Nitafan vs. Commissioner of Internal Revenue

The salaries of Justices and Judges are properly subject to a general income tax law applicable to all income earners, and the payment of such income tax does not fall within the constitutional protection against decrease of judicial salaries during their continuance in office.

Petitioners David G. Nitafan, Wenceslao M. Polo, and Maximo A. Savellano, Jr. were duly appointed and qualified Judges presiding over Branches 52, 19, and 53, respectively, of the Regional Trial Court, National Capital Judicial Region, all stationed in Manila. The respondents were the Commissioner of Internal Revenue and the Financial Officer of the Supreme Court of the Philippines. The dispute centered on whether the withholding of income tax from judicial salaries violated Section 10, Article VIII of the 1987 Constitution, which provides that the salary of the Chief Justice, Associate Justices, and judges of lower courts shall not be decreased during their continuance in office. Prior to the petition, the Court had already dealt with the matter administratively, reaffirming on June 4, 1987 the Chief Justice's directive to continue withholding taxes from the salaries of all members of the judiciary.

Petitioners Nitafan, Polo, and Savellano, Jr. were Regional Trial Court Judges presiding over Branches 52, 19, and 53, respectively, of the National Capital Judicial Region, all stationed in Manila. They filed a petition for prohibition to enjoin the Commissioner of Internal Revenue and the Financial Officer of the Supreme Court from deducting withholding taxes from their salaries. Their contention rested on Section 10, Article VIII of the 1987 Constitution, which provides that during the continuance in office of members of the judiciary, their salary shall not be decreased. They argued that any tax withheld from their emoluments or compensation as judicial officers constituted a decrease or diminution of their salaries, contrary to that constitutional provision, and was anathema to the ideal of an independent judiciary.

The matter had previously been addressed administratively. On June 4, 1987, the Court en banc had reaffirmed the Chief Justice's standing directive to the Fiscal Management and Budget Office to continue deducting withholding taxes from the salaries of the Justices of the Supreme Court and all other members of the judiciary. Despite that administrative resolution, the filing of the petition prompted the Court to settle the legal issue through a formal judicial pronouncement.

The Court examined the constitutional history of the non-diminution clause. The 1935 Constitution provided that judicial compensation "shall not be diminished during their continuance in office." The 1973 Constitution used the word "decreased" and, in a separate provision under General Provisions, expressly stipulated that "[n]o salary or any form of emolument of any public officer or employee, including constitutional officers, shall be exempt from payment of income tax." The 1987 Constitution, which petitioners relied upon, provides that judicial salaries "shall not be decreased" during continuance in office but does not contain a provision similar to Section 6, Article XV of the 1973 Constitution. Petitioners claimed that the absence of such a provision signified an intent to revert to the original concept of non-diminution, which included exemption from income tax.

The Court traced the deliberations of the 1986 Constitutional Commission on the draft of Section 10, Article VIII. The original draft proposal read that judicial salaries "shall not be diminished nor subjected to income tax." During the debates, Commissioners Aquino and Ople objected to the tax-exemption provision, citing principles of uniformity in taxation, equal protection, and the undesirability of creating an "island of extra territoriality" for the judiciary. Commissioner Rigos then proposed changing "diminished" to "decreased" and deleting the phrase "nor subjected to income tax" to "give substance to equality among the three branches in the government." Commissioner Bernas supported the deletion but proposed an amendment to the amendment, stating that merely dropping the phrase would cause a reversion to the rulings in Perfecto vs. Meer and Endencia vs. David, which excluded judicial salaries from income tax. Bernas proposed that the provision read: "During their continuance in office, their salary shall not be diminished BUT MAY BE SUBJECT TO GENERAL INCOME TAX." After a suspension, an understanding was reached that the text would read "shall not be DECREASED" with a period after that word, on the understanding that a provision similar to Section 6, Article XV of the 1973 Constitution would be included in the General Provisions, and that the doctrine in Perfecto vs. Meer and Endencia vs. David would no longer apply. The amendment was approved without objection. However, the corresponding provision in the General Provisions was inadvertently not included in the final text of the Constitution as ratified in February 1987.

