G.R. No. 175356 - Separate Opinions

Manila Memorial Park, Inc. v. Secretary of the DSWD, G.R. No. 175356, 3 December 2013
♦ Decision, Del Castillo [J]
♦ Dissenting Opinion, Carpio [J]
♦ Concurring Opinion, Velasco [J]
♦ Concurring Opinion, Bersamin [J]
♦ Concurring and Dissenting Opinion, Leonen [J]

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

The main issue in this case is the constitutionality of Section 4 of Republic Act No. 74321 (R.A. 7432), as amended by Republic Act No. 92572 (R.A. 9257_, which states that establishments may claim the 20% mandatory discount to senior citizens as tax credit. Manila Memorial Park, Inc. and La Funeraria Paz-Sucat, Inc. (petitioners) allege that the tax deduction scheme under R.A. 9257 violates Section 9, Article III of the Constitution which provides that "[p]rivate property shall not be taken for public use without just compensation."

Sec. 4. Privileges for the Senior Citizens. - The senior Citizens shall be entitled to the following:

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

The establishment may claim the discounts granted under (a), (f), (g) and (h) as tax deduction based on the net cost of the goods sold or services rendered: Provided, That the cost of the discount shall be allowed as deduction form gross income for the same taxable year that the discount is granted. Provided, further, That the total amount of the claimed tax deduction net of value added tax if applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to proper documentation and to the provisions of National Internal Revenue Code, as amended. (Emphasis supplied)

The constitutionality of Section 4(a) of R.A. 7432, as amended by R.A. 9257, had been passed upon by the Court in Carlos Superdrug Corporation v. Department of Social Welfare and Development.3

In Carlos Superdrug Corporation, the Court made a distinction between the tax credit scheme under Section 4 of R.A. 7432 (the old Senior Citizens Act). and the tax deduction scheme under R.A. 9257 (the Expanded Senior Citizens Act). Under the tax credit scheme, the establishments are paid back 100% of the discount they give to senior citizens. Under the tax deduction scheme, they are only paid back about 32% of the 20% discount granted to senior citizens.

The Court cited in Carlos Superdrug Corporation the clarification by the Department of Finance, through Director IV Ma. Lourdes B. Recente, which explained the difference between tax credit and tax deduction, as follows:

Under this scheme, the establishment concerned is allowed to deduct from gross income, in computing for its tax liability, the amount of discount granted to senior citizens. Effectively, the government has loses in terms of foregone revenues an amount equivalent to the marginal tax rate the said establishment is liable to pay the government. This will be an amount equivalent to 32% of the twenty percent (20%) discounts so granted. The establishment shoulders the remaining portion of the granted discounts.4 (Emphasis in the original)

Thus, under the tax deduction scheme, there is no full compensation for the 20% discount that private establishments are forced to give to senior citizens.

The justification for the validity of the tax deduction, which the majority opinion adopts, was explained by the Court in Carlos Superdrug Corporation as a lawful exercise of police power. The Court ruled:

The law is a legitimate exercise of police power which, similar to the power of eminent domain, has general welfare for its object. Police power is not capable of an exact definition, but has been purposely veiled in general terms to underscore its comprehensiveness to meet all exigencies and provide enough room for an efficient and flexible response to conditions and circumstances, thus assuring the greatest benefits. 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." It is "[t]he power vested in the legislature by the constitution to make, ordain , and establish all manner of wholesome and reasonable laws, statutes, and ordinances, either with penalities or without, not repugnant to the constitution, as they shall judge to be for the good and welfare of commonwealth, and of the subject of the same."

For this reason, when the conditions so demand as determined by the legislature, property rights must bow to the primacy of police power because property right, though sheltered by due process, must shield to general welfare.

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. Moreover, in the absence demonstrating the allege confiscatory effect of the provision in question, there is no basis for its nullification in view of presumption of validity which every law has in its favor.

Given these, it is incorrect for petitioners to insist that the petitioner to insist that the grant of the senior citizen discount is unduly oppressive to their business, because petitioners have not taken time to calculate correctly and come up with a financial report, so that they have not been able to show properly whether or not the tax deduction scheme really works greatly to their disadvantages. 5

In the case before us, the majority opinion declares that it finds no reason to overturn or modify the ruling in Carlos Superdrug Corporation. The majority opinion also declares the Court's earlier decision in Commissioner of Internal Revenue v. Central Luzon Drug Corporation6 (Central Luzon Drug Corporation) holding that "the tax credit benefit granted to these establishments can be deemed as their just compensation for private property taken by the State of public use"7 and that the permanent reduction in the total revenues of private establishments is "a forced subsidy corresponding to the taking of private property for public use or benefit"8 is an obiter dictum and is not a binding precedent. The majority opinion reasons that the Court in Central Luzon Drug Corporation was not confronted with the use of whether the 20% discount was not confronted with the issue of whether the 20% discount was an exercise of police power or eminent domain.

The sole issue, according to the Court's decision in Central Luzon Drug Corporation, was whether a private a private establishment operates at a loss. However, a reading of the decision shows that petitioner raised the issue of "[w]hether Court of Appeals erred in holding that respondent may claim the 20% sales discount as a tax credit instead of as tax deduction from gross income or gross sales." In that case, the BIR erroneously treated the 20% discount as a tax deduction under Sections 2.i and 4 of Revenue Regulations No. RR 2-94 necessitated the discussion explaining why the tax credit benefit given to private establishments should be deemed just compensation. The Court explained in Central Luzon Drug Corporation:

Fourt, Section 2.1 and 4 of RR 2-94 deny the exercise by the State of its power of eminent domain. Be it stressed that the privilege enjoyed by senior citizens does not come directly from the State, but rather from the private establishments concerned. Accordingly, the tax credit benefit granted to these establishments can be deemed as their just compensation for private property taken by the State for public use.

The concept of public use is no longer confined to the traditional notion of use by the public, but held synonymous with public interest, public interest, public benefit, public welfare, and public convenience. The discount privilege to which our senior citizens are entitled is actually a benefit enjoyed by the general public to which these citizens belong. The discountsgiven would have entered the coffers and formed part of the gross sales of the private establishments concerned, were it not for RA 7432. The permanent reduction in their total revenues is a forced subsidy corresponding to the taking of private property for public use or benefit.

