complin' *ith the 6alid re'ulation embodied in 23 9254 that
restricts their ri'ht to pro!it%
3s it is a re'ulator la*, not a la* implementin' the po*er o! eminent domain, the
assertion that the use o! the 20? discount as a deduction ne'ates its role as a O(ust
compensationP is mislaid and irrele6ant% .n the !irst place, as 23 9254 is a re'ulator
la*, the allo*ance to use the 20? discount, as a deduction !rom the 'ross income !or
purposes o! computin' the income ta# paable to the 'o6ernment, is not intended as
compensation% 2ather, it is simpl a reco'nition o! the !act that no income *as reali$ed
b the ta#paer to the e#tent o! the 20? o! the sellin' price b 6irtue o! the discount
'i6en to senior citi$ens% 8e that as it ma, the lo'ical result is that no ta# on income can
be imposed b the State% .n other *ords, b !orcin' some businesses to 'i6e a 20?
discount to senior citi$ens, the 'o6ernment is li)e*ise !ore'oin' the ta#es it could ha6e
other*ise earned !rom the earnin's pertinent to the 20? discount% This is the real import
o! Sec% 4 o! 23 9254% 3s 23 9254 does not sanction an ta)in' o! pri6ate propert, the
re'ulator la* does not re1uire the pament o! compensation%
0inall, it must be noted that the issue o! 6alidit o! Sec% 4 o! 23 9254 has alread been
settled% 3!ter ears o! implementation o! the la*, economic pro'ress has not been put to
a halt% .n !act, it has not been alle'ed that a business establishment commonl
patroni$ed b senior citi$ens and co6ered b 23 9254 had shut do*n because o! the
mandate to 'i6e the 20? discount and the supposed de!icient OcompensationP under
Sec% 4 o! 23 9254% This clearl sho*s that the re'ulation made in the sub(ect la* is a
minimal encumbrance to businesses that must not be emploed to o6erthro* an
other*ise reasonable, lo'ical, and (ust instrument o! the social (ustice polic o! our
Constitution%
,ndnotes:
1
Pilippine Ameri"an Life Insuran"e Company v. Auditor -eneral, :o% /"19255,
7anuar 18, 1968M citin' Nebbia v. New >or1, 291 I%S% 502, 523, 48 /% ed% 940, 948"949%
2
-elmart Industries, In". v. National Labor Relations Commission, F%2% :o% 85668,
3u'ust 10, 1989, 146 SC23 295%
3
Cavez v. Romulo, F%2% :o% 154036, 7une 9, 2004, 431 SC23 534%
4
Pilippine Ameri"an Life Insuran"e Company, supra note 1%
5
)rmita+'alate 0otel and 0otel $perators Asso"iation, In"., et al. v. City 'ayor of
'anila, :o% /"24693, 7ul 31, 1964, 20 SC23 849% See also )du v. )ri"ta, :o% /"
32096, >ctober 24, 1940, citin' Pampanga ,us Co. v. Pambus"o?s )mployees? .nion,
68 -hil% 541 <1939=M 'anila /rading and !upply Co. v. =ulueta, 69 -hil% 485 <1940=M
International 0ardwood and *eneer Company v. /e Pangil 4ederation of Labor, 40
-hil% 602 <1940=M Antamo1 -oldfields 'ining Company v. Court of Industrial Relations,
40 -hil% 340 <1940=M /apang v. Court of Industrial Relations, 42 -hil% 49 <1941=M People
v. Rosental, 68 -hil% 328 <1939=M Pangasinan /rans. Co., In". v. Publi" !ervi"e Com.,
40 -hil% 221 <1940=M Cama"o v. Court of Industrial Relations, 80 -hil% 848 <1948=M
$ngsia"o v. -amboa, 86 -hil% 50 <1950=M De Ramas v. Court of Agrarian Relations, :o%
/"19555, ,a 29, 1964, 11 SC23 141M Del Rosario v. De los !antos, :o% /"20589,
,arch 21, 1968, 22 SC23 1196M I"ong v. 0ernandez, 101 -hil% 1155 <1954=M Pil. Air
Lines )mployees? Asso. v. Pil Air Lines, In"., :o% /"18559, 7une 30, 1964, 11 SC23
384M People v. Cu Ci, 92 -hil% 944 <1953=M Roman Catoli" Ar"bisop of 'anila v.
!o"ial !e"urity Com., :o% /"15045, 7anuar 20, 1961, 1 SC23 10% c!% Dire"tor of
4orestry v. 'u@oz, :o% /"24446, 7une 28, 1968, 23 SC23 1183%
C6'C:##4'% 674'46'
*)#S&M4', J.:
3t issue is the constitutionalit o! the treatment as a ta# deduction b co6ered
establishments o! the 20? discount 'ranted to senior citi$ens under 2epublic 3ct <23=
:o% 9254 <)&panded !enior Citizens A"t of ABBC=
1
and the implementin' rules and
re'ulations issued b the Department o! Social ;el!are and De6elopment <DS;D= and
Department o! 0inance <D>0=%
The assailed pro6ision is Section 4 o! the )&panded !enior Citizens A"t of ABBC, *hich
pro6ides"
SGCT.>: 2% 2epublic 3ct% :o% 4432 is hereb amended to read as !ollo*s:
####
SGC% 4% Privileges for te !enior Citizens% " The senior citi$ens shall be entitled to the
!ollo*in':
recreation centers, and purchase o! medicines in all establishments !or the e#clusi6e
use or en(oment o! senior citi$ens, includin' !uneral and burial ser6ices !or the
death o! senior citi$ensM
####
deduction based on the net cost o! the 'oods sold or ser6ices rendered: -ro6ided That
The petitioners contend that Section 4, supra, 6iolates Section 9, 3rticle ... o! the
Constitution, *hich mandates that O@pAri6ate propert shall not be ta)en !or public use
>n the other hand, 7ustice del Castillo obser6es in his opinion abl *ritten !or the
,a(orit that the 6alidit o! the 20? senior citi$en discount must be upheld as an
e#ercise b the State o! its police po*erM and reminds that the issue has alread been
settled in Carlos !uperdrug Corporation v. Department of !o"ial #elfare and
Development,
2
*ith the Court pronouncin' therein that:
9254%
The Senior Citi$ens 3ct *as enacted primaril to ma#imi$e the contribution o! senior
citi$ens to nation"buildin', and to 'rant bene!its and pri6ile'es to them !or their
impro6ement and *ell"bein' as the State considers them an inte'ral part o! our societ%
The priorit 'i6en to senior citi$ens !inds its basis in the Constitution as set !orth in the
la* itsel!% Thus, the 3ct pro6ides:
SGC% 2% 2epublic 3ct :o% 4432 is hereb amended to read as !ollo*s:
SGCT.>: 1% De"laration of Poli"ies and $b%e"tives% +
-ursuant to 3rticle C&, Section 4 o! the Constitution, it is the dut o! the !amil to ta)e
care o! its elderl members *hile the State ma desi'n pro'rams o! social securit !or
them% .n addition to this, Section 10 in the Declaration o! -rinciples and State -olicies
pro6ides: OThe State shall pro6ide social (ustice in all phases o! national de6elopment%P
0urther, 3rticle C..., Section 11, pro6ides: OThe State shall adopt an inte'rated and
comprehensi6e approach to health de6elopment *hich shall endea6or to ma)e essential
'oods, health and other social ser6ices a6ailable to all the people at a!!ordable cost%
There shall be priorit !or the needs o! the underpri6ile'ed sic), elderl, disabled,
*omen and children%P Consonant *ith these constitutional principles the !ollo*in' are
the declared policies o! this 3ct:
% % %
HfJ To recognize the i2portant role of the priBate sector in the i2proBe2ent of the
To implement the abo6e polic, the la* 'rants a t*ent percent discount to senior
citi$ens !or medical and dental ser6ices, and dia'nostic and laborator !eesM admission
!ees char'ed b theaters, concert halls, circuses, carni6als, and other similar places o!
culture, leisure and amusementM !ares !or domestic land, air and sea tra6elM utili$ation o!
ser6ices in hotels and similar lod'in' establishments, restaurants and recreation centersM
and purchases o! medicines !or the e#clusi6e use or en(oment o! senior citi$ens% 3s a
!orm o! reimbursement, the la* pro6ides that business establishments e#tendin' the
t*ent percent discount to senior citi$ens ma claim the discount as a ta# deduction%
its !a6or%
3
The ,a(orit hold that the 20? senior citi$en discount is, b its nature and e!!ects, Oa
re'ulation a!!ectin' the abilit o! pri6ate establishments to price their products and
ser6ices relati6e to a special class o! indi6iduals, senior citi$ens, !or *hich the
Constitution a!!ords pre!erential concern%P
4
3s such, the discount ma be properl
6ie*ed as a price re'ulator measure that a!!ects the pro!itabilit o! establishments
sub(ected thereto, onl that: <1= the discount does not pre6ent the establishments !rom
ad(ustin' the le6el o! prices o! their 'oods and ser6ices, and <2= the discount does not
appl to all customers o! a 'i6en establishment but onl to the class o! senior citi$ens%
5