• Constitutional Non-Diminution: Petitioners submitted that any tax withheld from their emoluments or compensation as judicial officers constitutes a decrease or diminution of their salaries, contrary to Section 10, Article VIII of the 1987 Constitution, which mandates that during their continuance in office, their salary shall not be decreased.
• Judicial Independence: Petitioners argued that the withholding of taxes from judicial salaries is anathema to the ideal of an independent judiciary envisioned in and by the 1987 Constitution.
• Absence of Tax-Non-Exemption Provision: Because the 1987 Constitution does not contain a provision similar to Section 6, Article XV of the 1973 Constitution — which expressly stated that no salary or emolument of any public officer or employee, including constitutional officers, shall be exempt from income tax — petitioners claimed the framers intended to revert to the original concept of non-diminution of judicial salaries, which included exemption from income tax.

• Constitutionality of Withholding Tax on Judicial Salaries: Whether the deduction of withholding taxes from the salaries of members of the judiciary constitutes a decrease or diminution of their salaries in violation of Section 10, Article VIII of the 1987 Constitution.
• Intent of the Constitutional Framers: Whether the 1986 Constitutional Commission intended to make judicial salaries subject to general income taxation notwithstanding the absence in the 1987 Constitution of an express provision stating that no salary of any public officer shall be exempt from income tax.
• Continuing Validity of Prior Precedents: Whether the rulings in Perfecto vs. Meer and Endencia vs. David, which declared the salaries of members of the judiciary exempt from income tax, remain controlling under the 1987 Constitution.

• Constitutionality of Withholding Tax on Judicial Salaries: No. The salaries of Justices and Judges are properly subject to a general income tax law applicable to all income earners, and the payment of such income tax does not fall within the constitutional protection against decrease of judicial salaries during their continuance in office.
• Intent of the Constitutional Framers: Yes, the framers intended judicial salaries to be taxable. The deliberations of the 1986 Constitutional Commission disclosed that the true intent was to delete the proposed express grant of tax exemption and to make judicial salaries subject to general income tax, even though the corresponding provision in the General Provisions was inadvertently omitted from the final text.
• Continuing Validity of Prior Precedents: No. The rulings in Perfecto vs. Meer and Endencia vs. David were expressly discarded as no longer controlling under the 1987 Constitution.

• Constitutionality of Withholding Tax on Judicial Salaries: The Court applied the fundamental principle of constitutional construction that the intent of the framers and of the people adopting the Constitution should be given effect. The primary task in constitutional construction is to ascertain and thereafter assure the realization of the purpose of the framers and of the people. Construing Section 10, Article VIII, the provision authorizes Congress to pass a law fixing another rate of compensation for Justices and Judges, but such rate must be higher than that currently received, or if lower, applicable only to those appointed after its approval. It would be a strained construction to read into the provision an exemption from taxation in light of the Constitutional Commission's discussion. The Court accorded due respect to the intent of the people, through the deliberations of their representatives, that all citizens should bear their aliquot part of the cost of maintaining the government and share the burden of general income taxation equitably.

• Intent of the Constitutional Framers: The Court examined the constitutional history and the 1986 Constitutional Commission deliberations in detail. The original draft of Section 10, Article VIII stated that judicial salaries "shall not be diminished nor subjected to income tax." Commissioners Aquino and Ople objected, citing uniformity of taxation, equal protection, and the undesirability of granting economic immunity to the judiciary denied to the executive and legislative departments. Commissioner Rigos proposed deleting "nor subjected to income tax" and changing "diminished" to "decreased" to promote equality among the three branches. Commissioner Bernas supported the deletion but warned that merely dropping the phrase would cause a reversion to the Perfecto vs. Meer and Endencia vs. David doctrine. Bernas proposed language stating that salaries "shall not be diminished BUT MAY BE SUBJECT TO GENERAL INCOME TAX." After a suspension, an understanding was reached: the text would read "shall not be DECREASED" with a period, on the understanding that a provision similar to Section 6, Article XV of the 1973 Constitution would be included in the General Provisions, and that the Perfecto and Endencia doctrine would no longer apply. The amendment was approved without objection. Although the corresponding General Provisions clause was inadvertently omitted from the final text, the Court found that the debates, interpellations, and opinions expressed until final approval disclosed the true intent: to make judicial salaries taxable.

• Continuing Validity of Prior Precedents: The Court expressly declared that the ruling in Perfecto vs. Meer, as affirmed in Endencia vs. David — which held that the imposition of income tax upon judicial salaries is a diminution thereof and violates the Constitution — must be declared discarded. The framers of the 1987 Constitution, as the alter ego of the people, expressed in clear and unmistakable terms the meaning and import of Section 10, Article VIII, that judicial salaries are subject to general income taxation. The Court had already authorized the continuation of withholding tax deductions from the salaries of Supreme Court Justices and all other judiciary members, thereby effectively discarding the old doctrine even before this judicial pronouncement.