As a result of the 20 percent discount imposed by RA 7432, respondent becomes entitled to a just compensation. This term refers not only to the issuance of a tax credit certified indicating the correct amount of the discounts given, but also to the promptness in its release. Equivalent to the payment of property taken by the State, such issuance – when not done within a reasonable time from the grant of the discounts – cannot be considered as just compensation. In effect, respondent is made to suffer the consequences of being immediately deprived of its revenues while awaiting actual receipt, through the certificate, of the equivalent amount it needs to cope with the reduction in its revenues.

Besides, the taxation power can also be used as an implement for the exercise of the power of eminent domain. Tax measures are but "enforced contributions exacted on pain of penal sanctions" and "clearly imposed for a public purpose." In recent years, the power to tax has indeed become a most effective tool to realize social justice, public welfare, and the equitable distribution of wealth.

While it is a declared commitment under Section 1of RA 7432, social justice "cannot be invoked to trample on the rights of property owners who under our Constitution and laws are also entitled to protection. The social justice consecrated in our [C]onstitution [is] not intended to take away rights from a person and give them to another who is not entitled thereto. "For this reason, a just compensation for income that is taken away from respondent becomes necessary. It is the tax credit that our legislators find support to realize social justice, and no administrative body can alter fact.

To put it differently, a private establishment that merely breaks even- without the discount the discounts yet – will surely start to incur loses because of such discount. The same effect is expected if its mark-up is less than 20 percent, and if all its sales come from retail purchases by senior citizens. Aside from the observation we have already raised earlier, it will also be grossly unfair to an establishment if the discounts will be treated merely as deductions from either its gross income or its gross sales. Operating at a loss through no fault of its own, it will realize that the tax credit limitation under RR 2-94 is inutile, if not improper. Worse profit-generating businesses will be put in a better position if they avail themselves of tax credits denied those that are losing, because no taxes are due from the latter.10 (Emphasis supplied)

The foregoing discussion formed part of the explanation of this Court in Central Luzon Drug Corporation why Sections 2.i and 4 of RR 2-94 were erroneously issued. The foregoing discussion was certainly not unnecessary or immaterial in the resolution of the case;11 hence, the discussion is definitely not obiter dictum.

As regards Carlos Superdrug Corporation, a second look at the case shows that it barely distinguished between police power and eminent domain. While it is true that police power is similar to the power of eminent domain. While it is true that police power is similar to the power of eminent domain because both have the general welfare of the people for their object, we need to clarify the concept of taking in police power to prevent any claim of police power when the power actually exercised is eminent domain. When police power is exercised, there is no just compensation to the citizen who loses his private property. When eminent domain is exercised, there must be just compensation. Thus, the Court must clarify taking in police power and taking in eminent domain. Government officials cannot just invoke police power when the act constitutes eminent domain.

In the early case of People v. Pomar.12 the Court acknowledge that "[b]y reason of the constant growth of public opinion ina developing civilization, the term ‘police power’ has ever been, and we do not believe can be, clearly and definitely defined and circumscribed."13 The Court stated that the definition of the police power of the state must depend upon the particular law and the particular facts to which it is to be applied."14 However it was considered even then that police power, when applied to taking of property without compensation, refers to property without compensation, refers to property that are destroyed or placed outside the commerce of man. The Court declared in Pomar:

It is believed and confidently asserted that no case can be found, in civilized society and well-organized governments, where individuals have been deprived of their property, under the police power of the state, without compensation, except in cases where the property in question was used for the purpose of violatiing some law legally adopted, or constitutes a nuisance. Among such cases may be mentioned: Apparatus used in counterfeiting the money of the state; firearms illegally possessed; opium possessed in violation of law; apparatus used for gambling in violation of law; buildings and property used for the purpose of violating laws prohibiting the manufacture and sale of intoxicating liquor; and all cases in which their property itself has become a nuisance and dangerous and detrimental to the public health, morals and general welfare of the state. In all of such cases, and in many more which might be cited , the destruction of the property is permitted in the exercise of the public health, morals and general welfare of the state. In all of such cases, and in many more which might be cited, the destruction of the property is permitted in the exercise of the police power of the state. But it must first be established that such property was used as the instrument for the violation of a valid existing law. (Mugler vs. Kansan, 123 U.S. 623; Slaughter-House Cases, 16 Wall. [U.S.] 36; Butchers’ Union etc., Co. vs. Crescent City, etc., Co., 111 U.S. 746; John Stuart Mill – "On Liberty, " 28, 29)

Without further attempting to define what are the peculiar subjects or limits of th police power, it may safely de affirmed, that every law for the restraint and punishment of crimes, for the preservation of the public peace, health, and morals, must come within this category. But the state, when providing by legislation for the protection of the public health, the public morals, or the public safety, is subject to and is controlled by the paramount authority of the constituion of the stae, and will not be permitted to violate rights secured or guaranteedd by that instrument to the people under their law – the constitution. (Mugler vs. Kansan, 123 U.S. 623)15 (Emphasis supplied)

In City Government of Quezon City v. Hon. Judge Erica,16 the Court quoted with approval the trial court’s decision declaring null and void Section 9 of Ordinance No. 6118, S-64, of the Quezon City Council, thus:

We start the decision with a restatement of certain basic principles. Occupying the forefront in the bill of rights is the property without due process of law. (Art. III, Section 1 subparagraph 1, Constitution)

On the other hand, there are three inherent powers of government by which the state interferes with the property rights, namely – (1) police power, (2) eminent domain, [and] (3) taxation. These are said to exist independently of the Constitution as necessary attributes of sovereignity.