:onetheless, the ,a(orit posits that the discount has not been pro6ed to be
unreasonable, oppressi6e or con!iscator in the absence o! e6idence sho*in' that its
continued implementation causes an establishment to operate at a loss, or *ill be
unconscionabl detrimental to the business operations o! co6ered establishments such as
that o! the petitioners%
6
chanrobles6irtuala*librar
Su32issions
. $64' the ,a(orit%
. @6T) !or the dismissal o! the petition in order to uphold the constitutionalit o! the
ta# deduction scheme as a 6alid e#ercise o! the StateRs police po*er%
4+
The 20% senior citizen discount under the ,xpanded 'enior )iti!ens &ct does not
a2ount to co2pensa3le taing
The petitionersR claim o! unconstitutionalit o! the ta# deduction scheme under the
)&panded !enior Citizens A"t rests on the premise that the 20? senior citi$en discount
*as enacted b Con'ress in the e#ercise o! its po*er o! eminent domain%
/i)e the ,a(orit, . cannot sustain the claim o! the petitioners, because . !ind that the
imposition o! the discount does not emanate !rom the e#ercise o! the po*er o! eminent
domain, but !rom the e#ercise o! police po*er%
/et me e#plain%
Gminent domain is de!ined as +
@TAhe po*er o! the nation or a so6erei'n state to ta)e, or to authori$e the ta)in' o!,
pri6ate propert !or a public use *ithout the o*nerRs consent, conditioned upon
pament o! (ust compensation%P .t is ac)no*led'ed as Oan inherent political ri'ht,
!ounded on a common necessit and interest o! appropriatin' the propert o! indi6idual
members o! the communit to the 'reat necessities o! the *hole communit%
4
The StateRs e#ercise o! the po*er o! eminent domain is not *ithout limitations, but is
constrained b Section 9, 3rticle ... o! the Constitution, *hich re1uires that pri6ate
propert shall not be ta)en !or public use *ithout (ust compensation, as *ell as b the
Due -rocess Clause !ound in Section 1,
8
3rticle ... o! the Constitution% 3ccordin' to
Republi" v. *da. de Castellvi,
9
the re1uisites o! ta)in' in eminent domain are as !ollo*s:
first, the e#propriator must enter a pri6ate propertM se"ond, the entr into pri6ate
propert must be !or more than a momentar periodM tird, the entr into the propert
should be under *arrant or color o! le'al authoritM fourt, the propert must be de6oted
to a public use or other*ise in!ormall appropriated or in(uriousl a!!ectedM and, fift,
the utili$ation o! the propert !or public use must be in such a *a as to oust the o*ner
and depri6e him o! all bene!icial en(oment o! the propert%
The essential component o! the proper e#ercise o! the po*er o! eminent domain is,
there!ore, the e#istence o! "ompensable ta1ing% There is ta1ing *hen +
@TAhe o*ner is actuall depri6ed or dispossessed o! his propertM *hen there is a
practical destruction or a material impairment o! the 6alue o! his propert or *hen he is
depri6ed o! the ordinar use thereo!% There is a Ota)in'P in this sense *hen the
e#propriator enters pri6ate propert not onl !or a momentar period but !or a more
permanent duration, !or the purpose o! de6otin' the propert to a public use in such a
manner as to oust the o*ner and depri6e him o! all bene!icial en(oment thereo!% 0or
o*nership, a!ter all, Ois nothin' *ithout the inherent ri'hts o! possession, control and
en(oment%P ;here the o*ner is depri6ed o! the ordinar and bene!icial use o! his
propert or o! its 6alue b its bein' di6erted to public use, there is ta)in' *ithin the
Constitutional sense%
10
3s . see it, the nature and e!!ects o! the 20? senior citi$en discount do not meet all the
re1uisites o! ta1ing !or purposes o! e#ercisin' the po*er o! eminent domain as
delineated in Republi" v. *da. de Castellvi, considerin' that the second o! the re1uisites,
that the ta)in' must be !or more than a momentar period, is not met% . base this
conclusion on the uni6ersal understandin' o! the term momentary, rendered in Republi"
v. *da. de Castellvi thusl:
O,omentarP means, Olastin' but a momentM o! but a momentRs durationP <The >#!ord
Gn'lish Dictionar, &olume &., pa'e 596=M Olastin' a 6er short timeM transitorM ha6in'
a 6er brie! li!eM operati6e or recurrin' at e6er momentP <;ebsterRs Third .nternational
Dictionar, 1963 edition%= The *ord OmomentarP *hen applied to possession or
occupanc o! <real= propert should be construed to mean Oa limited periodP Q not
inde!inite or permanent%
11
.n concept, discount is an abatement or reduction made !rom the 'ross amount or 6alue
o! anthin'M a reduction !rom a price made to a speci!ic customer or class o!
customers%
12
Inder the )&panded !enior Citizens A"t, the 20? senior citi$en discount is
a special pri6ile'e 'ranted onl to senior citi$ens or the elderl, as de!ined b la*,
13

