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G.R. No. 175356 December 3, 2013

MANILA MEMORIAL PARK, INC. AND LA FUNERARIA PAZ-SUCAT, INC., Petitioners,vs.SECRETARY OF THE DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT and THESECRETARY OF THE DEPARTMENT OF FINANCE, Respondents.

Doctrine: When a party challeges the constitutionality of a law, the burden of proof rests upon him.

Facts:

1. Petitioners assail the constitutionality of Section 4 of Republic Act (RA) No. 7432 ,3 asamended by RA 9257 ,4 and the implementing rules and regulations issued by the DSWD andDOF insofar as these allow business establishments to claim the 20% discount given tosenior citizens as a tax deduction.

2. On February 26, 2004, RA 9257 8 amended certain provisions of RA 7432, to wit:

SECTION 4. Privileges for the Senior Citizens. The senior citizens shall be entitled to thefollowing:

(a) the grant of twenty percent (20%) discount from all establishments relative to theutilization of services in hotels and similar lodging establishments, restaurantsand recreation centers, and purchase of medicines in all establishments for theexclusive use or enjoyment of senior citizens, including funeral and burialservices for the death of senior citizens;

3. The establishment may claim the discounts granted under (a), (f), (g) and (h) as taxdeduction based on the net cost of the goods sold or services rendered: Provided, That thecost of the discount shall be allowed as deduction from gross income for the same taxableyear that the discount is granted.

Issue:

- Whether the Senior Citizens Discount that can be claimed as Tax Deductions byestablishments is invalid and unconstitutional

Held:

- NO, It is Constitutional, and a valid exercise of police power.

Ratio:

- Petitioners Arguments Petitioners emphasize that they are not questioning the 20% discount

granted to senior citizens but are only assailing the constitutionality of the taxdeduction scheme prescribed under RA 9257 and the implementing rulesand regulations issued by the DSWD and the DOF.

Petitioners assert that Section 4(a) of the law is unconstitutional because itconstitutes deprivation of private property. Compelling drugstore owners andestablishments to grant the discount will result in a loss of profit and capital

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because 1) drugstores impose a mark-up of only 5% to 10% on brandedmedicines; and 2) the law failed to provide a scheme whereby drugstores willbe justly compensated for the discount.

Petitioners argue that we have previously ruled in Central Luzon DrugCorporatio n 37 that the 20% discount is an exercise of the power of eminentdomain, thus, requiring the payment of just compensation.

- Respondents Arguments Respondents, on the other hand, question the filing of the instant Petition

directly with the Supreme Court as this disregards the hierarchy of courts. likewise assert that there is no justiciable controversy as petitioners failed to

prove that the tax deduction treatment is not a "fair and full equivalent of theloss sustained" by them.

As to the constitutionality of RA 9257 and its implementing rules andregulations, respondents contend that petitioners failed to overturn itspresumption of constitutionality

- Court Rulingo The law is a legitimate exercise of police power which, similar to the power of

eminent domain, has general welfare for its object. Accordingly, it has been described as "the most essential, insistent and the

least limitable of powers, extending as it does to all the great public needs." Itis "[t]he power vested in the legislature by the constitution to make, ordain,and establish all manner of wholesome and reasonable laws, statutes, andordinances, either with penalties or without, not repugnant to the constitution,as they shall judge to be for the good and welfare of the commonwealth, andof the subjects of the same."

The petitioners cannot claim that they will be at a loss due to small mark upsand only a 32% recovery of the 20% discount. But they have notsubstantiated this claim with income statements of their business.

While the Constitution protects property rights, petitioners must accept therealities of business and the State, in the exercise of police power, canintervene in the operations of a business which may result in an impairmentof property rights in the process.

We, thus, found that the 20% discount as well as the tax deduction scheme isa valid exercise of the police power of the State.

o It is not an exercise by the state of the power of Eminent Domain The 20% discount is intended to improve the welfare of senior citizens who,

at their age, are less likely to be gainfully employed, more prone to illnessesand other disabilities, and, thus, in need of subsidy in purchasing basiccommodities. It may not be amiss to mention also that the discount serves tohonor senior citizens who presumably spent the productive years of theirlives on contributing to the development and progress of the nation.

The obiter in Central Luzon Drug Corporation ,78 however, describes the 20%discount as an exercise of the power of eminent domain and the tax credit,under the previous law, equivalent to the amount of discount given as the justcompensation therefor. The flaw in this reasoning is in its premise . Itpresupposes that the subject regulation, which impacts the pricing and,hence, the profitability of a private establishment, automatically amounts to adeprivation of property without due process of law. If this were so, then allprice and rate of return on investment control laws would have to beinvalidated.

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The impact or effect of a regulation, such as the one under consideration,must, thus, be determined on a case-to-case basis. Whether that linebetween permissible regulation under police power and "taking" undereminent domain has been crossed must, under the specific circumstances ofthis case, be subject to proof and the one assailing the constitutionality of theregulation carries the heavy burden of proving that the measure is

unreasonable, oppressive or confiscatory. We adopted a similar line of reasoning in Carlos SuperdrugCorporatio n 85 when we ruled that petitioners therein failed to prove that the20% discount is arbitrary, oppressive or confiscatory. We noted that noevidence, such as a financial report, to establish the impact of the 20%discount on the overall profitability of petitioners was presented in order toshow that they would be operating at a loss due to the subject regulation orthat the continued implementation of the law would be unconscionablydetrimental to the business operations of petitioners.

On its face, we find that there are at least two conceivable bases to sustainthe subject regulations validity absent clear and convincing proof that it isunreasonable, oppressive or confiscatory. Congress may have legitimatelyconcluded that business establishments have the capacity to absorb adecrease in profits or income/gross sales due to the 20% discount withoutsubstantially affecting the reasonable rate of return on their investments

(1) not all customers of a business establishment are senior citizens (2) the level of its profit margins on goods and services offered to the

general public. Hence, the present recourse must, likewise, fail. Because all laws enjoy the

presumption of constitutionality, courts will uphold a laws vali dity if any set offacts may be conceived to sustain it.

- In the case at bar, evidence is indispensable before a determination of a constitutionalviolation can be made because of the following reasons. First, the assailed law, by imposingthe senior citizen discount, does not take any of the properties used by a businessestablishment like, say, the land on which a manufacturing plant is constructed or the

equipment being used to produce goods or services. Second, rather than taking specificproperties of a business establishment, the senior citizen discount law merely regulates theprices of the goods or services being sold to senior citizens by mandating a 20% discount.

- Note that the law does not impose at what specific price the product shall be sold, only that a20% discount shall be given to senior citizens based on the price set by the businessestablishment. A business establishment is, thus, free to adjust the prices of the goods orservices it provides to the general public.

- WHEREFORE, the Petition is hereby DISMISSED for lack of merit.

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