Police power is defined by Freud as ‘the power of promoting the public welfare by restraining and regulating the use of liberty and property’ (Quoted in Politiocal Law by Tañada and Carreon, V-11, p. 50) It is usually exerted oin order to merely regulate the use and enjoyment of property of the owner. If he is deprived of his property outright, it is not taken for public use but rather to destroy in order to promote the general welfare. In policepower, the owner does not recover from the government for injury sustained in consequence thereof (12 C.J. 623). It has been said that police power is the most essential of government powers, at time the most insistent, and always one of the least limitable of the powers of government (Ruby vs. Provincial Board, 39 Phil. 660; Ichong vs. Hernandez, L-7995, May 31, 1957). This power embraces the whole system of public regulation (U.S. vs. Linsuya Fan, 10 Phil. 104). The Supreme Court has said that police power is so far-reaching in scope that it has almost become impossible to limit its sweep. As it derives its existence from the very existence of state itself, it is the most positive and active of all governmental processes, the most essential insistent and illimitable. Especially it is so under the modern democratic framework where the demands of society and nation s have multiplied to almost unimaginable proportions. The field and scope of police power have become almost boundless, just as the fields of public interest and public welfare have become almost all embracing and have transcended human foresight. Since the Court cannot foresee the needs and demands of public interest and welfare, they cannot delimit beforehand the extent or scope of the police power by which and through which the state seeks to attain or achieve public interest and welfare . (Ichong vs. Hernandez, L-7995, May 31, 1957).

The police power being the most active power of the government and the due process clause being the broadest limitation on governmental power, the conflict between this power of government and the due process clause of the Constitution is oftentimes inevitable.

It will be seen from the foregoing authorities that the police power is usually exercised in the form of mere regulation or restrictions in the use of liberty or property for the promotion of the general welfare. It does not involve the taking or confiscation of property with the exception of a few cases where there is a necessity t o confiscate private property in order to destroy it for the purpose of protecting the peace and order and of promoting the general welfare as for instance, the confiscation of an illegally possessed article, such as opium and firearms.17 (Boldfacing and italicization supplied)

Clearly, taking under the exercise of police power does not require any compensation because the property taken is either destroyed or placed outside the commerce of man.

xxx ‘ the highest and most exact idea of property remaining in the government’ that may be acquired for some public purpose through a method in the nature of a forced purchase by the State. It is a right to take or reassert dominion over property within the state for public use or to meet public exigency. It is said to be an essential part of governance even in its most primitive form and thus inseparable from sovereignty. The only direct constitutional qualification is that "prvate property should not be taken for public use without just compensation. " This proscription is intended to provide a safeguard against whose property the power is sought to be enforced.18

In order to be valid, the taking of private property by the government under eminent domain has to be for public use and there must be just compensation.19

Both police power and the power of eminent have the general welfare for their object. The former achieves its object by regulation while the latter by "taking". When property right is impaired by regulation, compensation is not required; whereas, when property is taken, the Constitution prescribes just compensation. Hence, a sharp distinction must be made between regulation and taking.

When title to property is transferred to the expropriating authority, there is a clear case of compensable taking. However, as will be seen, it is a settled rule that neither acquisition of title nor total destruction of value is essential to taking. It is in cases where title remains with the private owner that inquiry must be made whether the impairment of property right is merely regulation or already amounts to compensable taking.

An analysis of existing jurisprudence yields the rule that when a property interest is appropriated and applied to some public purpose, there is compensable taking. Where, however, a property interest is merely restricted because continued unrestricted use would be injurious to public welfare or where property is destroyed because continued existence of the property would be injurious to public interest, there is no compensable taking.20 (Emphasis supplied)

In Section 4 of R.A. 7432, it is undeniable that there is taking of property for public use. Private property is anything that is subject to private ownership. The property taken for public is anything that is subject to private ownership. The property taken for public use applies not only to land but also to other proprietary property, including the mandatory discounts given to senior citizens which form part of the gross sales of the private establishments that are forced to give them. The amount of mandatory discount is money that belongs to the private establishment. For sure, money or cash is private propertybecause it is something of value that is subject to private ownership. The taking of property under Section 4 of R.A. 7432 is an exercise of the power of eminent domain and not an exercise of the polie power of the State. A clear and sharp distinction should be made because private property owners will be left at the mercy of government officials if these officials are allowed to invoke police power when what is actually exercised is the power of eminent domain.

Section 9, Article III of the 1987 Constitution speaks or private property without any distinction It does not state that there should be profit before the taking of property is subject to just compensation. The private property referred to purposes of taking could be inherited, donated, purchased, mortgaged, or as in this case, part of the gross sales of private establishments. They are all private property and any taking should be attended by a corresponding payment of just compensation. The 20% whether these establishments make a profit or suffer a loss. In fact, the 20% discount applies to non-profit establishments like country, social, or golf clubs which are open to the public and not only for exclusive membership’21 The issue of profit or loss to the establishments is immaterial.

Just compensation is "the full equivalent of the property taken from its owner by the expropriator,"22 The Court explained:

x x x. The measure is not the taker’s gain, but the owner’s loss. The word ‘just’ is used to qualify the meaning of the word ‘compensation’ and to convey thereby the idea that the amount to be tendered for the property to be taken shall be real, substantial, full and ample. x x x.23 (Emphasis supplied)

The 32% of the discount that the private establishments could recover under the tax deduction scheme cannot be considered real, substantial, full and ample compensation. In Carlos Superdrug Corporation, the Court conceded that "[t]he permanent reduction in [private establishments’] total revenue is forced subsidy corresponding to the taking of private property for public use or benefit"[24 The Court ruled that "[t]his constitutes compansable taking for which petitioners would ordinarily become entitled to s just compensation."25 Despite these pronouncements admitting there was compensable taking, the Court still proceeded to rule that "the State, in promoting the health and welfare of a special group of citizens, can be impose upon private establishments the burden of partly subsidizing government program."

There may be valid instances when the State can impose burdens on private establishments that effectively subsidize a government program. However, the moment a constitutional threshold is crossed – when the burden constitutes a taking of private property for public use – then the burden becomes an exercise of eminent domain for which just compensation is required.