*hen a sale is made or a ser6ice is rendered b a co6ered establishment to a senior
citi$en or an elderl% The income or re6enue correspondin' to the amount o! the
discount 'ranted to a senior citi$en is thus unreali$ed onl in the e6ent that a sale is
made or a ser6ice is rendered to a senior citi$en% &eril, the discount is not a6ailed o!
*hen there is no sale or ser6ice rendered to a senior citi$en%
The amount o! unreali$ed re6enue or lost potential pro!its on the part o! the co6ered
establishment + should it be subse1uentl sho*n that the 20? senior citi$en discount
'ranted could ha6e co6ered operatin' e#penses + lac)s the character o! inde!initeness
and permanence considerin' that the ta1ing *as conditioned upon the occurrence o! a
sale or ser6ice to a senior citi$en% The ta# deduction scheme is, there!ore, not the
compensation contemplated under Section 9, 3rticle ... o! the Constitution%
G6en assumin' that the unreali$ed re6enue or lost potential pro!its resultin' !rom the
'rant o! the 20? senior citi$en discount 1uali!ies as ta)in' *ithin the contemplation o!
the po*er o! eminent domain, the ta# deduction scheme su!!ices as a !orm o! (ust
compensation% 0or that purpose, (ust compensation is de!ined as +
@TAhe !ull and !air e1ui6alent o! the propert ta)en !rom its o*ner b the e#propriator%
The measure is not the ta)erRs 'ain, but the o*nerRs loss% The *ord O(ustP is used to
intensi! the meanin' o! the *ord OcompensationP and to con6e thereb the idea that
the e1ui6alent to be rendered !or the propert to be ta)en shall be real, substantial, !ull,
and ample% .ndeed, the O(ustP"ness o! the compensation can onl be attained b usin'
reliable and actual data as bases in !i#in' the 6alue o! the condemned propert%
14
The petitioners, relin' on the rulin' in Commissioner of Internal Revenue v. Central
Luzon Drug Corporation,
15
appear to espouse the 6ie* that the ta# credit method, rather
than the ta# deduction scheme, meets the de!inition o! (ust compensation% This, because
Oa ta& "redit reduces the ta# due, includin' + *hene6er applicable + the in"ome ta& that
is determined a!ter applin' the correspondin' ta# rates to ta&able in"omeP *hile a Ota&
dedu"tion, on the other, reduces the income that is sub(ect to ta# in order to arri6e at
ta&able in"ome%P
16
3t the time *hen the supposed ta1ing happens, i.e., upon the sale o! the 'oods or the
rendition o! a ser6ice to a senior citi$en, the loss incurred b the co6ered establishment
represents onl the gross amount of dis"ount 'ranted to the senior citi$en% 3t that point,
the real e1ui6alent o! the propert ta)en is the amount o! unreali$ed income or re6enue
o! the co6ered establishment, *ithout the bene!it o! operatin' e#penses and e#emptions,
i! an% The ta# deduction scheme substantiall compensates such loss, there!ore,
because the loss corresponds to the real and actual 6alue o! the propert at the time o!
ta)in'%
44+
The 20% senior citizen discount is a ta/ing in the for2 of regulationM thus, Aust
co2pensation is not reFuired
.n Didipio )art !avers? 'ulti+Purpose Asso"iation, In". v. -ozun,
14
the Court has
distin'uished the element o! ta1ing in eminent domain !rom the concept o! ta)in' in the
e#ercise o! police po*er, viz:
-ropert condemned under police po*er is usuall no#ious or intended !or a no#ious
purposeM hence, no compensation shall be paid% /i)e*ise, in the e#ercise o! police
po*er, propert ri'hts o! pri6ate indi6iduals are sub(ected to restraints and burdens in
order to secure the 'eneral com!ort, health, and prosperit o! the state% Thus, an
ordinance prohibitin' theaters !rom sellin' tic)ets in e#cess o! their seatin' capacit
<*hich *ould result in the diminution o! pro!its o! the theater"o*ners= *as upheld 6alid
as this *ould promote the com!ort, con6enience and sa!et o! the customers% .n I%S% 6%
Toribio, the court upheld the pro6isions o! 3ct :o% 1144, a statute re'ulatin' the
slau'hter o! carabao !or the purpose o! conser6in' an ade1uate suppl o! dra!t animals,
as a 6alid e#ercise o! police po*er, not*ithstandin' the propert ri'hts impairment that
the ordinance imposed on cattle o*ners% 3 $onin' ordinance prohibitin' the operation o!
a lumber ard *ithin certain areas *as assailed as unconstitutional in that it *as an
in6asion o! the propert ri'hts o! the lumber ard o*ners in -eople 6% De Fu$man% The
Court nonetheless ruled that the re'ulation *as a 6alid e#ercise o! police po*er% 3
similar rulin' *as arri6ed at in Sen' Hee S Co% 6% Garnsha* and -iatt *here an
ordinance di6ided the Cit o! ,anila into industrial and residential areas%
3 thorou'h scrutin o! the e#tant (urisprudence leads to a co'ent deduction that *here a
propert interest is merel restricted because the continued use thereo! *ould be
in(urious to public *el!are, or *here propert is destroed because its continued
e#istence *ould be in(urious to public interest, there is no compensable ta)in'%
Lo*e6er, *hen a propert interest is appropriated and applied to some public purpose,
there is compensable ta)in'%
3ccordin' to noted constitutionalist, 0r% 7oa1uin 8ernas, S7, in the e#ercise o! its police
po*er re'ulation, the state restricts the use o! pri6ate propert, but none o! the propert
interests in the bundle o! ri'hts *hich constitute o*nership is appropriated !or use b or
!or the bene!it o! the public% Ise o! the propert b the o*ner *as limited, but no aspect
o! the propert is used b or !or the public% The depri6ation o! use can in !act be total
and it *ill not constitute compensable ta)in' i! nobod else ac1uires use o! the propert
or an interest therein%
.!, ho*e6er, in the re'ulation o! the use o! the propert, somebod else ac1uires the use
or interest thereo!, such restriction constitutes compensable ta)in'%
# # #
;hile the po*er o! eminent domain o!ten results in the appropriation o! title to or
possession o! propert, it need not al*as be the case% Ta)in' ma include trespass
*ithout actual e6iction o! the o*ner, material impairment o! the 6alue o! the propert or
pre6ention o! the ordinar uses !or *hich the propert *as intended such as the
establishment o! an easement
.n order to determine *hether a challen'ed le'islation in6ol6es re'ulation or ta)in', the
purpose o! the la* should be re6isited, anal$ed, and scrutini$ed%
18
There is no more
direct and better *a to do so no* than to loo) at the declared policies and ob(ecti6es o!
the )&panded !eniors Citizens A"t, to *it:
SGCT.>: 1% De"laration of Poli"ies and $b%e"tives% + -ursuant to 3rticle C&, Section
4 o! the Constitution, it is the dut o! the !amil to ta)e care o! its elderl members
*hile the State ma desi'n pro'rams o! social securit !or them% .n addition to this,
Section 10 in the Declaration o! -rinciples and State -olicies pro6ides: WThe State shall
pro6ide social (ustice in all phases o! national de6elopment%R 0urther, 3rticle C...,
Section 11 pro6ides: WThe State shall adopt an inte'rated and comprehensi6e approach
to health and other social ser6ices a6ailable to all the people at a!!ordable cost% There
shall be priorit !or the needs o! the underpri6iled'ed, sic), elderl, disabled, *omen
and children%R Consonant *ith these constitution principles the !ollo*in' are the
declared policies o! this 3ct:
<a= To moti6ate and encoura'e the senior citi$ens to contribute to nation buildin'M
<b= To encoura'e their !amilies and the communities the li6e *ith to rea!!irm the
6alued 0ilipino tradition o! carin' !or the senior citi$ensM
<c= To giBe full support to the i2proBe2ent of the total (ell<3eing of the elderly
and their full participation in society considering that senior citizens are integral
part of 7hilippine societyM
<d= To recognize the rights of senior citizens to tae their proper place in society+
This 2ust 3e the concern of the fa2ily, co22unity, and goBern2entM
<e= To proBide a co2prehensiBe health care and reha3ilitation syste2 for disa3led
senior citizens to foster their capacity to attain a 2ore 2eaningful and productiBe
ageingM and
<!= To recognize the i2portant role of the priBate sector in the i2proBe2ent of the
.n accordance *ith these policies, this 3ct aims to:
<1= establish mechanism *hereb the contribution o! the senior citi$ens are ma#imi$edM
<2= adopt 2easures (here3y our senior citizens are assisted and appreciated 3y the
co22unity as a (holeM
<3= esta3lish a progra2 3eneficial to the senior citizens, their fa2ilies and the rest
of the co22unity that they serBeM and
<4= establish communit"based health and rehabilitation pro'rams in e6er political unit
o! societ% <8old emphasis supplied=
3s the !ore'oin' sho*s, the 20? senior citi$en discount !orbids a co6ered establishment
!rom sellin' certain 'oods or renderin' ser6ices to senior citi$ens in e#cess o! 80? o!
the o!!ered price, thereb causin' a diminution in the re6enue or pro!its o! the co6ered
establishment% The amount correspondin' to the discount, instead o! bein' con6erted to
income o! the co6ered establishments, is retained b the senior citi$en to be used b him
in order to promote his *ell"bein', to reco'ni$e his important role in societ, and to
ma#imi$e his contribution to nation"buildin'% 3lthou'h a !orm o! re'ulation o! or
limitation on propert ri'ht is thereb mani!est, *hat the la* clearl and primaril
intends is to 'rant bene!its and special pri6ile'es to senior citi$ens%
3 ne* 1uestion necessaril arises% Can a la*, *hose chie! purpose is to 'i6e bene!its to
a special class o! citi$ens, be (usti!ied as a 6alid e#ercise o! the StateRs police po*erE
-olice po*er, inso!ar as it is bein' e#ercised b the State, is depicted as a re'ulatin',
prohibitin', and punishin' po*er% .t is neither bene6olent nor 'enerous% Inli)e
traditional re'ulator le'islations, ho*e6er, the )&panded !enior Citizens A"t does not
intend to pre6ent an e6il or destro anthin' obno#ious% G6en so, the )&panded !enior
Citizens A"t remains a 6alid e#ercise o! the StateRs police po*er% The rulin' in ,inay v.
Domingo,
19
*hich in6ol6es police po*er as e#ercised b a local 'o6ernment unit
pursuant to the 'eneral *el!are clause, pro6es instructi6e% Therein, the erst*hile
,unicipalit o! ,a)ati had passed a resolution 'rantin' burial assistance o! -500%00 to
1uali!ied bene!iciaries, to be ta)en out o! the unappropriated a6ailable e#istin' !unds
!rom the ,unicipal Treasur%
20
The Commission on 3udit disallo*ed on the 'round that
there *as Ono perceptible connection or relation bet*een the ob(ecti6e sou'ht to be
attained under 2esolution :o% 60, s% 1988, supra, and the alle'ed public sa!et, 'eneral
*el!are, etc% o! the inhabitants o! ,a)ati%P
21
.n upholdin' the 6alidit o! the resolution,
the Court ruled:
,unicipal 'o6ernments e#ercise this po*er under the 'eneral *el!are clause: pursuant
thereto the are clothed *ith authorit to Wenact such ordinances and issue such
re'ulations as ma be necessar to carr out and dischar'e the responsibilities con!erred
upon it b la*, and such as shall be necessar and proper to pro6ide !or the health,
sa!et, com!ort and con6enience, maintain peace and order, impro6e public morals,
promote the prosperit and 'eneral *el!are o! the municipalit and the inhabitants
thereo!, and insure the protection o! propert therein%R <Sections 91, 149, 144 and 208,
8- 334=% 3nd under Section 4 o! 8- 334, We6er local 'o6ernment unit shall e#ercise the
po*ers e#pressl 'ranted, those necessaril implied there!rom, as *ell as po*ers
necessar and proper !or 'o6ernance such as to promote health and sa!et, enhance
prosperit, impro6e morals, and maintain peace and order in the local 'o6ernment unit,
and preser6e the com!ort and con6enience o! the inhabitants therein%R
