8/31/2016 G.R.No.

L59431

TodayisWednesday,August31,2016

RepublicofthePhilippines
SUPREMECOURT
Manila

ENBANC

G.R.No.L59431July25,1984

ANTEROM.SISON,JR.,petitioner,
vs.
RUBENB.ANCHETA,ActingCommissioner,BureauofInternalRevenueROMULOVILLA,Deputy
Commissioner,BureauofInternalRevenueTOMASTOLEDODeputyCommissioner,BureauofInternal
RevenueMANUELALBA,MinisterofBudget,FRANCISCOTANTUICO,Chairman,CommissioneronAudit,
andCESARE.A.VIRATA,MinisterofFinance,respondents.

AnteroSisonforpetitionerandforhisownbehalf.

TheSolicitorGeneralforrespondents.

FERNANDO,C.J.:

Thesuccessofthechallengeposedinthissuitfordeclaratoryrelieforprohibitionproceeding1onthevalidityofSection
I of Batas Pambansa Blg. 135 depends upon a showing of its constitutional infirmity. The assailed provision further amends Section 21 of the National
Internal Revenue Code of 1977, which provides for rates of tax on citizens or residents on (a) taxable compensation income, (b) taxable net income, (c)
royalties, prizes, and other winnings, (d) interest from bank deposits and yield or any other monetary benefit from deposit substitutes and from trust fund
andsimilararrangements,(e)dividendsandshareofindividualpartnerinthenetprofitsoftaxablepartnership,(f)adjustedgrossincome. 2 Petitioner 3
astaxpayerallegesthatbyvirtuethereof,"hewouldbeundulydiscriminatedagainstbytheimpositionofhigherratesoftax
uponhisincomearisingfromtheexerciseofhisprofessionvisavisthosewhichareimposeduponfixedincomeorsalaried
individual taxpayers. 4 He characterizes the above sction as arbitrary amounting to class legislation, oppressive and
capricious in character 5 For petitioner, therefore, there is a transgression of both the equal protection and due process
clauses6oftheConstitutionaswellasoftherulerequiringuniformityintaxation.7

TheCourt,inaresolutionofJanuary26,1982,requiredrespondentstofileananswerwithin10daysfromnotice.
Suchananswer,aftertwoextensionsweregrantedtheOfficeoftheSolicitorGeneral,wasfiledonMay28,1982.
8 The facts as alleged were admitted but not the allegations which to their mind are "mere arguments, opinions or
conclusionsonthepartofthepetitioner,thetruth[forthem]beingthosestated[intheir]SpecialandAffirmativeDefenses."
9Theanswerthenaffirmed:"BatasPambansaBig.135isavalidexerciseoftheState'spowertotax.Theauthoritiesand
casescitedwhilecorrectlyquotedorparaghraphdonotsupportpetitioner'sstand." 10Theprayerisforthedismissalofthepetitionfor
lackofmerit.

ThisCourtfindssuchapleamorethanjustified.Thepetitionmustbedismissed.

1.Itismanifestthatthefieldofstateactivityhasassumedamuchwiderscope,Thereasonwassoclearlyset
forthbyretiredChiefJusticeMakalintalthus:"Theareaswhichusedtobelefttoprivateenterpriseandinitiative
and which the government was called upon to enter optionally, and only 'because it was better equipped to
administerforthepublicwelfarethanisanyprivateindividualorgroupofindividuals,'continuetolosetheirwell
defined boundaries and to be absorbed within activities that the government must undertake in its sovereign
capacityifitistomeettheincreasingsocialchallengesofthetimes."11Hencetheneedformorerevenues.Thepowertotax,an
inherent prerogative, has to be availed of to assure the performance of vital state functions. It is the source of the bulk of public funds. To praphrase a
recentdecision,taxesbeingthelifebloodofthegovernment,theirpromptandcertainavailabilityisoftheessence.12