An example of burden that can be validly imposed on private establishments is the requirement under Article 157 of the Labor Code that employers with certain number of employees should maintain a clinic and employ a registered nurse, a physician, and a dentist, depending on number of employee. Article 157 of the Labor Code provides:

Art. 157. Emergency medical and dental services. – It shall be duty of every employer to furnish his employees in any locality with free

Article 157 is a burden imposed by the State on private employers to complement a government program of promoting a healthy workplace. The employer itself, however, benefits fully from this burden because the health of its workers while in the workplace is a legitimate concern of the private employer. Moreover, the cost of maintaining the clinic and staff is part of the legislated wages for which the private employer is fully compensated by the services of the employees. In the case of the senior citizen’s discount, the private establishment is compensated only in the equivalent amount of 32% of the mandatory discount. There are no services rendered by the senior citizens, or any other form of payment, that could make up for the 68% balance of the mandatory discount. Clearly, the private establishments cannot recover the full amount of the discount they give and thus there is taking to the extent of the amount that cannot be recovered.

Another example of a burden that can be validly imposed on a private establishment is the requirement under Section 19 in relation to Section 18 of the Social Security Law26 and Section 7 of the Pag-IBIG Fund27 for the employer to contrinute a certain amount to fund the benefits of its employees. The amounts contributed by private employers form part of the legislated wages of employees. The private employers are deemed fully compensated for these amounts by the services rendered by the employees.

In the present case, the private establishments are only compensated about 32% of the 20% discount granted to senior citizens. They shoulder 68% of the discount they are forced to give to senior citizens. The Court should correct this situation as it clearly violates Section 9, Article III of the Constitution which provides that "[p]rivate property shall not be taken for public use without just compensation." Carlos Superdrug Corporation should be abandoned by this Court and Central Luzon Drug Corporation re-affirmed.

Carlos Superdrug Corporation admitted that the permanent reduction in the total revenues of private establishments is a "Compensable taking for which petitioners would ordinarily become entitled to a just compensation."28 However, Carlos Superdrug Corporation considered that there was sufficient basis for taking without compensation but invoking the exercise of police power of the State. In doing so, the Court failed to consider that a permanent taking of property for public use is an exercise of eminent domain for which the government must pay compensation. Eminent domain is a sub-class of police power and its exercise is subject to certain conditions, that is, the taking of property for public use and payment of just compensation.

It is incorrect to say that private establishments only suffer a minimal loss when they give 20% discount to senior citizens. Under R.A. 9257, the 20% discount applies to "all establishments relative to the utilization of services in hotels and similar lodging establishment, restaurants and recreation centers, and purchase of medicines in all establishments for exclusive use or enjoyment to senior citizens;"29 "admission fees charged by theaters, cinema houses and concert halls, circuses, carnivals, and other similar places of culture, leisure and amusement for the exclusive use or enjoyment for senior citizens;"30 "medical and dental services, and diagnostic and laboratory fees provided under Section 4(e) including professional fees of attending doctors in all private hospitals and medical facilities, in accordance with the rule and regulations to be issued by the Department of Health in coordination with the Philippine Health Insurance Corporation;"31 "fare for domestic air and sea travel for the exclusive use or enjoyment of senior citizens;"32 and "public railways, skyways and bus fare for the exclusive use and enjoyment of the senior citizens:’’33 The 20% discount cannot be considered minimal because not all private establishments make a 20% margin of profit. Besides, on its face alone, a 20% mandatory discount based on the gross selling price huge. The 20% mandatory discount is more that the 12% Value Added Tax, itself not an insignificant amount.

The majority opinion states that the grant of 20% discount to senior citizens is a regulation of business similar to the regulation of public utilities and businesses imbued with public interest. The majority opinion states:

The subject regulation may be said to be similar to, but with substantial distinctions from, price control or rate of return on investment control laws which are traditionally regarded as police power measures. These laws generally regulate public utilities or industries/enterprises imbued with public interest in order to protect consumers from exorbitant or unreasonable pricing as well as temper corporate greed by controlling the rate or return on investment of these corporations considering that they have monopoly over the goods or services that they provide to the general public. The subject regulation differs therefrom in that (1) the discount does not prevent the establishment from adjusting the level of prices of their goods and services, and (2) the discount does not apply to all customers of a given establishment but only to a class of senior citizens. x x x34

However, the majority opinion admits that the 20% mandatory discount is only "similar to, but with substantial distinctions from price control or rate or return on investment control laws" which "regulate public utilities or industries/enterprises imbued with public interest." Since there are admittedly "substantial distinctions," regulatory laws on public utilities or industries imbued with public interest cannot be used as justification for the 20% mandatory discount with our payment of just compensation. The profits of public utilities are regulated

Because they operate under franchises granted by the State.1âwphi1 Only those who are granted franchises by the State can operate public utilities and these franchises have agreed to limit their profits as condition for the grant of the franchises. The profits of industries imbued with public interest, but which do not enjoy franchises from the State, can only be regulated temporarily during emergencies like calamities. There has to be an emergency to trigger price control on businesses and only for the duration of the emergency. The profits of private establishments which are non-franchisees cannot be regulated permanently, and there is no such law regulating their profits permanently. The majotity opinion cites a case35 that allegedly allows the State to limit the net profits of private establishments. However, the case cited by the majority opinion refers to franchise holders of electric plants.

The State cannot compel private establishments without franchise to grant discounts, or to operate at a loss, because that constitutes taking of private property for public use without just compensation. The State can take over private property without compensation in times of war or other national emergency under Section 23(2) Article VI of the 1987 Constitution but only for a limited period and subject to such restrictions as Congress may provide. Under its police power, the State may also temporarily limit or suspend business activities. One example is the two-day liquor ban during elections under Article 261 of the Omnibus Election Code but this, again, is only for a limited period. This is a valid exercise of police power of the State.

However, any form of permanent taking of private property is exercise of eminent domain that requires the State to pay just compensation. The police power to regulate business cannot negate another provision of the Constitution like the eminent domain clause, which requires just compensation to be paid for taking or private property for public use. The State has the power to regulate the conduct of the business of private establishments as long as the regulation is reasonable, but when the regulation amounts to permanent taking of private property for public use , there must be just compensation because the regulation now reaches the level of eminent domain.

The explanation by the majority that private establishments can always increase their prices to recover the mandatory discount will only encourage private establishments to adjust their prices upwards to prejudice of customers who do not enjoy the 20% discount. It was likewise suggested that if a company increases its prices, despite the application of the 20% discount, the establishment becomes more profitable than it was before the implementation of R.A. 7432. Such an economic justification is self-defeating, for more consumers will suffer from the price increase than will benefit from the 20% discount. Even then, such ability to increase prices cannot legally validate a violation of the eminent domain clause.