7olice po(er is the po(er to prescri3e regulations to pro2ote the health, 2orals,
peace, education, good order or safety and general (elfare of the people+ 4t is the
2ost essential, insistent, and illi2ita3le of po(ers+ 4n a sense it is the greatest and
2ost po(erful attri3ute of the goBern2ent+ 4t is elastic and 2ust 3e responsiBe to
Barious social conditions+ <San'alan', et al% 6s% .3C, 146 SC23 419=% >n it depends
the securit o! social order, the li!e and health o! the citi$en, the com!ort o! an e#istence
in a thic)l populated communit, the en(oment o! pri6ate and social li!e, and the
bene!icial use o! propert, and it has been said to be the 6er !oundation on *hich our
social sstem rests% <16 C%7%S%, p% 896= >o(eBer, it is not confined (ithin narro(
circu2stances of precedents resting on past conditionsM it 2ust follo( the legal
progress of a de2ocratic (ay of life+ <San'alan', et al% 6s% .3C, supra=%
.n the case at bar, C>3 is o! the position that there is Wno perceptible connection or
relation bet*een the ob(ecti6e sou'ht to be attained under 2esolution :o% 60, s% 1988,
supra, and the alle'ed public sa!et, 'eneral *el!are etc% o! the inhabitants o!,a)ati%R
<2ollo, 3nne# 9F9, p% 51=%
3pparentl, C>3 tries to rede!ine the scope o! police po*er b circumscribin' its
e#ercise to Wpublic sa!et, 'eneral *el!are, etc% o! the inhabitants o! ,a)ati%R
4n the case of Sangalang Bs+ 4&C, supra, ?e ruled that police po(er is not capa3le
of an exact definition 3ut has 3een, purposely, Beiled in general ter2s to
underscore its all<co2prehensiBeness+ 4ts scope, oBer<expanding to 2eet the
exigencies of the ti2es, eBen to anticipate the future (here it could 3e done,
proBides enough roo2 for an efficient and flexi3le response to conditions and
circu2stances thus assuring the greatest 3enefits+
The police po*er o! a municipal corporation is broad, and has been said to be
commensurate *ith, but not to e#ceed, the dut to pro6ide !or the real needs o! the
people in their health, sa!et, com!ort, and con6enience as consistentl as ma be *ith
pri6ate ri'hts% .t e#tends to all the 'reat public needs, and, in a broad sense includes all
le'islation and almost e6er !unction o! the municipal 'o6ernment% .t co6ers a *ide
scope o! sub(ects, and, *hile it is especiall occupied *ith *hate6er a!!ects the peace,
securit, health, morals, and 'eneral *el!are o! the communit, it is not limited thereto,
but is broadened to deal *ith conditions *hich e#ist so as to brin' out o! them the
'reatest *el!are o! the people b promotin' public con6enience or 'eneral prosperit,
and to e6erthin' *orth*hile !or the preser6ation o! com!ort o! the inhabitants o! the
corporation <62 C%7%S% Sec% 128=% Thus, it is deemed inad6isable to attempt to !rame an
de!inition *hich shall absolutel indicate the limits o! police po*er%
C>3Rs additional ob(ection is based on its contention that W2esolution :o% 60 is still
sub(ect to the limitation that the e#penditure co6ered thereb should be !or a public
purpose, ### should be !or the bene!it o! the *hole, i! not the ma(orit, o! the
inhabitants o! the ,unicipalit and not !or the bene!it o! onl a !e* indi6iduals as in the
present case%R <2ollo, 3nne# WFR, p% 51=%
C>3 is not attuned to the chan'in' o! the times% -ublic purpose is not unconstitutional
merel because it incidentall bene!its a limited number o! persons% 3s correctl pointed
out b the >!!ice o! the Solicitor Feneral, Wthe dri!t is to*ards social *el!are le'islation
'eared to*ards state policies to pro6ide ade1uate social ser6ices <Section 9, 3rt% ..,
Constitution=, the promotion o! the 'eneral *el!are <Section 5, ibid= social (ustice
<Section 10, ibid= as *ell as human di'nit and respect !or human ri'hts <Section 11,
ibid=%R <Comment, p% 12=
The care for the poor is generally recognized as a pu3lic duty+ The support for the
poor has long 3een an accepted exercise of police po(er in the pro2otion of the
co22on good+
22
<8old emphasis supplied%=
The )&panded !enior Citizens A"t is similar to the municipal resolution in 8ina
because both accord bene!its to a speci!ic class o! citi$ens, and both on their !aces do
not primaril intend to burden or re'ulate an person in 'i6in' such bene!it% >n the one
hand, the )&panded !enior Citizens A"t aims to achie6e this b, amon' others, re1uirin'
select establishments to 'rant senior citi$ens the 20? discount !or their 'oods or
ser6ices, *hile, on the other, the municipal resolution in ,inay appropriated mone
!romn the ,unicipal Treasur to achie6e its 'oal o! 'i6in' support to the poor%
.! the Court sustained in ,inay a municipalitRs e#ercise o! police po*er to enact
bene6olent and bene!icial resolutions, *e ha6e a 'reater reason to uphold the StateRs
e#ercise o! the same po*er throu'h the enactment o! a la* o! a similar nature% .ndeed, it
is but opportune !or the Court to no* ma)e an une1ui6ocal and de!initi6e
pronouncement on this ne* dimension o! the StateRs police po*er%
&CC6#14'%5=, . 6ote to 14SM4SS the petition%
,ndnotes:
1
3mended b 23 :o% 9994, 0ebruar 15,2010%
2
F%2% :o% 166494, 7une 29, 2004, 526 SC23 130%
3
.d% at 141"144%
4
Decision, p% 19%
5
.d% at 20%
6
.d% at 21"22%
4
,arangay !indalan, !an 4ernando, Pampanga v. Court of Appeals, F%2% :o% 150640,
,arch 22, 2004, 518 SC23 649, 654"658%
8
Section 1% :o person shall be depri6ed o! hisDher li!e, libert, or propert *ithout due
process o! la*%
9
:o% /"20620, 3u'ust 15, 1944, 58 SC23 336, 350"352%
10
Ansaldo v. /antui"o, (r., F%2% :o% 50144, 3u'ust 3, 1990, 188 SC23 300, 304%
11
Supra note 9, at 350%
12
;ebsterRs Third :e* .nternational Dictionar, p% 646%
13
OSenior citi$enP or OelderlP shall mean an resident citi$en o! the -hilippines at least
si#t <60= ears old% <Section 2<a=, 23 :o% 9254=%
14
National Power Corporation v. Diato+,ernal, F%2% :o% 180949, December 15, 2010,
638 SC23 660, 669 <bold emphasis is supplied=%
15
F%2% :o% 159644, 3pril 15, 2005, 456 SC23 414%
16
.d% at 428"429%
14
F%2% :o% 154882, ,arch 30, 2006, 485 SC23 586, 604"604%
18
8ernas, /e 5678 Constitution of te Republi" of te Pilippines A Commentary, 2009
ed%, p% 435%
19
F%2% :o% 92389, September 11, 1991, 201 SC23 508%
20
.d% at 511%
21
.d% at 512%
22
.d%at 514"516%
C6'C:##4'% &'1 14SS)'T4'% 674'46'
5)6')', J.:
This case in6ol6es the constitutionalit o! Section 4 o! 2epublic 3ct :o% 4432 as
amended b 2epublic 3ct :o% 9254
1
as *ell as the implementin' rules and re'ulations
issued b respondents Department o! Social ;el!are and De6elopment and Department
o! 0inance% The pro6isions allo* the 20? discount 'i6en b business establishments to
senior citi$ens onl as a tax deduction !rom their 'ross income% The pro6isions amend
an earlier la* that allo*s the senior citi$en discount as a tax credit !rom their total ta#
liabilit%
. concur *ith the ponen"ia in denin' the constitutional challen'e%
The enactment o! the pro6ision as *ell as its implementin' rules is a proper e#ercise o!
the inherent po*er to ta# and police po*er% Lo*e6er, . re'ret . cannot (oin m esteemed
collea'ues 7ustice ,ariano del Castillo as the ponen"ia and 7ustice 3ntonio Carpio in
his thou'ht!ul dissent that the po*er o! eminent domain is also in6ol6ed% .t is !or these
reasons that . o!!er this separate opinion%
/e Petition
8e!ore us is a -etition !or -rohibition
2
!iled b ,anila ,emorial -ar), .nc% and /a
0uneraria -a$"Sucat, .nc% a'ainst the Secretaries o! the Department o! Social ;el!are
and De6elopment and the Department o! 0inance% -etitioners are domestic corporations
en'a'ed in the business o! pro6idin' !uneral and burial ser6ices%
>n 3pril 23, 1992, 2epublic 3ct :o% 4432 *as passed 'rantin' senior citi$ens
pri6ile'es% Section 4<a= 'rants them a 20? discount !rom certain establishments
pro6ided O@tAhat pri6ate establishments ma claim the cost as ta# credit%P
>n 3u'ust 23, 1993, 2e6enue 2e'ulation :o% 02"94 *as issued to implement 2epublic
3ct :o% 4432% Section 2<i= on the de!inition o! Ota# creditP pro6ides that the discount
Oshall be deducted b the said establishments !rom their 'ross income # # #%P Section 4
on boo))eepin' re1uirements !or pri6ate establishments similarl states that O@tAhe
amount o! 20? discount shall be deducted !rom the 'ross income !or income ta#
purposes and !rom 'ross sales o! the business enterprise concerned !or purposes o! &3T
and other percenta'e ta#es%P
Commissioner of Internal Revenue v. Central Luzon Drug Corporation
3
later declared
these sections o! 2e6enue 2e'ulation :o% 02"94 as erroneous !or contra6enin' 2epublic
3ct :o% 4432, *hich speci!icall allo*s establishments to claim a ta# credit%
>n 0ebruar 26, 2004, 2epublic 3ct :o% 9254 *as passed amendin' certain pro6isions
o! 2epublic 3ct :o% 4432% Speci!icall, Section 4 no* pro6ides as !ollo*s:
the !ollo*in':
utili$ation o! ser6ices in hotels and similar lod'in' establishments, restaurants and
senior citi$ensM
# # #
deduction based on the net cost o! the 'oods sold or ser6ices rendered: -ro6ided, That
The Secretar o! 0inance issued 2e6enue 2e'ulation :o% 4"2006 to implement 2epublic
3ct :o% 9254% The Department o! Social ;el!are and De6elopment also issued its o*n
2ules and 2e'ulations .mplementin' 2epublic 3ct :o% 9254%
-etitioners, thus, !iled this -etition ur'in' that Section 4 o! 2epublic 3ct :o% 4432 as
amended b 2epublic 3ct :o% 9254, as *ell as the implementin' rules and re'ulations
issued b respondents, be declared unconstitutional inso!ar as these allo* business
establishments to claim the 20? discount 'i6en as a ta# deductionM that respondents be
prohibited !rom en!orcin' themM and that the ta# credit treatment o! the 20? discount
under the !ormer Section 4<a= o! 2epublic 3ct :o% 4432 be reinstated%
4
The most salient issue is as !ollo*s: *hether Section 4 o! 2epublic 3ct :o% 4432 as
amended b 2epublic 3ct :o% 9254, as *ell as its implementin' rules and re'ulations,
inso!ar as the pro6ide that the 20? discount to senior citi$ens ma be claimed as a ta#
deduction b pri6ate establishments, is in6alid and unconstitutional%
The ar'uments o! the parties as summari$ed in the ponen"ia are as !ollo*s:
-etitioners contend that the ta# deduction scheme contra6enes 3rticle ..., Section 9 o!
the Constitution, *hich states that: O@pAri6ate propert shall not be ta)en !or public use
5
,oreo6er, petitioners cite Commissioner of Internal
Revenue v. Central Luzon Drug Corporation
6
rulin' that the 20? discount pri6ile'e
constitutes ta)in' o! pri6ate propert !or public use *hich re1uires the pament o! (ust
compensation,
4
and Carlos !uperdrug Corporation v. Department of !o"ial #elfare and
Development
8
ac)no*led'in' that the ta# deduction scheme does not meet the de!inition
o! (ust compensation%
9
-etitioners also see) a re6ersal o! the rulin' in Carlos !uperdrug that the ta# deduction
scheme is (usti!ied b police po*er%
10
The assert that O@aAlthou'h both police po*er and
the po*er o! eminent domain ha6e the 'eneral *el!are !or their ob(ect, there are still
traditional distinctions bet*een the t*oP
11
and that Oeminent domain cannot be made
less supreme than police po*er%P
12
The claim that in amendin' 2epublic 3ct :o% 4432,
the le'islature relied on an erroneous contemporaneous construction that prior pament
o! ta#es is re1uired !or ta# credit%
13
-etitioners li)e*ise ar'ue that the ta# deduction scheme 6iolates 3rticle C&, Section 4,
and 3rticle C..., Section 11 o! the Constitution because it shi!ts the StateRs
constitutional mandate or dut o! impro6in' the *el!are o! the elderl to the pri6ate
sector%
14
Inder the ta# deduction scheme, the pri6ate sector shoulders 65? o! the
discount because onl 35? <no* 30?= o! it is actuall returned b the 'o6ernment%
15

