Case Summary (G.R. No. 175356)
Petitioners
Manila Memorial Park, Inc.
La Funeraria Paz-Sucat, Inc.
Respondents
Secretary, Department of Social Welfare and Development
Secretary, Department of Finance
Key Dates
• April 23, 1992 – RA 7432 enacted, granting senior-citizen privileges.
• August 23, 1993 – Revenue Regulations (RR) No. 02-94 issued.
• February 26, 2004 – RA 9257 amended RA 7432.
• 2006 – RR No. 4-2006 issued.
• December 3, 2013 – Supreme Court en banc decision.
Applicable Law
• 1987 Philippine Constitution
• RA 7432 (Senior Citizens Act)
• RR 02-94 (1993)
• RA 9257 (Expanded Senior Citizens Act of 2003)
• RR 4-2006 (Implementing RA 9257)
• National Internal Revenue Code, as amended
Background of the Senior-Citizen Discount Privilege
RA 7432 granted senior citizens a 20 percent discount on specified goods and services, with the cost reimbursable to private establishments as a tax credit. RR 02-94 redefined the privilege as a deduction from gross income or sales, contrary to the plain wording of the statute.
Central Luzon Drug Corporation Ruling
In 2005, the Court voided RR 02-94’s treatment of the discount as a deduction, holding that private establishments were expressly entitled to claim a tax credit under RA 7432. The decision noted that regulations cannot enlarge or amend the clear terms of a statute.
Amendment by RA 9257 and New Regulations
RA 9257 revised Section 4 of RA 7432, allowing establishments to claim the 20 percent discount as a tax deduction from gross income for the same taxable year and to include the claimed deduction net of VAT in gross sales receipts. RR 4-2006 (DOF) and corresponding DSWD rules implemented these changes, prescribing conditions and record-keeping requirements.
Petitioners’ Constitutional Arguments
Petitioners do not dispute the discount privilege itself but contend that converting the discount into a tax deduction shifts 65 percent of the subsidy to private businesses, constituting a taking of private property without just compensation (Article III, Section 9). They invoke precedents that viewed the discount as a compensable taking and argue that the measure improperly relies on police power and overturns the original taxable‐credit scheme without constitutional authority.
Respondents’ Arguments
Respondents challenge the Petition’s timeliness and justiciability, asserting no actual controversy and arguing that petitioners lack evidence of unfair treatment. They defend RA 9257 and its rules as presumptively constitutional exercises of police power and emphasize that petitioners have not overcome the burden of proving unconstitutionality.
Actual Case or Controversy
The Court held that petitioners possess a personal and substantial interest and suffer a direct adverse effect from the tax deduction scheme. The controversy is ripe for resolution, satisfying requisites for judicial review of constitutional challenges.
Validity of the Tax Deduction Scheme
Invoking Carlos Superdrug Corporation v. DSWD (2007), the Court reaffirmed that the 20 percent discount and its tax-deduction treatment are legitimate exercises of police power. The discount serves a public welfare objective to subsidize senior citizens’ purchases, and mandatory participation by private establishments is a valid means to further that goal.
Police Power vs. Eminent Domain
The Court distinguished police power (regulation of business conditions for the general welfare) from eminent domain (appropriation of specific pr
...continue readingCase Syllabus (G.R. No. 175356)
Citation and Procedural Posture
- G.R. No. 175356, decided December 3, 2013, en banc
- Petition for Prohibition under Rule 65 of the Rules of Court
- Petitioners: Manila Memorial Park, Inc. and La Funeraria Paz-Sucat, Inc.
- Respondents: Secretaries of the Department of Social Welfare and Development (DSWD) and Department of Finance (DOF)
- Subject matter: constitutionality of Section 4 of R.A. 7432 (Senior Citizens Act), as amended by R.A. 9257, and implementing regulations allowing private establishments to claim the 20% senior citizen discount as tax deduction
Legislative Background
- R.A. 7432 (April 23, 1992): grants senior citizens privileges, including a 20% discount on goods/services, “Provided, That private establishments may claim the cost as tax credit”
- R.A. 9257 (February 26, 2004): expands senior citizen privileges (funeral, burial, transport, lodging, recreation, medicines) and changes tax treatment—discount may now be claimed “as tax deduction based on the net cost of the goods sold or services rendered,” subject to proper documentation
- National Internal Revenue Code amendments set maximum tax rates and inclusion of claimed deductions in gross sales receipts
Regulatory History
- RR No. 02-94 (August 23, 1993, DOF): defined “tax credit” as 20% discount deductible from gross income or gross sales; required record-keeping by establishments
- Cited error in RR 2-94 in Commissioner v. Central Luzon Drug Corp. (496 Phil. 307): revenue regulations contravened R.A. 7432 by treating the discount as deduction instead of credit
- RR No. 4-2006 (DOF): implements R.A. 9257—allows sales discount to senior citizens as deduction from gross income, subject to conditions (separate invoicing, year-of-grant deduction, record-keeping)
- DSWD Rules VI–VIII: mirror DOF regulations and defer specific tax procedures to BIR rules
Facts and Antecedents
- Petitioners are private funeral and burial service corporations
- They challenged:
- Section 4(a) of R.A. 7432 as amended by R.A. 9257 (tax deduction scheme)
- Implementing rules issued by DSWD and DOF allowing establishments to claim 20% discount as tax deduction
- Petitioners seek:
- Declaration of unconstitutionality
- Prohibition of enforcement
- Reinstatement of tax credit scheme under pre-2004 law
Issues Presented
- Actual case or controversy?
- Validity and constitutionality of R.A. 9257, Section 4, and its implementing rules (DOF RR 4-2006; DSWD rules) insofar as they provide that the 20% senior citizen discount may be