Finally, the 20% discount granted to senior citizens is not per se unreasonable. It is the provision that the 20% discount may be claimed by private establishments as tax deduction, and no longer as tax credit, that is oppressive and confiscatory.

SEC. 4. Privileges for the Senior Citizens. – The senior citizens shall be entitled to the following:

(a) the grant of twenty percent (20%) discount from all establishments relative to the utilization of services in hotels and similar lodging establishment, restaurants and recreation centers, and purchase of medicines in all establishments for the exclusive use or enjoyment of senior citizens, including fineral and burial services for the death of senior citizens;

The establishment may claim the discounts granted under (a), (f), (g) and (h) as tax deduction based on the net cost of the goods sold or services rendered:Provided, That the cost of the discount shall be allowed as deduction from gross income for the same taxable year that the discount is granted. Provided, further, That the total amount of the claimed tax deduction net value added tax is applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to proper documentation and to the provisions of the National Internal Revenue Code, as amended. (Emphasis supplied)

Due to the patent unconstitutionality of Section 4 of R.A. 7432, as amended by R.A. 9257, providing that the private establishments may claim the 20% discount to senior citizens as tax deduction, the old law, or Section 4 of R.A. 7432, which allows the 20% discount as tax credit, is automatically reinstated. Where amendments to statute are declared unconstituional, the original statute as it existed before the amendment remains in force36 An amendatory law, if declared null and void, in legal contemplation does not exist.37 The private establishments should therefore be allowed to claim the 20% discount granted to senior citizens as tax credit.

The issue in the present case hinges upon the consequence of reclassification of mandate discount as deduction from the gross income instead of a tax credit deductible from the tax liability of affected taxpayers. In particular, the petition questions the constitutionality of Section 4 of Republic Act No. (RA) 9257, and its implementing rules, which has allowed the amount representing the 20% forcible discount to senior citizens as a deduction from gross income rather than a tax credit.

As cited by the ponencia, this Court had previously resolved the issue in Carlos Superdrug v. DSWD (Carlos Superdrug) by sustaining the reclassification as a proper implement of the police power of the State. A vie, however, has been advance that We should take a second look at the doctrine laid down in Carlos Superdrug and declare Sec. 4 of RA 9257 as an improper exercise of the power of eminent domain by the State as it permits the deprivation of private property without just compensation.

Indeed, the practice allowing taking of private without just compensation is an abhorrent policy. However, I do not agree that such policy underpins Sec. 4 of RA 9257 is no more than a regulation of the right to profits of certain taxpayers in order to benefit a significant sector of society. It is, thus, a valid exercise of the police power of the State.

The right to profit, as distinguished from profit itself, is not subject to expropriation as it is of a mercurial character that denies the possibility of taking for a public purpose. It is a right solely within the discretion of the taxpayers that cannot be appropriated by the government. The mandated 20% discount for the benefit fo senior citizens is not property already vested with the taxpayer before the sale of the markup on the cost of the good or service and the income to be gained from the sale. Without the sale and corresponding purchase by senior citizens, there is no gain derived by the taxpayer. This nebulous nature of the financial gain of the seller deters the acquisition by the state of the "domain" or ownership of the right to such financial gain through expropriation. At best, the State is empowered to regulate this right to the acquisition of this financial gain to benefit senior citizens by ensuring that the good or service be sold to them at a price 20% less than the regular selling price. Time and again, this Court has recognized the fundamental police power of the State to regulate the exercise of various rights holding that "equally fundamental with the private right is that of the public to regulate it in the common interest."1

This Court has, for instance, recognized the power of the State to regulate and temper the right of employers to dismiss their employees.2

Similarly, We have sustained the State’s power to regulate the right to acquire and possess arms.3

Contractual rights are also subject to the regulatory police power of the State.4

The right to profit is not immune from this regulatory power of the State intended to promote the common good and the attainment of social justice. As early as the first half of the past century, this Court has rejected the doctrine of laissez faire as an axiom of economic theory and has upheld the power of the State to regulate businesses even to the extent of limiting their profit.5

Thus, the imposition of price control is recognized as a valid exercise of police power that does not give businessmen the right to be compensated for the amount of what they could have earned considering the demand of the market. The effect of RA 9257 is not dissimilar to a price control law. The fact that the State has not fixed an amount to be deducted from the selling price of certain goods and services to senior citizens indicates that RA 9257 is a regulatory law under the police power of the State. It is an acknowledgment that proprietors can and will factor in the potential deduction of 20% of the price given to some of their customers, i.e., the senior citizens, in the overall pricing strategy of their products and services. RA 9257 has to be sure not obliterated the right of taxpayers to profit nor divested them of profits already earned; it simply regulated the right to the attainment of these profits. The enforcement of the 20% discount in favor of senior citizens does not, therefore, partake the nature of "taking" in the context of eminent domain. As such, proprietors like petitioners cannot insist that they areentitled to a peso-for-peso compensation for complying with the valid regulation embodied in RA 9257 that restricts their right to profit.

As it is a regulatory law, not a law implementing the power of eminent domain, the assertion tha the use of the 20% discount as a deduction negates its role as a "just compensation" is mislaid and irrelevant. In the first place, as RA 9257 is a regulatory law, the allowance to sue the 20% discount, as a deduction from the gross income for purposes of computing the income tax payable to the government, is not intended as compensation. Rather, it is simply a recognition of the fact that no income was realized by the taxpayer to the extent of the 20% of the selling price by virtue of the discount given to senior citizens. Be that as it may, logical result is that no tax on income can be imposed by the State. In other words, by forcing some businesses to give a 20% discount to senior citizens, the government is likewise foregoing the taxes it could have otherwise earned from the earnings pertinent to the 20% discount. This is the real import of Sec. 4 of RA 9257.As RA 9257 does not sanction any taking of private property, the regulatory law does not require the payment of compensation.