Conse1uentl, its implementation a!!ects petitionersR businesses,
16
and there e#ists an
actual case or contro6ers o! transcendental importance%
14
2espondents, on the other hand, 1uestion the !ilin' o! the instant -etition directl *ith
this Court in disre'ard o! the hierarch o! courts%
18
The assert that there is no (usticiable
contro6ers as petitioners !ailed to pro6e that the ta# deduction treatment is not a O!air
and !ull e1ui6alent o! the loss sustainedP b them%
19
>n the constitutionalit o! 2epublic
3ct :o% 9254 and its implementin' rules and re'ulations, respondents ar'ue that
petitioners !ailed to o6erturn its presumption o! constitutionalit%
20
The maintain that
the ta# deduction scheme is a le'itimate e#ercise o! the StateRs police po*er%
21
.
Incertain 8urdens and .nchoate /osses
;hat is in 1uestion here is not the actual imposition o! a senior citi$en discountM rather%
it is the treatment of that senior citi!en discount for taxation purposes% 0rom bein' a
ta# credit, it is no* onl a ta# deduction% The imposition o! the senior citi$en discount is
an e#ercise o! police po*er% The determination that it *ill be a ta# deduction, not a ta#
credit, is an e#ercise o! the po*er to ta#%
The imposition o! a discount !or senior citi$ens a!!ects the price% .t is thus an inherentl
re'ulator !unction% Lo*e6er, nothin' in the la* controls the prices o! the 'oods sub(ect
to such discount% /e'islation inter!eres *ith the autonom o! contractual arran'ements
in that it imposes a t*o"tiered pricin' sstem% There *ill be t*o prices !or e6er 'ood or
ser6ice: one is the re'ular price !or e6erone e#cept !or senior citi$ens *ho 'et a t*ent
percent <20?= discount%
8usinessesR discretion to !i# the re'ular price or impro6e the costs o! the 'oods or the
ser6ice that the o!!er to the public Q and there!ore determine their pro!it Q is not
a!!ected b the la*% >! course, rational businesses *ill ta)e into consideration economic
!actors such as price elasticit,
22
the mar)et structure, the )ind o! competition businesses
!ace, the barriers to entr that *ill ma)e possible the e#pansion o! suppliers should there
be a chan'e in the prices and the pro!its that can be made in that industr% Ta#es, *hich
include 1uali!ications such as e#emptions, e#clusions and deductions, *ill be part o! the
cost o! doin' business !or all such businesses%
No pri"e restri"tion, no "ertain losses
There is no restriction in the la* !or businesses to attempt to reco6er the same amount
o! pro!its !or the businesses a!!ected b the la*%
To put this idea in perspecti6e, let us assume that Compan 3 is in the business o! the
sale o! memorial lots% The demand !or memorial lots is not usuall in!luenced b price
!luctuations% There *ill al*as be a static demand !or memorial lots because it is strictl
based on a non"ne'otiable pre!erence o! the purchaser%
/et us also assume, !or purposes o! ar'ument, that Compan 3 ac1uired the plots o!
land at $ero cost% This means that the price o! the plot multiplied b the number o! plots
sold *ill al*as be considered re6enue%
23
To simpli!, consider this !ormula:
2 V P & <
;here 2 V 2e6enue
- V -rice per unit
N V Nuantit sold
Fi6en these assumptions, let us presume that in an 'i6en ear be!ore the promul'ation
o! an la* !or senior citi$en discountin', Compan 3 sells 1,600 s1uare meters o!
memorial plots at the price o! -100%00 per s1uare meter% Considerin' the !ormula, the
total pro!it o! Compan 3 *ill be:
20 V P & <
20 V -100%00 # 1,600 s1% m%
20 V 7,00,000+00
/et us assume !urther that out o! the 1,600 s1uare meters sold, onl 320 s1uare meters
are bou'ht b senior citi$ens, and 1,280 s1uare meters are bou'ht b ordinar citi$ens%
;hen Con'ress enacted 2epublic 3ct :o% 4432, Compan 3 *as !orced to 'i6e a 20?
discount to senior citi$ens% There *ill be a price discrimination scheme *herein senior
citi$ens can a6ail a s1uare meter o! a memorial plot !or onl -80%00 per s1uare meter%
The total re6enue recei6ed b Compan 3 *ill no* constitute re6enue deri6ed !rom
plots sold to senior citi$ens added to the re6enue deri6ed !rom plots sold to ordinar
citi$ens% Lence, the !ormula becomes:
2T V R! D RC
2S V P! & <!
2C V PC & <C
#T N 0P' x 1' 2 3 0P) x 1) 2
;here 2T V Total 2e6enue
2S V 2e6enue !rom Senior Citi$ens
2C V 2e6enue !rom >rdinar Citi$ens
-S V -rice !or Senior Citi$ens per Init
NS V Nuantit Sold to Senior Citi$ens
-C V -rice !or >rdinar Citi$ens per Init
NC V Nuantit Sold to >rdinar Citi$ens
.n our e#ample, this means that the total re6enue o! Compan 3 becomes:
2T1 V 2P! & <!3 U 2PC & <C3
2T1 V <-80%00 # 320 s1% m%= U <-100%00 # 1,280 s1%
m%=
2T1 V -25,600%00 U -128,000%00
2T1 V 7,./,000+00
>b6iousl, the Total 2e6enue a!ter the discount *as applied is lo*er than the 2e6enue
deri6ed b Compan 3 be!ore the discount *as imposed%
The natural conse1uence o! Compan 3, in order to maintain its pro!itabilit, is to
increase the price per s1uare meter o! a memorial lot% 3ssume that the price increase
*as -10%00% This ma)es the price !or ordinar citi$ens 'o up to -110%00 per s1uare
meter% ,ean*hile, the discounted price !or senior citi$ens becomes -88%00 per s1uare
meter% The e!!ects o! that *ith respect to total re6enue o! Compan 3 become:
2T2 V 2P! & <!3 U 2PC & <C3
2T2 V <-88%00 # 320 s1% m%= U <-110%00 # 1,280 s1%
m%=
2T2 V -28,160%00 U -140,800%00
2T2 V 7,0O,P00+00
3!ter Compan 3 increases its prices, despite the application o! the mandated discount
rates, Compan 3 becomes more pro!itable than it *as be!ore the implementation o!
2epublic 3ct :o% 4432%
3'ain, nothin' in the la* prohibits Compan 3 !rom increasin' its prices !or re'ular
customers%
24
The ta# implications o! 2epublic 3ct :o% 4432 6is"T"6is the ta# implications o! the
amendment introduced in 2epublic 3ct :o% 9254 are also au'mented b controllin' the
price% .! *e compute !or the ta# liabilit and the net income o! Compan 3 a!ter the
implementation o! 2epublic 3ct :o% 4432 and a!ter treatin' the discount 'i6en to senior
citi$ens becomes ta# credit !or Compan 3, *e *ill 'et:
Fross .ncome
<2T1=
- 153,600