2.Thepowertotaxmoreover,toborrowfromJusticeMalcolm,"isanattributeofsovereignty.Itisthestrongestof
allthepowersofofgovernment." 13 It is, of course, to be admitted that for all its plenitude 'the power to tax is not unconfined. There are
restrictions.TheConstitutionsetsforthsuchlimits.Adverselyaffectingasitdoesproperlyrights,boththedueprocessandequalprotectionclausesinay
properlybeinvoked,allpetitionerdoes,toinvalidateinappropriatecasesarevenuemeasure.ifitwereotherwise,therewouldbetruthtothe1803dictum
ofChiefJusticeMarshallthat"thepowertotaxinvolvesthepowertodestroy."14InaseparateopinioninGravesv.NewYork,15JusticeFrankfurter,after
referringtoitasan1,unfortunateremarkcharacterizeditas"aflourishofrhetoric[attributableto]theintellectualfashionofthetimesfollowing]afreeuseof
absolutes."16 This is merely to emphasize that it is riot and there cannot be such a constitutional mandate. Justice Frankfurter could rightfully conclude:
"ThewebofunrealityspunfromMarshall'sfamousdictumwasbrushedawaybyonestrokeofMr.JusticeHolmesspen:'Thepowertotaxisnotthepower
todestroywhilethisCourtsits."17SoitisinthePhilippines.

3. This Court then is left with no choice. The Constitution as the fundamental law overrides any legislative or
executive, act that runs counter to it. In any case therefore where it can be demonstrated that the challenged
statutoryprovisionaspetitionerhereallegesfailstoabidebyitscommand,thenthisCourtmustsodeclare
andadjudgeitnull.Theinjurythusiscenteredonthequestionofwhethertheimpositionofahighertaxrateon
taxablenetincomederivedfrombusinessorprofessionthanoncompensationisconstitutionallyinfirm.

4,Thedifficultyconfrontingpetitioneristhusapparent.Heallegesarbitrariness.Amereallegation,ashere.does
not suffice. There must be a factual foundation of such unconstitutional taint. Considering that petitioner here
wouldcondemnsuchaprovisionasvoidoritsface,hehasnotmadeoutacase.Thisismerelytoadheretothe
authoritativedoctrinethatwerethedueprocessandequalprotectionclausesareinvoked,consideringthatthey
arcnotfixedrulesbutratherbroadstandards,thereisaneedforofsuchpersuasivecharacteraswouldleadto
suchaconclusion.Absentsuchashowing,thepresumptionofvaliditymustprevail.18

5.Itisundoubtedthatthedueprocessclausemaybeinvokedwhereataxingstatuteissoarbitrarythatitfindsno
support in the Constitution. An obvious example is where it can be shown to amount to the confiscation of
property. That would be a clear abuse of power. It then becomes the duty of this Court to say that such an
arbitraryactamountedtotheexerciseofanauthoritynotconferred.Thatproperlycallsfortheapplicationofthe
Holmesdictum.Ithasalsobeenheldthatwheretheassailedtaxmeasureisbeyondthejurisdictionofthestate,

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or is not for a public purpose, or, in case of a retroactive statute is so harsh and unreasonable, it is subject to
attackondueprocessgrounds.19