Finally, it must be noted that the issue of validity of Sec. 4 of RA 9257 has already been settled. After years of implementation of the law, economic progress has not been put to a halt. IN fact, it has not been alleged that a business establishment commonly patronized by senior citizens and covered by RA 9257 had shut down because of the mandate to give the 20% discount and the supposed deficient "compensation" under Sec. 4 of RA 9257. This clearly shows that the regulation made in the subject law is a minimal encumbrance to businesses that must be employed to overthrow an otherwise reasonable, logical, and just instrument of the social justice policy of our Constitution.

At issue is the constitutionality of the treatment as a tax deduction by covered establishments of the 20% discount granted to senior citizens under Republic Act (RA) No. 9527 (Expanded Senior Citizens Act of 2003)1 and the implementing rules and regulations issued by the Department of Social Welfare and Development (DSWD) and Department of Finance (DOF).

The assailed provision is Section 4 of the Expanded Senior Citizens Act of 2003, which provides –

SEC. 4. Privileges for the Senior Citizens. – The senior citizens shall be entitled to the following:

The establishment may claim the discounts granted under (a), (f), (g) and (h) as tax deduction based on the net cost of the goods sold or services rendered: Provided That the cost of the discount shall be allowed as deduction from gross income for the same taxable year that the discount is granted. Provided, further, That the total amount of the claimed tax deduction net value added tax if applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to proper documentation and to the provisions of the National Internal Revenue Code, as amended.

The petitioners contend that Section 4, supra, violates Section 9, Article III of the Constitution, which mandates that "[p]rivate property shall not be taken for public use without just compensation." On the other hand, Justice del Castillo observes in his opinion ably written for the Majority that the validity of the 20% senior citizen discount must be upheld as an exercise by the State of its police power; and reminds that the issue has already been settled in Carlos Superdrug Corporation v. Department of Social Welfare and Development,2 with the Court pronouncing therein that:

Theoretically, the treatment of the discount as a deduction reduces the net income of the private establishments concerned. The discounts given would have entered the coffers and formed part of the gross sales of the private establishments, were it not for R.A. No. 9257. The permanent reduction in their total revenues is a forced subsidy corresponding to the taking of private property for public use or benefit. This constitutes compensable taking for which petitioners would ordinarily become entitled to a just compensation. Just compensation is defined as the full and fair equivalent of the property taken from its owner by the expropriator. The measure is not the taker’s gain but the owner’s loss. The word just is used to intensify the meaning of the word compensation, and to convey the idea that the equivalent to be rendered for the property to be taken shall be real, substantial, full and ample. A tax deduction does not offer full reimbursement of the senior citizen discount. As such, it would not meet the definition of just compensation. Having said that, this raises the question of whether the State, in promoting the health and welfare of a special group of citizens, can impose upon private establishments the burden of partly subsidizing a government program. The Court believes so. The Senior Citizens Act was enacted primarily to maximize the contribution of senior citizens to nation-building, and to grant benefits and privileges to them for their improvement and well-being as the State considers them an integral part of our society. The priority given to senior citizens finds its basis in the Constitution as set forth in the law itself. Thus, the Act provides: SEC. 2. Republic Act No. 7432 is hereby amended to read as follows:

SECTION 1. Declaration of Policies and Objectives. – Pursuant to Article XV, Section 4 of the Constitution, it is the duty of the family to take care of its elderly members while the State may design programs of social security for them. In addition to this, Section 10 in the Declaration of Principles and State Policies provides: "The State shall provide social justice in all phases of national development." Further, Article XIII, Section 11, provides: "The State shall adopt an integrated and comprehensive approach to health development which shall endeavor to make essential goods, health and other social services available to all the people at affordable cost. There shall be priority for the needs of the underprivileged sick, elderly, disabled, women and children." Consonant with these constitutional principles the following are the declared policies of this Act:

(f) To recognize the important role of the private sector in the improvement of the welfare of senior citizens and to actively seek their partnership. To implement the above policy, the law grants a twenty percent discount to senior citizens for medical and dental services, and diagnostic and laboratory fees; admission fees charged by theaters, concert halls, circuses, carnivals, and other similar places of culture, leisure and amusement; fares for domestic land, air and sea travel; utilization of services in hotels and similar lodging establishments, restaurants and recreation centers; and purchases of medicines for the exclusive use or enjoyment of senior citizens. As a form of reimbursement, the law provides that business establishments extending the twenty percent discount to senior citizens may claim the discount as a tax deduction. The law is a legitimate exercise of police power which, similar to the power of eminent domain, has general welfare for its object. Police power is not capable of an exact definition, but has been purposely veiled in general terms to underscore its comprehensiveness to meet all exigencies and provide enough room for an efficient and flexible response to conditions and circumstances, thus assuring the greatest benefits. 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." It is "[t]he power vested in the legislature by the constitution to make, ordain, and establish all manner of wholesome and reasonable laws, statutes, and ordinances, either with penalties or without, not repugnant to the constitution, as they shall judge to be for the good and welfare of the commonwealth, and of the subjects of the same." For this reason, when the conditions so demand as determined by the legislature, property rights must bow to the primacy of police power because property rights, though sheltered by due process, must yield to general welfare. 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. Moreover, in the absence of evidence demonstrating the alleged confiscatory effect of the provision in question, there is no basis for its nullification in view of the presumption of validity which every law has in its favor.3

The Majority hold that the 20% senior citizen discount is, by its nature and effects, "a regulation affecting the ability of private establishments to price their products and services relative to a special class of individuals, senior citizens, for which the Constitution affords preferential concern."4

As such, the discount may be properly viewed as a price regulatory measure that affects the profitability of establishments subjected thereto, only that: (1) the discount does not prevent the establishments from adjusting the level of prices of their goods and services, and (2) the discount does not apply to all customers of a given establishment but only to the class of senior citizens.5

Nonetheless, the Majority posits that the discount has not been proved to be unreasonable, oppressive or confiscatory in the absence of evidence showing that its continued implementation causes an establishment to operate at a loss, or will be unconscionably detrimental to the business operations of covered establishments such as that of the petitioners.6

I JOIN the Majority. I VOTE for the dismissal of the petition in order to uphold the constitutionality of the tax deduction scheme as a valid exercise of the State’s police power.