• Constitutional Construction — Intent of the Framers — The primary task in constitutional construction is to ascertain and thereafter assure the realization of the purpose of the framers and of the people in the adoption of the Constitution. The intent of the framers of the organic law and of the people adopting it should be given effect. It may be safely assumed that the people in ratifying the Constitution were guided mainly by the explanation offered by the framers. The Court applied this doctrine by examining the deliberations of the 1986 Constitutional Commission to determine that the framers intended judicial salaries to be subject to general income tax, notwithstanding the inadvertent omission of an express non-exemption provision from the final constitutional text.

• Non-Diminution of Judicial Salaries — Section 10, Article VIII of the 1987 Constitution provides that the salary of the Chief Justice, Associate Justices, and judges of lower courts shall not be decreased during their continuance in office. The Court held that this provision authorizes Congress to fix another rate of compensation, but such rate must be higher than that currently received, or if lower, applicable only to those appointed after its approval. The imposition of a general income tax on judicial salaries does not constitute a prohibited decrease, as it is a tax applicable to all income earners and not a targeted reduction of judicial compensation.

• "The Court hereby reiterates that the salaries of Justices and Judges are properly subject to a general income tax law applicable to all income earners and that the payment of such income tax by Justices and Judges does not fall within the constitutional protection against decrease of their salaries during their continuance in office." — This passage states the ratio decidendi of the case, articulating the core holding that general income taxation on judicial salaries does not violate the constitutional non-diminution clause.

• "The ascertainment of that intent is but in keeping with the fundamental principle of constitutional construction that the intent of the framers of the organic law and of the people adopting it should be given effect." — This passage articulates the doctrinal basis for the Court's interpretive approach, grounding its ruling in the principle that constitutional construction must give effect to the framers' intent.

• "we accord due respect to the intent of the people, through the discussions and deliberations of their representatives, in the spirit that all citizens should bear their aliquot part of the cost of maintaining the government and should share the burden of general income taxation equitably." — This passage captures the equitable rationale underlying the ruling, emphasizing the principle that all citizens, including members of the judiciary, must share the burden of taxation.

• Perfecto vs. Meer, 85 Phil. 552 (1950) — Previously held that the independence of judges is of far greater importance than any revenue that could come from taxing their salaries, and that the imposition of income tax upon judicial salaries is a diminution thereof violating the Constitution. Expressly discarded by the Court as no longer controlling under the 1987 Constitution.
• Endencia vs. David, 93 Phil. 696 (1953) — Affirmed the ruling in Perfecto vs. Meer that judicial salaries were exempt from income tax. Likewise expressly discarded by the Court.
• Gold Creek Mining Co. vs. Rodriguez, 66 Phil. 259 (1938) — Cited for the principle that the intent of the framers of the organic law and of the people adopting it should be given effect in constitutional construction.
• J.M. Tuason & Co., Inc. vs. Land Tenure Administration, 31 SCRA 413 (1970) — Cited for the principle that the primary task in constitutional construction is to ascertain and assure the realization of the purpose of the framers and of the people in adopting the Constitution.

• Section 10, Article VIII, 1987 Constitution — Provides that the salary of the Chief Justice, Associate Justices, and judges of lower courts shall be fixed by law and shall not be decreased during their continuance in office. The Court construed this provision in light of the Constitutional Commission deliberations and held that it does not exempt judicial salaries from general income taxation.
• Section 9, Article VIII, 1935 Constitution — Provided that judicial compensation "shall not be diminished during their continuance in office." Cited for historical comparison.
• Section 10, Article X, 1973 Constitution — Provided that judicial salaries "shall not be decreased during their continuance in office." Cited for historical comparison.
• Section 6, Article XV, 1973 Constitution — Stated that "[n]o salary or any form of emolument of any public officer or employee, including constitutional officers, shall be exempt from payment of income tax." The 1986 Constitutional Commission intended to include a similar provision in the General Provisions of the 1987 Constitution, but it was inadvertently omitted from the final text.

Teehankee, C.J., Fernan, Narvasa, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento, and Cortes, JJ., concurred. Yap, J., was on leave.