6.Nowforequalprotection.Theapplicablestandardtoavoidthechargethatthereisadenialofthisconstitutional
mandate whether the assailed act is in the exercise of the lice power or the power of eminent domain is to
demonstratedthatthegovernmentalactassailed,farfrombeinginspiredbytheattainmentofthecommonweal
waspromptedbythespiritofhostility,orattheveryleast,discriminationthatfindsnosupportinreason.Itsuffices
then that the laws operate equally and uniformly on all persons under similar circumstances or that all persons
mustbetreatedinthesamemanner,theconditionsnotbeingdifferent,bothintheprivilegesconferredandthe
liabilitiesimposed.Favoritismandunduepreferencecannotbeallowed.Fortheprincipleisthatequalprotection
and security shall be given to every person under circumtances which if not Identical are analogous. If law be
lookeduponintermsofburdenorcharges,thosethatfallwithinaclassshouldbetreatedinthesamefashion,
whatever restrictions cast on some in the group equally binding on the rest." 20 That same formulation applies as
well to taxation measures. The equal protection clause is, of course, inspired by the noble concept of approximating the
Idealofthelawsbenefitsbeingavailabletoallandtheaffairsofmenbeinggovernedbythatsereneandimpartialuniformity,
which is of the very essence of the Idea of law. There is, however, wisdom, as well as realism in these words of Justice
Frankfurter: "The equality at which the 'equal protection' clause aims is not a disembodied equality. The Fourteenth
Amendmentenjoins'theequalprotectionofthelaws,'andlawsarenotabstractpropositions.Theydonotrelatetoabstract
unitsA,BandC,butareexpressionsofpolicyarisingoutofspecificdifficulties,addresstotheattainmentofspecificends
bytheuseofspecificremedies.TheConstitutiondoesnotrequirethingswhicharedifferentinfactoropiniontobetreated
inlawasthoughtheywerethesame."21Hencetheconstantreiterationoftheviewthatclassificationifrationalincharacter
isallowable.Asamatteroffact,inaleadingcaseofLutzV.Araneta, 22thisCourt,throughJusticeJ.B.L.Reyes,wentso
farastohold"atanyrate,itisinherentinthepowertotaxthatastatebefreetoselectthesubjectsoftaxation,andithas
been repeatedly held that 'inequalities which result from a singling out of one particular class for taxation, or exemption
infringenoconstitutionallimitation.'"23

7.Petitionerlikewiseinvokedthekindredconceptofuniformity.AccordingtotheConstitution:"Theruleoftaxation
shagbeuniformandequitable." 24 This requirement is met according to Justice Laurel in Philippine Trust Company v.
Yatco,25decidedin1940,whenthetax"operateswiththesameforceandeffectineveryplacewherethesubjectmaybe
found."26Helikewiseadded:"Theruleofuniformitydoesnotcallforperfectuniformityorperfectequality,becausethisis
hardlyattainable." 27Theproblemofclassificationdidnotpresentitselfinthatcase.Itdidnotariseuntilnineyearslater,
whentheSupremeCourtheld:"Equalityanduniformityintaxationmeansthatalltaxablearticlesorkindsofpropertyofthe
same class shall be taxed at the same rate. The taxing power has the authority to make reasonable and natural
classifications for purposes of taxation, ... . 28 As clarified by Justice Tuason, where "the differentiation" complained of
"conforms to the practical dictates of justice and equity" it "is not discriminatory within the meaning of this clause and is
thereforeuniform."29Thereisquiteasimilaritythentothestandardofequalprotectionforallthatisrequiredisthatthetax
"appliesequallytoallpersons,firmsandcorporationsplacedinsimilarsituation."30

8. Further on this point. Apparently, what misled petitioner is his failure to take into consideration the distinction
between a tax rate and a tax base. There is no legal objection to a broader tax base or taxable income by
eliminating all deductible items and at the same time reducing the applicable tax rate. Taxpayers may be
classified into different categories. To repeat, it. is enough that the classification must rest upon substantial
distinctions that make real differences. In the case of the gross income taxation embodied in Batas Pambansa
Blg.135,the,discerniblebasisofclassificationisthesusceptibilityoftheincometotheapplicationofgeneralized
rules removing all deductible items for all taxpayers within the class and fixing a set of reduced tax rates to be
appliedtoallofthem.Taxpayerswhoarerecipientsofcompensationincomearesetapartasaclass.Asthereis
practicallynooverheadexpense,thesetaxpayersareenotentitledtomakedeductionsforincometaxpurposes
because they are in the same situation more or less. On the other hand, in the case of professionals in the
practice of their calling and businessmen, there is no uniformity in the costs or expenses necessary to produce
their income. It would not be just then to disregard the disparities by giving all of them zero deduction and
indiscriminatelyimposeonallalikethesametaxratesonthebasisofgrossincome.Thereisamplejustification
then for the Batasang Pambansa to adopt the gross system of income taxation to compensation income, while
continuingthesystemofnetincometaxationasregardsprofessionalandbusinessincome.