/ess:
Deductions
<-
60,000=

Ta#able
.ncome
- 93,600

.ncome
Ta# 2ate
30?
.ncome Ta#
/iabilit
- 28,080

/ess:
Senior
Citi$en

Discount
Tax )redit
<- 6,400=
9inal 4nco2e
Tax 5ia3ility
7 2,,0O0

'et 4nco2e 7 ,/,,P20
Fi6en the chan'es made in 2epublic 3ct :o% 9254, senior citi$en discount is considered
a deduction% Lence:
Fross .ncome
<2T1=
- 153,600

/ess:
Deductions
<-
60,000=

/ess:
Senior
Citi$en

Discount <- 6,400=
Ta#able
.ncome
- 84,200

.ncome
Ta# 2ate
30?
.ncome Ta#
/iabilit
- 26,160

/ess: Ta#
Credit
- 0
9inal 4nco2e
Tax 5ia3ility
7 20,,00

'et 4nco2e 7 ,2-,EE0
Heepin' the number o! units sold to senior citi$ens and ordinar citi$ens constant,
2epublic 3ct :o% 9254 *ill mean a smaller net income !or Compan 3% Lo*e6er, i!
Compan 3 uses pricin' to respond to 2epublic 3ct :o% 9254, as discussed in the earlier
e#ample *here Compan 3 increased its prices !rom -100%00 to -110%00, the net
income becomes:
Fross .ncome
<2T2=
- 168,960