The 20% senior citizen discount
under the Expanded Senior Citizens Act
does not amount to compensable taking

The petitioners’ claim of unconstitutionality of the tax deduction scheme under the Expanded Senior Citizens Act rests on the premise that the 20% senior citizen discount was enacted by Congress in the exercise of its power of eminent domain. Like the Majority, I cannot sustain the claim of the petitioners, because I find that the imposition of the discount does not emanate from the exercise of the power of eminent domain, but from the exercise of police power.

[T]he power of the nation or a sovereign state to take, or to authorize the taking of, private property for a public use without the owner’s consent, conditioned upon payment of just compensation." It is acknowledged as "an inherent political right, founded on a common necessity and interest of appropriating the property of individual members of the community to the great necessities of the whole community.7

The State’s exercise of the power of eminent domain is not without limitations, but is constrained by Section 9, Article III of the Constitution, which requires that private property shall not be taken for public use without just compensation, as well as by the Due Process Clause found in Section 1,8

Article III of the Constitution. According to Republic v. Vda. de Castellvi,9 the requisites of taking in eminent domain are as follows: first, the expropriator must enter a private property; second, the entry into private property must be for more than a momentary period; third, the entry into the property should be under warrant or color of legal authority; fourth, the property must be devoted to a public use or otherwise informally appropriated or injuriously affected; and, fifth, the utilization of the property for public use must be in such a way as to oust the owner and deprive him of all beneficial enjoyment of the property. The essential component of the proper exercise of the power of eminent domain is, therefore, the existence of compensable taking. There is taking when –

[T]he owner is actually deprived or dispossessed of his property; when there is a practical destruction or a material impairment of the value of his property or when he is deprived of the ordinary use thereof. There is a "taking" in this sense when the expropriator enters private property not only for a momentary period but for a more permanent duration, for the purpose of devoting the property to a public use in such a manner as to oust the owner and deprive him of all beneficial enjoyment thereof. For ownership, after all, "is nothing without the inherent rights of possession, control and enjoyment." Where the owner is deprived of the ordinary and beneficial use of his property or of its value by its being diverted to public use, there is taking within the Constitutional sense.10

As I see it, the nature and effects of the 20% senior citizen discount do not meet all the requisites of taking for purposes of exercising the power of eminent domain as delineated in Republic v. Vda. de Castellvi, considering that the second of the requisites, that the taking must be for more than a momentary period, is not met. I base this conclusion on the universal understanding of the term momentary, rendered in Republic v. Vda. de Castellvi thusly:

"Momentary" means, "lasting but a moment; of but a moment’s duration" (The Oxford English Dictionary, Volume VI, page 596); "lasting a very short time; transitory; having a very brief life; operative or recurring at every moment" (Webster's Third International Dictionary, 1963 edition.) The word "momentary" when applied to possession or occupancy of (real) property should be construed to mean "a limited period" — not indefinite or permanent.11

In concept, discount is an abatement or reduction made from the gross amount or value of anything; a reduction from a price made to a specific customer or class of customers.12

Under the Expanded Senior Citizens Act, the 20% senior citizen discount is a special privilege granted only to senior citizens or the elderly, as defined by law,13 when a sale is made or a service is rendered by a covered establishment to a senior citizen or an elderly. The income or revenue corresponding to the amount of the discount granted to a senior citizen is thus unrealized only in the event that a sale is made or a service is rendered to a senior citizen. Verily, the discount is not availed of when there is no sale or service rendered to a senior citizen. The amount of unrealized revenue or lost potential profits on the part of the covered establishment – should it be subsequently shown that the 20% senior citizen discount granted could have covered operating expenses – lacks the character of indefiniteness and permanence considering that the taking was conditioned upon the occurrence of a sale or service to a senior citizen. The tax deduction scheme is, therefore, not the compensation contemplated under Section 9, Article III of the Constitution. Even assuming that the unrealized revenue or lost potential profits resulting from the grant of the 20% senior citizen discount qualifies as taking within the contemplation of the power of eminent domain, the tax deduction scheme suffices as a form of just compensation. For that purpose, just compensation is defined as –

[T]he full and fair equivalent of the property taken from its owner by the expropriator. The measure is not the taker’s gain, but the owner’s loss. The word "just" is used to intensify the meaning of the word "compensation" and to convey thereby the idea that the equivalent to be rendered for the property to be taken shall be real, substantial, full, and ample. Indeed, the "just"-ness of the compensation can only be attained by using reliable and actual data as bases in fixing the value of the condemned property.14

The petitioners, relying on the ruling in Commissioner of Internal Revenue v. Central Luzon Drug Corporation,15 appear to espouse the view that the tax credit method, rather than the tax deduction scheme, meets the definition of just compensation. This, because "a tax credit reduces the tax due, including – whenever applicable – the income tax that is determined after applying the corresponding tax rates to taxable income" while a "tax deduction, on the other, reduces the income that is subject to tax in order to arrive at taxable income."16

At the time when the supposed taking happens, i.e., upon the sale of the goods or the rendition of a service to a senior citizen, the loss incurred by the covered establishment represents only the gross amount of discount granted to the senior citizen. At that point, the real equivalent of the property taken is the amount of unrealized income or revenue of the covered establishment, without the benefit of operating expenses and exemptions, if any. The tax deduction scheme substantially compensates such loss, therefore, because the loss corresponds to the real and actual value of the property at the time of taking.