9. Nothing can be clearer, therefore, than that the petition is without merit, considering the (1) lack of factual
foundation to show the arbitrary character of the assailed provision 31 (2) the force of controlling doctrines on due
process, equal protection, and uniformity in taxation and (3) the reasonableness of the distinction between compensation
andtaxablenetincomeofprofessionalsandbusinessmancertainlynotasuspectclassification,

WHEREFORE,thepetitionisdismissed.Costsagainstpetitioner.

Makasiar,Concepcion,Jr.,Guerero,MelencioHerrera,Escolin,Relova,Gutierrez,Jr.,DelaFuenteandCuevas,
JJ.,concur.

Teehankee,J.,concursintheresult.

Plana,J.,tooknopart.

SeparateOpinions

AQUINO,J.,concurring:

Iconcurintheresult.Thepetitionerhasnocauseofactionforprohibition.

ABADSANTOS,J.,dissenting:

This is a frivolous suit. While the tax rates for compensation income are lower than those for net income such
circumtancedoesnotnecessarilyresultinlowertaxpaymentsforthesereceivingcompensationincome.Infact,
the reverse will most likely be the case those who file returns on the basis of net income will pay less taxes
becausetheyclaimallsortofdeductionjustifiedornotIvotefordismissal.
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SeparateOpinions

AQUINO,J.,concurring:

Iconcurintheresult.Thepetitionerhasnocauseofactionforprohibition.

ABADSANTOS,J.,dissenting:

Thisisafrivoloussuit.Whilethetaxratesforcompensationincomearelowerthanthosefornetincomesuch
circumtancedoesnotnecessarilyresultinlowertaxpaymentsforthesereceivingcompensationincome.Infact,
thereversewillmostlikelybethecasethosewhofilereturnsonthebasisofnetincomewillpaylesstaxes
becausetheyclaimallsortofdeductionjustifiedornotIvotefordismissal.

Footnotes

1PetitionermusthaverealizedthatasuitfordeclaratoryreliefmustbefiledwithRegionalTrial
Courts.

2BatasPambansaBlg.135,Section21(1981).

3TherespondentsareRubenB.Ancheta,ActingCommissioner,BureauofInternalRevenue
RomuloVilla,DeputyCommissioner,BureauofInternalRevenueTomasToledo,Deputy
Commissioner,BureauofInternalRevenueManuelAlba,MinisterofBudgetFranciscoTantuico,
Chairman,CommissioneronAuditandCesarE.A.Virata,MinisterofFinance.

4Petition,Parties,par.1.Thechallengeisthusaimedatparagraphs(a)and(b)ofSection1further
AmendingSection21oftheNationalInternalRevenueCodeof1977.Par.(a)reads:"(a)Ontaxable
compensationincome.Ataxisherebyimposeduponthetaxablecompensationincomeas
determinedinSection28(a)receivedduringeachtaxableyearfromallsourcesbyeveryindividual,
whetheracitizenofthePhilippines,determinedinaccordancewiththefollowingschedule:

NotoverP2,500 0%

OverP2,500butnotoverP 1%
5,000

OverP5,000butnotover10,000 P25+3%ofexcessoverP5,000

OverP10,000butnotoverP P175+7%ofexcessoverP10,000
20,000

OverP20,000butnotoverP P875+11%,ofexcessoverP20,000
40,000

OverP40.000butnotoverP P3,075+I15%ofexcessoverP40,000
60,000

OverP60,000butnotover P6,075+19%ofexcessoverP60,000
P100,000

OverP100,000butnotover P13,675+24%excessoverP100,000
P250,000

OverP250,000butnotover P49,675+29%ofexcessoverP250,000
P500,000

OverP500,000 P122,175+35%ofexcessover
P500,000

Par.(b)reads:"(b)Ontaxablenetincome.Ataxisherebyimposeduponthetaxablenetincome
asdeterminedinSection29(a)receivedduringeachtaxableyearfromallsourcesbyevery
individual,whetheracitizenofthePhilippines,oranalienresidinginthePhilippinesdeterminedin
accordancewiththefollowingschedule:

NotoverP10,000 5%

OverP10,000butnotoverP P500+15%ofexcessoverP10,000
30,000

OverP30,000butnotover P3,500+30%ofexcessoverP30,000
P150,000

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OverP150,000butnotover P39,500+45%ofexcessover
P500,000 P150,000

OverP500,000 P197,000+601%ofexcessover
P500,000

5IbidStatement,par.4.

6ArticleIV,Section1oftheConstitutionreads:"Nopersonshallbedeprivedoflife,libertyor
propertywithoutdueprocessoflaw,norshallanypersonbedeniedtheequalprotectionofthelaws."

7ArticleVII,Section7.par.(1)oftheConstitutionreads:"Theruleoftaxationshallbeuniformand
equitable.TheBatasangPambansashallevolveaprogressivesystemoftaxation."

8ItwasfiledbySolicitorGeneralEstelitoP.Mendoza.HewasassistedbyAssistantSolicitorGeneral
EduardoD.MontenegroandSolicitorErlindaB,Masakayan.

9Answer,pars.16.

10Ibid,par.6.

11AgriculturalCreditandCooperativeFinancingAdministrationv.ConsiderationofUnionsin
GovernmentCorporationandOffices,L21484,November29,1969,30SCRA649,662.

12Cf,Verav.Fernandez,L31364,March30,1979,89SCRA199,perCastro,J.

13Sarasolav.Trinidad,40Phil.252,262(1919).

14McCollochv.Maryland4Wheaton316,

15306US466(938).

16Ibid,489

17Ibid.490.

18Cf.ErmitaMalateHotelandMotelOperatorSAssociationv.Hon.CityMayor,127Phil.306,315(
1967)U.S.v.Salaveria,39Phil.102,111(1918)andEbonav.Daet,85Phil,369(1950).Likewise
referredtoisO'GormanandYoungv.HartfordFireInsuranceCo282US251,328(1931).

19Cf.ManilaGasCo.v.CollectorofInternalRevenue,62Phil.895(1936)WellsFargoBankand
UnionTrustCo.v.Collector,70Phil.325(1940)Republicv.OasanVda.deFernandez,99Phil.934
(1956).

20TheexcerptisfromtheopinioninJ.M.TuasonandCo.v.TheLandTenureAdministration,L
21064,February18,1970,31SCRA413,435andreiteratedinBautistav.Juinio,G.R.No.50908,
January31,1984,127SCRA329,339.Theformerdealswithaneminentdomainproceedingand
thelatterwithasuitcontestingthevalidityofapolicepowermeasure.

21Tignerv.Texas,310US141,147(1940).

2298Phil.148(1955).

23Ibid,153.

24ArticleVIII,Section17,par.1,firstsentenceoftheConstitution

2569Phil.420(1940).

26Ibid,426.

27Ibid,424.

28EasternTheatricalCo.v.Alfonso,83Phil.852,862(1949).

29ManilaRaceHorseTrainersAsso.v.DelaFuente,88Phil.60,65(1951).

30UyMatiasv.CityofCebu,93Phil.300(1953).

31Whilepetitionercitedfigurestosustaininhisassertion,publicrespondentsrefutedwithother
figuresthatargueagainsthissubmission.Onereasonforrequiringdeclaratoryreliefproceedingsto
startinregionaltrialcourtsispreciselytoenablepetitionertoprovehisallegation,absentan
admissionintheanswer.

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