/ess:
Deductions
<-
60,000=

/ess:
Senior
Citi$en

Discount <- 4,040=
Ta#able
.ncome
- 101,920

.ncome
Ta# 2ate
30?
.ncome Ta#
/iabilit
- 30,546

/ess: Ta#
Credit
- 0
9inal 4nco2e
Tax 5ia3ility
7 /0,.-0

'et 4nco2e 7 ,/O,/OE
It be"omes apparent tat despite "onverting te dis"ount from ta& "redit to an in"ome
dedu"tion, Company A "ould improve its net in"ome tan in te situation were te
senior "itizen dis"ount was treated as a ta& "redit if it imposes a pri"e in"rease. Note
tat te pri"e in"rease we provided in tis e&ample was even less tan te dis"ount
given to senior "itizens.
The decision to increase price as *ell as its ma'nitude depends upon a number o! non"
le'al !actors% 8usinesses, !or instance, *ill consider *hether the are in a situation o!
near monopol or a competiti6e mar)et% The *ill *ant to )no* *hether the chan'e in
their prices *ould encoura'e customers to shi!t their pre!erences to crematin' their
lo6ed ones instead o! burin' them%
25
The mi'ht also *ant to determine i! the
subse1uent increase in relati6e pro!its *ill encoura'e the settin' up o! more competition
into their mar)et%
Losses, terefore, are not guaranteed by te "ange in legislation "allenged in tis
Petition. Put simply, losses are not inevitable. $n tis basis alone, te "onstitutional
"allenge sould fail. /e "ase is premised on te inevitable loss to be suffered by te
petitioners. /ere is no fa"tual basis for tat 1ind of "ertainty. #e do not de"ide
"onstitutional issues on te basis of in"oate losses and un"ertain burdens.
0urthermore, income and pro!its are not 6ested ri'hts% The are the results o! 'ood or
bad business (ud'ments occasioned b the proper response to their economic
en6ironment% -ro!its and the maintenance o! a stead stream o! income should be the
re*ard o! business acumen o! entrepreneurship% Courts read la* and in doin' so pro6ide
the 'i6ens in a business en6ironment% ;e should not allo* oursel6es to become the
tools !or 'ood business results !or some businesses%
Profits "an improve wit effi"ien"y
3part !rom increasin' the price o! 'oods and ser6ices, e!!icienc in the business can
also maintain or e6en increase pro!its% 3 more restricti6e business en6ironment should
occasion a re6ie* o! the cost structure o! the economic a'ent%
26
;e cannot simpl
assume that businesses, includin' the businesses o! petitioners, are at their optimum
le6el o! e!!icienc% The chan'e in the ta# treatment o! senior citi$enRs discount,
there!ore, in some cases, can be better !or the econom althou'h it ma, *ithout an
certaint, occasion some pain on some businesses% >ur 6ie* should be more all"
encompassin'%
8esides, compensatin' !or the alle'ed losses o! the petitioners assumes that *e accept
their current pricin' as correct% That is, it is the price that co6ers their costs and pro6ides
them *ith pro!its that a competiti6e mar)et can bear% ;e cannot ha6e the situation
*here establishments can (ust set an price and come to court to reco6er *hate6er pro!it
the *ere en(oin' prior to a re'ulator measure%
..
-o*er to Ta#
The po*er to ta# is Oa principal attribute o! so6erei'nt%P
24
Such inherent po*er o! the
State anchors on its Osocial contract *ith its citi$ens @*hichA obli'es it to promote public
interest and common 'ood%P
28
The scope o! the le'islati6e po*er to ta# necessaril includes not onl the po*er to
determine the rate o! ta# but the method o! its collection as *ell%
29
;e ha6e held that
Con'ress has the po*er to Ode!ine *hat ta# shall be imposed, *h it should be imposed,
ho* much ta# shall be imposed, a'ainst *hom <or *hat= it shall be imposed and were
it sall be imposed%P
30
.n !act, the State has the po*er Oto ma)e reasonable and natural
classi!ications !or the purposes o! ta#ation # # # @*Ahether it relates to the sub(ect o!
ta#ation, the )ind o! propert, the rates to be le6ied, or the amounts to be raised, the
metods of assessment, valuation and "olle"tion, the StateRs po*er is entitled to
presumption o! 6alidit # # #%P
31
This means that the po*er to ta# also allo*s Con'ress
to determine matters as *hether ta# rates *ill be applied to 'ross income or net income
and *hether costs such as discounts ma be allo*ed as a deduction !rom 'ross income
or a ta# credit !rom net income a!ter ta#%
;hile the po*er to ta# has been considered the stron'est o! all o! 'o6ernmentRs
po*ers
32
*ith ta#es as the Oli!eblood o! the 'o6ernment,P this po*er has its limits% .n a
number o! cases,
33
*e ha6e re!erred to our discussion in the 1988 case o! Commissioner
of Internal Revenue v. Algue,
34
as !ollo*s:
Ta#es are the li!eblood o! the 'o6ernment and so should be collected *ithout
unnecessar hindrance% >n the other hand, such collection should be made in
accordance *ith la* as an arbitrariness *ill ne'ate the 6er reason !or 'o6ernment
itsel!% .t is there!ore necessar to reconcile the apparentl con!lictin' interests o! the
authorities and the ta#paers so that the real purpose o! ta#ation, *hich is the promotion
o! the common 'ood, ma be achie6ed%
# # #
.t is said that ta#es are *hat *e pa !or ci6ili$ed societ% ;ithout ta#es, the 'o6ernment
*ould be paral$ed !or lac) o! the moti6e po*er to acti6ate and operate it% Lence,
despite the natural reluctance to surrender part o! oneRs hard"earned income to the ta#in'
authorities, e6er person *ho is able to must contribute his share in the runnin' o! the
'o6ernment% The 'o6ernment, !or its part, is e#pected to respond in the !orm o! tan'ible
and intan'ible bene!its intended to impro6e the li6es o! the people and enhance their
moral and material 6alues% This smbiotic relationship is the rationale o! ta#ation and
should dispel the erroneous notion that it is an arbitrar method o! e#action b those in
the seat o! po*er%
,ut even as we "on"ede te inevitability and indispensability of ta&ation, it is a
reEuirement in all demo"rati" regimes tat it be e&er"ised reasonably and in a""ordan"e
wit te pres"ribed pro"edure. .! it is not, then the ta#paer has a ri'ht to complain and
the courts *ill then come to his succor% 0or all the a*esome po*er o! the ta# collector,
he ma still be stopped in his trac)s i! the ta#paer can demonstrate, as it has here, that
the la* has not been obser6ed%
35
<)mpasis supplied=
The Constitution pro6ides !or limitations on the po*er o! ta#ation% 0irst, O@tAhe rule o!
ta#ation shall be uni!orm and e1uitable%P
36
This re1uirement !or uni!ormit and e1ualit
means that Oall ta#able articles or )inds o! propert o! the same class @shallA be ta#ed at
the same rate%P
34
The ta# deduction scheme !or the 20? discount applies e1uall and
uni!orml to all the pri6ate establishments co6ered b the la*% Thus, it complies *ith
this limitation%
Second, ta#es must neither be con!iscator nor arbitrar as to amount to a O@depri6ationA
o! propert *ithout due process o! la*%P
38
.n Camber of Real )state and ,uilders?
Asso"iations, In". v. )&e"utive !e"retary Romulo,
39
petitioners 1uestioned the
constitutionalit o! the ,inimum Corporate .ncome Ta# <,C.T= alle'in' amon' others
that Ope''in' the ta# base o! the ,C.T to a corporationRs 'ross income is tantamount to
a con!iscation o! capital because 'ross income, unli)e net income, is not Wreali$ed
'ain%RP
40
.n dismissin' the -etition, this Court discussed the due process limitation on
the po*er to ta#:
3s a 'eneral rule, the po*er to ta# is plenar and unlimited in its ran'e, ac)no*led'in'
in its 6er nature no limits, so that the principal chec) a'ainst its abuse is to be !ound
onl in the responsibilit o! the le'islature <*hich imposes the ta#= to its constituenc
*ho are to pa it% :e6ertheless, it is circumscribed b constitutional limitations% 3t the
same time, li)e an other statute, ta# le'islation carries a presumption o!
constitutionalit%
The constitutional sa!e'uard o! due process is embodied in the !iat O@noA person shall be
depri6ed o! li!e, libert or propert *ithout due process o! la*%P .n !ison, (r. v. An"eta,
et al., *e held that the due process clause ma properl be in6o)ed to in6alidate, in
appropriate cases, a re6enue measure *hen it amounts to a con!iscation o! propert% 8ut
in the same case, *e also e#plained that *e *ill not stri)e do*n a re6enue measure as
unconstitutional <!or bein' 6iolati6e o! the due process clause= on the mere alle'ation o!
arbitrariness b the ta#paer% There must be a !actual !oundation to such an
unconstitutional taint% This merel adheres to the authoritati6e doctrine that, *here the
due process clause is in6o)ed, considerin' that it is not a !i#ed rule but rather a broad
standard, there is a need !or proo! o! such persuasi6e character% <Citations omitted=
41
.n the present case, there is no sho*in' that the ta# deduction scheme is con!iscator%
The portion o! the 20? discount petitioners are made to bear under the ta# deduction
scheme *ill not result in a complete loss o! business !or pri6ate establishments% 3s
illustrated earlier, these establishments are !ree to ad(ust !actors as prices and costs to
recoup the 20? discount 'i6en to senior citi$ens% :either is the scheme arbitrar% 2ules
and 2e'ulations ha6e been issued b a'encies as respondent Department o! 0inance to
ser6e as 'uidelines !or the implementation o! the 20? discount and its ta# deduction
scheme%
.n !act, this Court has consistentl upheld the doctrine that Ota#in' po*er ma be used
as an implement o! police po*erP
42
in order to promote the 'eneral *el!are o! the
people%
...
Gminent Domain
G6en assumin' that the losses and the burdens can be determined and are speci!ic, these
are not enou'h to sho* that eminent domain is in6ol6ed% .t is not enou'h to conclude
that there is a 6iolation o! 3rticle ..., Section 9 o! the Constitution% This pro6ision
mandates that O@pAri6ate propert shall not be ta)en !or public use *ithout (ust
compensation%P
-etitioners claim that there is ta)in' b the 'o6ernment o! that portion o! the 20?
discount the are re1uired to 'i6e senior citi$ens under 2epublic 3ct :o% 9254 but are
not allo*ed to deduct !rom their ta# liabilit in !ull as a ta# credit% The ar'ue that the
are ine6itabl made to bear a portion o! the loss !rom the 20? discount re1uired b la*%
.n their 6ie*, these speculati6e losses are to be pro6ided *ith (ust compensation%
Thus, the see) to declare as unconstitutional Section 4 o! 2epublic 3ct :o% 4432 as
amended b 2epublic 3ct :o% 9254, as *ell as the implementin' rules and re'ulations
issued b respondents Department o! Social ;el!are and De6elopment and Department
o! 0inance, !or onl allo*in' the 20? discount as a ta# deduction !rom 'ross income,
and not as a ta# credit !rom total ta# liabilit%
-etitioners cannot be !aulted !or this 6ie*% Carlos !uperdrug Corporation v.
Department of !o"ial #elfare and Development,
43
cited in the ponen"ia, hinted:
*ord (ust is used to intensi! the meanin' o! the *ord compensation, and to con6e the
44
The ponen"ia is, ho*e6er, open to the possibilit that eminent domain *ill appl% ;hile
the main opinion held that the 20? senior citi$en discount is a 6alid e#ercise o! police
po*er, it e#plained that this is due to the absence o! an clear sho*in' that the discount
is unreasonable, oppressi6e or con!iscator as to amount to a ta)in' under eminent
domain re1uirin' the pament o! (ust compensation%
45
Alalayan v. National Power
Corporation
46
and Carlos !uperdrug Corp. v. Department of !o"ial #elfare and
Development
44
*ere cited as e#amples *hen there *as !ailure to pro6e that the limited
rate o! return !or !ranchise holders, or the re1uired 20? senior citi$ens discount, O*ere
arbitrar, oppressi6e or con!iscator%P
48
.t !ound that petitioners similarl did not
establish the !actual bases o! their claims and relied on hpothetical computations%
49
The ponen"ia re!ers to City of 'anila v. 0on. Laguio, (r.
50
citin' the I%S% case o!
Pennsylvania Coal v. 'aon in that *e must determine on a case to case basis as to
*hen the re'ulation o! propert becomes a ta)in' under eminent domain%
51
.t cites the
I%S% case o! 'unn v. Illinois
52
in that the State can emplo police po*er measures to
re'ulate pricin' pursuant to the common 'ood Opro6ided that the re'ulation does not 'o
too !ar as to amount to Wta)in'R%P
53
This concept o! re'ulator ta)in', as opposed to
ordinar ta)in', is amorphous and has not been applied in our (urisdiction% ;hat *e
ha6e is indirect e#propriation amountin' to compensable ta)in'%
.n National Power Corporation v. !ps. -utierrez,
54
!or e#ample, *e held that Othe
easement o! ri'ht"o!"*a @due to electric transmission lines constructed o6er the
propertA is de!initel a ta)in' under the po*er o! eminent domain% # # # the limitation
imposed b :-C a'ainst the use o! the land !or an inde!inite period depri6es pri6ate
respondents o! its ordinar use%P
55
The ponen"ia also compares the ta# deduction scheme !or the 20? discount *ith price
controls or rate o! return on in6estment control la*s *hich are 6alid e#ercises o! police
po*er% ;hile it ac)no*led'es that there are di!!erences bet*een these la*s and the
sub(ect ta# deduction scheme,
56
it held that Othe 20? discount ma be properl 6ie*ed
as belon'in' to the cate'or o! price re'ulator measures *hich a!!ects the pro!itabilit
o! establishments sub(ected thereto%P
54
. disa'ree%
The eminent domain clause *ill still not appl e6en i! *e assume, *ithout concedin',
that the 20? discount or a portion o! it is lost pro!its !or petitioners% -ro!its are
intan'ible personal propert
58
!or *hich petitioners merel ha6e an inchoate ri'ht% These
are tpes o! propert *hich cannot be Ota)en%P
Nature of Profits9 In"oate and Intangible Property
Gminent domain has been de!ined as Oan inherent po*er o! the State that enables it to
!orcibl ac1uire pri6ate lands intended !or public use upon pament o! (ust
compensation to the o*ner%P
