Primary Holding

The Supreme Court held that the 20% senior citizen discount mandated by RA 7432, as amended by RA 9257, and the corresponding tax deduction scheme are a valid exercise of the State's police power and do not constitute an unconstitutional taking of private property requiring just compensation.

Background

Manila Memorial Park, Inc. and La Funeraria Paz-Sucat, Inc. challenged the constitutionality of the tax deduction scheme implemented for senior citizen discounts, claiming it violates the constitutional provision against taking private property for public use without just compensation.

Facts

• 1. Manila Memorial Park and La Funeraria Paz-Sucat, domestic corporations, provide funeral and burial services.
• 2. RA 7432 granted senior citizens a 20% discount, initially allowing businesses to claim the cost as a tax credit.
• 3. RA 9257 amended the law, changing the reimbursement mechanism to a tax deduction.
• 4. Petitioners argued the tax deduction scheme did not provide just compensation for the discounts, as it only offered a partial reimbursement.
• 5. Petitioners asserted that the tax deduction scheme effectively shifted the State's responsibility for senior citizen welfare onto the private sector.

Arguments of the Petitioners

• 1. The tax deduction scheme violates Article III, Section 9 of the Constitution, as it constitutes a taking of private property for public use without just compensation.
• 2. The tax deduction scheme is not a fair and full equivalent of the loss sustained by private establishments.
• 3. The ruling in Carlos Superdrug Corporation, justifying the scheme under police power, should be reversed.
• 4. The scheme shifts the State's constitutional mandate of improving the welfare of the elderly to the private sector.

Arguments of the Respondents

• 1. The petition was improperly filed directly with the Supreme Court, disregarding the hierarchy of courts.
• 2. There is no justiciable controversy, as petitioners failed to prove the tax deduction treatment is not a fair equivalent of their loss.
• 3. RA 9257 and its implementing rules are constitutional, enjoying a presumption of validity.
• 4. The tax deduction scheme is a legitimate exercise of the State's police power.

Issues

• 1. Whether the petition presents an actual case or controversy.
• 2. Whether Section 4 of RA 9257 and its implementing rules are unconstitutional insofar as they allow the 20% discount to senior citizens to be claimed as a tax deduction by private establishments.

Ruling

• 1. An actual case or controversy exists because the challenged tax deduction scheme has a direct adverse effect on the petitioners.
• 2. The validity of the 20% senior citizen discount and tax deduction scheme under RA 9257, as an exercise of police power of the State, has already been settled in Carlos Superdrug Corporation.
• 3. The Court found that the 20% discount as well as the tax deduction scheme is a valid exercise of the police power of the State.
• 4. The obiter in Central Luzon Drug Corporation describing the 20% discount as an exercise of eminent domain is not binding precedent.
• 5. The 20% senior citizen discount has not been shown to be unreasonable, oppressive or confiscatory.

Doctrines

• 1. Police Power: The inherent power of the State to regulate or restrain the use of liberty and property for public welfare.
• 2. Eminent Domain: The inherent power of the State to take private property for public use upon payment of just compensation.
• 3. Presumption of Constitutionality: Laws are presumed to be constitutional, and the burden of proving otherwise rests on the challenger.
• 4. Just Compensation: The full and fair equivalent of the property taken from its owner by the expropriator.
• 5. Hierarchy of Courts: The principle that cases should generally be filed with the lower courts before being elevated to higher courts.

Key Excerpts

• 1. "When a party challenges the constitutionality of a law, the burden of proof rests upon him."
• 2. "Police power as an attribute to promote the common good would be diluted considerably if on the mere plea of petitioners that they will suffer loss of earnings and capital, the questioned provision is invalidated."

Precedents Cited

• 1. Cordillera Broad Coalition v. Commission on Audit: Used to support the principle that the burden of proof lies on the party challenging the constitutionality of a law.
• 2. Commissioner of Internal Revenue v. Central Luzon Drug Corporation: Distinguished, with the Court stating that the disquisition on eminent domain was obiter dicta.
• 3. Carlos Superdrug Corporation v. Department of Social Welfare and Development: Affirmed and relied upon, holding that the discount scheme is a valid exercise of police power.
• 4. Association of Small Landowners in the Phils., Inc. v. Secretary of Agrarian Reform: Used to discuss traditional distinctions between police power and eminent domain.
• 5. City of Manila v. Laguio, Jr.: Used to recognize a taking could be found if government regulation of the use of property went "too far."
• 6. Alalayan v. National Power Corporation: Used to reiterate the rule that the burden of proving the unconstitutionality of a law rests upon the one assailing it and "the burden becomes heavier when police power is at issue."

Statutory and Constitutional Provisions

• 1. Article III, Section 9 of the Constitution: Private property shall not be taken for public use without just compensation.
• 2. Section 4 of RA 7432: Privileges for senior citizens.
• 3. RA 9257: Amends RA 7432, regarding tax deductions for establishments.
• 4. Article XV, Section 4 of the Constitution: Duty of the family to care for its elderly members; the State may design programs of social security for them.
• 5. Article XIII, Section 11 of the Constitution: The State shall adopt an integrated and comprehensive approach to health development.