59
,ost i! not all (urisprudence on eminent domain in6ol6es
real propert, speci!icall that o! land% 3lthou'h 2ule 64 o! the 2ules o! Court, the rules
'o6ernin' e#propriation proceedin's, re1uires the complaint to Odescribe the real or
personal property sou'ht to be e#propriated,P
60
this re!ers to tan'ible personal propert
!or *hich the court *ill deliberate as to its 6alue !or purposes o! (ust compensation%
61
.n a sense, the !orced nature o! a sale under eminent domain is more (usti!ied !or real
propert such as land% The common situation is that the 'o6ernment needs a speci!ic
plot, !or the construction o! a public hi'h*a !or e#ample, and the pri6ate o*ner cannot
mo6e his land to a6oid bein' part o! the pro(ect% >n the other hand, most tan'ible
personal or mo6able propert need not be sub(ect o! a !orced sale *hen the 'o6ernment
can procure these items in a public biddin' *ith se6eral able and *illin' pri6ate sellers%
.n Republi" of te Pilippines v. *da. de Castelvi,
62
this Court also laid do*n !i6e <5=
Ocircumstances @thatA must be present in the Wta)in'R o! propert !or purposes o! eminent
domainP
63
as !ollo*s:
0irst, the e#propriator must enter a pri6ate propert% # # #%
Second, the entrance into pri6ate propert must be !or more than a momentar period% #
# #%
Third, the entr into the propert should be under *arrant or color o! le'al authorit% # #
#%
0ourth, the propert must be de6oted to a public use or other*ise in!ormall
appropriated or in(uriousl a!!ected% # # #%
0i!th, the utili$ation o! the propert !or public use must be in such a *a as to oust the
o*ner and depri6e him o! all bene!icial en(oment o! the propert% # # #%
64
The re1uirement !or OentrP or the element o! Ooust@in'A the o*nerP is not possible !or
intan'ible personal propert such as pro!its%
-ro!its are not onl intan'ible personal propert% The are also inchoate ri'hts% 3n
inchoate ri'ht means that the ri'ht Ohas not !ull de6eloped, matured, or 6ested%P
65
.t
ma or ma not ripen% The e#istence o! pro!its, more so its speci!ic amount, is uncertain%
8usiness decisions are made e6er da dealin' *ith !actors such as price, 1uantit, and
cost in order to mana'e potential outcomes o! pro!it or loss at an 'i6en point% -ro!its
are thus considered as O!uture economic bene!itsP *hich, at best, entitles petitioners
onl to an inchoate ri'ht%
66
This is not the pri6ate propert re!erred in the Constitution that can be ta)en and *ould
re1uire the pament o! (ust compensation%
64
7ust compensation has been de!ined Oto be
the (ust and complete e1ui6alent o! the loss *hich the o*ner o! the thin' e#propriated
has to su!!er b reason o! the e#propriation%P
68
-etitionersR position in see)in' (ust compensation !or the 20? discount assumes that the
discount al*as translates to lost pro!its% This is not al*as the case% There ma be
ta#able periods *hen the *ill be reportin' a loss in their endin' balance as a result o!
other !actors such as hi'h costs o! 'oods sold% ,oreo6er, not all their sales are made to
senior citi$ens%
3t most, pro!its can materiali$e in the !orm o! cash, but e6en then, this is not the pri6ate
propert contemplated b the Constitution and *hose 6alue *ill be deliberated b courts
!or purposes o! (ust compensation% ;e cannot compensate cash !or cash%
7ustice Carpio submits in his dissent that the Constitution spea)s o! pri6ate propert
*ithout distinction, thus, the issue o! pro!it or loss to pri6ate establishments li)e
petitioners is immaterial% The 20? discount belon's to them *hether the ma)e a pro!it
or su!!er a loss%
69
;hen the 20? discount is 'i6en to customers *ho are senior citi$ens, there is a
per"eived loss !or the establishment !or that same amount at that precise moment%
Lo*e6er, this moment is !leetin' and the percei6ed loss can easil be recouped b sales
to ordinar citi$ens at hi'her prices% The concern that more consumers *ill su!!er as a
result o! a price increase
40
is a matter better addressed to the *isdom o! the Con'ress% 3s
it stands, 2epublic 3ct :o% 9254 does not establish a price control% 0or non"pro!it
establishments, the ma cut do*n on costs and ma)e other business decisions to
optimi$e per!ormance% 8usiness decisions li)e these ha6e been made e6en be!ore the
20? discount became la*, and *ill continue to be made to adapt to the e6er chan'in'
mar)et% ;e cannot consider this !luid concept o! possible loss and potential pro!it as
pri6ate propert belon'in' to pri6ate establishments% The are inchoate% The ma or
ma not e#ist dependin' on man !actors, some o! *hich are *ithin the control o! the
pri6ate establishments% There is nothin' concrete, earmar)ed, actual or speci!ic !or
ta)in' in this scenario% :ecessaril, there is nothin' to compensate%
>ur determination o! pro!its as a !orm o! personal propert that can be ta)en in a
constitutional sense as a result o! 6alid re'ulation *ould in6ite untold conse1uences on
our le'al sstem% /oss o! pro!its *ill be di!!icult to pro6e and *ill ta# the ima'ination
and speculati6e abilities o! (ud'es and (ustices% G6er piece o! le'islation in the !uture
*ould cause the !ilin' o! cases that *ill as) us to determine the loss or dama'e caused
to an on'oin' business% This certainl is not the intent o! the eminent domain pro6isions
in our bill o! ri'hts% This is not the sort o! protection to propert ima'ined b our
constitutional order%
9inal 'ote
3rticle C... *as introduced in the 1984 Constitution to speci!icall address Social
7ustice and Luman 2i'hts% 0or this purpose, the state ma re'ulate the ac1uisition,
o*nership, use, and disposition o! propert and its increments, viz:
Section 1% The Con'ress shall 'i6e hi'hest priorit to the enactment o! measures that
protect and enhance the ri'ht o! all the people to human di'nit, reduce social,
economic, and political ine1ualities, and remo6e cultural ine1uities b e1uitabl
di!!usin' *ealth and political po*er !or the common 'ood%
To this end, the State shall re'ulate the ac1uisition, o*nership, use, and disposition o!
propert and its increments%
41
Thus, in the e#ercise o! its police po*er and in promotin' senior citi$ensR *el!are, the
'o6ernment Ocan impose upon pri6ate establishments @li)e petitionersA the burden o!
partl subsidi$in' a 'o6ernment pro'ram%P
42
3ccordin'l, . 6ote to DG:K the -etition and hold that the challen'e to the
constitutionalit o! Section 4 o! 2epublic 3ct :o% 4432 as amended b 2epublic 3ct
:o% 9254, as *ell as the implementin' rules and re'ulations issued b respondents
Department o! Social ;el!are and De6elopment and Department o! 0inance, should !ail%
,ndnotes:
1
2epublic 3ct :o% 9254 is other*ise )no*n as the G#panded Seniors Citi$ens 3ct o!
2003% .t *as amended b 2epublic 3ct :o% 9994, 0ebruar 15, 2010%
2
-etition is !iled pursuant to 2ule 65 o! the 2ules o! Court%
3
496 -hil% 304 <2005=%
4
Rollo, p% 31%
5
.d% at 401"402%
6
496 -hil% 304 <2005=%
4
Rollo, pp% 402"403%
8
553 -hil% 120 <2004=%
9
Rollo, pp% 405"409%
10
.d% at 410"420%
11
.d% at 411"412%
12
.d% at 413%
13
.d% at 424"436%
14
.d% at 421"424%
15
.d% at 425%
16
.d% at 424%
14
.d% at 394"401%
18
.d% at 363"364%
19
.d% at 359"363%
20
.d% at 368"340%
21
.d% at 364"368%
22
O@-rice elasticitA measures ho* much the 1uantit demanded o! a 'ood chan'es
*hen its price chan'es%P -% 3% S3,IG/S>: 3:D ;% D% :>2DL3IS, GC>:>,.CS
66 <Gi'hteenth Gdition, 2005=%
23
2e6enue in the economic sense is not usuall sub(ect to such simplistic treatment%
Costs must be ta)en into consideration% .n economics, to e6aluate the combination o!
!actors to be used b a pro!it"ma#imi$in' !irm, an analsis o! the mar'inal product o!
inputs is compared to the mar'inal re6enue% Gconomists usuall compare i! an
additional unit o! labor *ill contribute to additional producti6it% 0or a more
comprehensi6e e#planation, re!er to -% 3% S3,IG/S>: 3:D ;% D% :>2DL3IS,
GC>:>,.CS 225"239 <Gi'hteenth Gdition, 2005=%
24
To determine the price !or both ordinar customers and senior citi$ens that *ill retain
the same le6el o! pro!itabilit, the !ormula !or the price !or ordinar customers is P) 4
R0 5 00.61' 3 1)2 *here 20 is the total re6enue be!ore the senior citi$en discount *as
'i6en%
25
This sensiti6it is re!erred to as price elasticit% OThe precise de!inition o! price
elasticit is the percenta'e chan'e in 1uantit demanded di6ided b the percenta'e
chan'e in price%P -% 3% S3,IG/S>: 3:D ;% D% :>2DL3IS, GC>:>,.CS 66
<Gi'hteenth Gdition, 2005=%
26
3nother al'ebraic !ormula *ill sho* us ho* costs should be minimi$ed to retain the
same le6el o! pro!itabilit% The !ormula is )7 4 )0 8 9020 x P)2 x 1': *here:
C1 V Cost o! producin' all 1uantities a!ter the discount polic
C0 V Cost o! producin' all 1uantities be!ore the discount polic
-C V -rice per unit !or >rdinar Citi$ens
NS V Nuantit sold to Senior Citi$ens
24
National Power Corporation v. City of Cabanatuan, 449 -hil% 233, 244 <2003= citin'
0ong :ong ; !angai ,an1ing Corp. v. Rafferty, 39 -hil% 145 <1918=M #ee Po"o ;
Co. v. Posadas, 64 -hil% 640 <1934=M Reyes v. Almanzor, 243 -hil% 558, 564 <1991=%
28
National Power Corporation v. City of Cabanatuan, supra at 248%
29
0or instance, 2epublic 3ct :o% 9334 introducin' !urther re!orms to the &alue 3dded
Ta# <&3T= sstem *as upheld as constitutional% Sections 106, 104, and 108 o! the Ta#
Code *ere amended to impose a &alue 3dded Ta# rate o! 10? to be increased to 12?
upon satis!action o! enumerated conditions% 2ele6ant portions o! Sections 110 and 114
o! the Ta# Code *ere also amended, pro6idin' !or limitations on a ta#paerRs claim !or
input ta#% !ee Aba1ada -uro Party List v. )&e"utive !e"retary, 506 -hil% 1 <2005=%
30
Camber of Real )state and ,uilders? Asso"iations, In". v. )&e"utive !e"retary
Romulo, F%2% :o% 160456, ,arch 9, 2010, 614 SC23 605, 626% <)mpasis supplied=
31
Aba1ada -uro Party List v. )&e"utive !e"retary )rmita, supra at 129% <)mpasis
supplied=
32
Reyes v. Almanzor, 243 -hil% 558, 564 <1991=%
33
!ee for instan"e Las"ona Land Co. v. Commissioner of Internal Revenue, F%2% :o%
141251, ,arch 5, 2012, 664 SC23 455M Commissioner of Internal Revenue v. 'etro
!tar !uperama, In"., F%2% :o% 185341, December 8, 2010, 634 SC23 633, 644"648%
34
241 -hil% 829 <1988=%
35
.d% at 830"836%
36
C>:ST.TIT.>:, 3rt% &., Sec% 28 <1=%
Sec% 28 <1= The rule o! ta#ation shall be uni!orm and e1uitable% The Con'ress shall
e6ol6e a pro'ressi6e sstem o! ta#ation%
34
/olentino v. !e"retary of 4inan"e, 319 -hil% 455, 495 <1995=%
38
C>:ST.TIT.>:, 3rt% ..., Sec% 1%
Sec% 1 :o person shall be depri6ed o! li!e, libert, or propert *ithout due process o!
la*, nor shall an person be denied the e1ual protection o! the la*s%
39
F%2% :o% 160456, ,arch 9, 2010, 614 SC23 605%
40
.d% at 625%
41
.d% at 626"624%
42
-ero"i v. Department of )nergy, 554 -hil 563, 582 <2004 = citin' $sme@a v. $rbos,
F%2% :o% 99886, ,arch 31, 1993, 220 SC23 403, 410"411M -aston v. Republi" Planters
,an1, 242 -hil% 344 <1988=M /io v. *ideogram Regulatory ,oard, 235 -hil% 198 <1984=M
and Lutz v. Araneta, 98 -hil% 148 <1955=%
43
Supra note 8%
44
.d% at 129"130% <Citations omitted=
45
Ponen"ia, p% 21%
46
133 -hil% 249 <1968=%
44
Supra note 8%
48
Ponen"ia, p% 22%
49
.d% at 22%
50
495 -hil% 289 <2005=%
51
.d% at 320"321 "iting Pennsylvania Coal v. 'aon, 260 I%S% 393, 415 <1922= and
Penn Central /ransportation Co. v. New >or1 City, 438 I%S% 104 <1948=%
:o !ormula or rule can be de6ised to ans*er the 1uestions o! *hat is too !ar and *hen
re'ulation becomes a ta)in'% .n 'aon, 7ustice Lolmes reco'ni$ed that it *as Oa
1uestion o! de'ree and there!ore cannot be disposed o! b 'eneral propositions%P >n
man other occasions as *ell, the I%S% Supreme Court has said that the issue o! *hen
re'ulation constitutes a ta)in' is a matter o! considerin' the !acts in each case% The
Court as)s *hether (ustice and !airness re1uire that the economic loss caused b public
action must be compensated b the 'o6ernment and thus borne b the public as a *hole,
or *hether the loss should remain concentrated on those !e* persons sub(ect to the
public action%
52
94 I%S% 113 <1844=%
53
Ponen"ia, p% 20%
54
241 -hil% 1 <1991=%
55
.d% at 4% !ee also Republi" of te Pil. v. PLD/, 136 -hil% 20 <1969=%
56
Ponen"ia, p% 20%
54
.d% at 20%
58
!ee C.&./ C>DG, 3rticle 416% This pro6ides !or the de!inition o! personal propert%
59
Asso"iation of !mall Land $wners in te Pil., In". v. 0on. !e"retary of Agrarian
Reform, 256 -hil 444, 809 <1989=%
60
2I/GS >0 C>I2T, 2ule 64, Sec% 1%
61
!ee National Power Corporation v. /uazon, F%2% :o% 193023, 7une 29, 2011, 653
SC23 84, 95 *here this Court held that O@tAhe determination o! (ust compensation in
e#propriation cases is a !unction addressed to the discretion o! the courts # # #%P
62
154 -hil% 329 <1944=%
63
.d% at 345%
64
.d% at 345"346%
65
8/3CHRS /3; D.CT.>:32K 444 <Gi'hth Gd%, 2004=%
66
!ee )rmita v. Alde"oa+Delorino, F%2% :o% 144130, 7une 4, 2011, 651 SC23 128,143%
64
C>:ST.TIT.>:, 3rt% ..., Sec% 9%
68
National Power Corporation v. -utierrez, 241 -hil% 1, 4 <1991= citin' Provin"e of
/ayabas v. Perez, 66 -hil% 464 <1938=M Asso". of !mall Land $wners of te Pils., In". v.
0on. !e"retary of Agrarian Reform, A"una v. Arroyo, Pabri"o v. (ui"o, 'anaay v. (ui"o,
256 -hil% 444 <1989=%
69
Dissenting $pinion of (usti"e Carpio, p% 9%
40
.d% at 14%
41
C>:ST.TIT.>:, 3rt% C..., Sec% 1%
42
Carlos !uperdrug Corp. v. Department of !o"ial #elfare and Development, supra note
8, at 130%

SC Upholds Legality of Senior Citizens 20% As Tax Deductions

Hochgeladen von

Dokumentinformationen

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

SC Upholds Legality of Senior Citizens 20% As Tax Deductions

Hochgeladen von

Copyright:

Verfügbare Formate

SC upholds legality of senior citizens 20%

discount, tax deduction

Das könnte Ihnen auch gefallen