The 20% senior citizen discount is
a taking in the form of regulation;
thus, just compensation is not required

In Didipio Earth Savers’ Multi-Purpose Association, Inc. v. Gozun,17 the Court has distinguished the element of taking in eminent domain from the concept of taking in the exercise of police power, viz:

Property condemned under police power is usually noxious or intended for a noxious purpose; hence, no compensation shall be paid. Likewise, in the exercise of police power, property rights of private individuals are subjected to restraints and burdens in order to secure the general comfort, health, and prosperity of the state. Thus, an ordinance prohibiting theaters from selling tickets in excess of their seating capacity (which would result in the diminution of profits of the theater-owners) was upheld valid as this would promote the comfort, convenience and safety of the customers. In U.S. v. Toribio, the court upheld the provisions of Act No. 1147, a statute regulating the slaughter of carabao for the purpose of conserving an adequate supply of draft animals, as a valid exercise of police power, notwithstanding the property rights impairment that the ordinance imposed on cattle owners. A zoning ordinance prohibiting the operation of a lumber yard within certain areas was assailed as unconstitutional in that it was an invasion of the property rights of the lumber yard owners in People v. De Guzman. The Court nonetheless ruled that the regulation was a valid exercise of police power. A similar ruling was arrived at in Seng Kee S Co. v. Earnshaw and Piatt where an ordinance divided the City of Manila into industrial and residential areas. A thorough scrutiny of the extant jurisprudence leads to a cogent deduction that where a property interest is merely restricted because the continued use thereof would be injurious to public welfare, or where property is destroyed because its continued existence would be injurious to public interest, there is no compensable taking. However, when a property interest is appropriated and applied to some public purpose, there is compensable taking. According to noted constitutionalist, Fr. Joaquin Bernas, SJ, in the exercise of its police power regulation, the state restricts the use of private property, but none of the property interests in the bundle of rights which constitute ownership is appropriated for use by or for the benefit of the public. Use of the property by the owner was limited, but no aspect of the property is used by or for the public. The deprivation of use can in fact be total and it will not constitute compensable taking if nobody else acquires use of the property or any interest therein. If, however, in the regulation of the use of the property, somebody else acquires the use or interest thereof, such restriction constitutes compensable taking. x x x x While the power of eminent domain often results in the appropriation of title to or possession of property, it need not always be the case. Taking may include trespass without actual eviction of the owner, material impairment of the value of the property or prevention of the ordinary uses for which the property was intended such as the establishment of an easement In order to determine whether a challenged legislation involves regulation or taking, the purpose of the law should be revisited, analyzed, and scrutinized.18

There is no more direct and better way to do so now than to look at the declared policies and objectives of the Expanded Seniors Citizens Act , to wit:

As the foregoing shows, the 20% senior citizen discount forbids a covered establishment from selling certain goods or rendering services to senior citizens in excess of 80% of the offered price, thereby causing a diminution in the revenue or profits of the covered establishment. The amount corresponding to the discount, instead of being converted to income of the covered establishments, is retained by the senior citizen to be used by him in order to promote his well-being, to recognize his important role in society, and to maximize his contribution to nation-building. Although a form of regulation of or limitation on property right is thereby manifest, what the law clearly and primarily intends is to grant benefits and special privileges to senior citizens.

A new question necessarily arises. Can a law, whose chief purpose is to give benefits to a special class of citizens, be justified as a valid exercise of the State’s police power? Police power, insofar as it is being exercised by the State, is depicted as a regulating, prohibiting, and punishing power. It is neither benevolent nor generous. Unlike traditional regulatory legislations, however, the Expanded Senior Citizens Act does not intend to prevent any evil or destroy anything obnoxious. Even so, the Expanded Senior Citizens Act remains a valid exercise of the State’s police power. The ruling in Binay v. Domingo,19 which involves police power as exercised by a local government unit pursuant to the general welfare clause, proves instructive. Therein, the erstwhile Municipality of Makati had passed a resolution granting burial assistance of ₱500.00 to qualified beneficiaries, to be taken out of the unappropriated available existing funds from the Municipal Treasury.20

The Commission on Audit disallowed on the ground that there was "no perceptible connection or relation between the objective sought to be attained under Resolution No. 60, s. 1988, supra, and the alleged public safety, general welfare, etc. of the inhabitants of Makati."21

Municipal governments exercise this power under the general welfare clause: pursuant thereto they are clothed with authority to ‘enact such ordinances and issue such regulations as may be necessary to carry out and discharge the responsibilities conferred upon it by law, and such as shall be necessary and proper to provide for the health, safety, comfort and convenience, maintain peace and order, improve public morals, promote the prosperity and general welfare of the municipality and the inhabitants thereof, and insure the protection of property therein.’ (Sections 91, 149, 177 and 208, BP 337). And under Section 7 of BP 337, ‘every local government unit shall exercise the powers expressly granted, those necessarily implied therefrom, as well as powers necessary and proper for governance such as to promote health and safety, enhance prosperity, improve morals, and maintain peace and order in the local government unit, and preserve the comfort and convenience of the inhabitants therein.’

Police power is the power to prescribe regulations to promote the health, morals, peace, education, good order or safety and general welfare of the people. It is the most essential, insistent, and illimitable of powers. In a sense it is the greatest and most powerful attribute of the government. It is elastic and must be responsive to various social conditions. (Sangalang, et al. vs. IAC, 176 SCRA 719). On it depends the security of social order, the life and health of the citizen, the comfort of an existence in a thickly populated community, the enjoyment of private and social life, and the beneficial use of property, and it has been said to be the very foundation on which our social system rests. (16 C.J.S., p. 896)

However, it is not confined within narrow circumstances of precedents resting on past conditions; it must follow the legal progress of a democratic way of life.

(Sangalang, et al. vs. IAC, supra). In the case at bar, COA is of the position that there is ‘no perceptible connection or relation between the objective sought to be attained under Resolution No. 60, s. 1988, supra, and the alleged public safety, general welfare etc. of the inhabitants ofMakati.’ (Rollo, Annex "G", p. 51). Apparently, COA tries to redefine the scope of police power by circumscribing its exercise to ‘public safety, general welfare, etc. of the inhabitants of Makati.’

In the case of Sangalang vs. IAC, supra, We ruled that police power is not capable of an exact definition but has been, purposely, veiled in general terms to underscore its all-comprehensiveness. Its scope, over-expanding to meet the exigencies of the times, even to anticipate the future where it could be done, provides enough room for an efficient and flexible response to conditions and circumstances thus assuring the greatest benefits.

The police power of a municipal corporation is broad, and has been said to be commensurate with, but not to exceed, the duty to provide for the real needs of the people in their health, safety, comfort, and convenience as consistently as may be with private rights. It extends to all the great public needs, and, in a broad sense includes all legislation and almost every function of the municipal government. It covers a wide scope of subjects, and, while it is especially occupied with whatever affects the peace, security, health, morals, and general welfare of the community, it is not limited thereto, but is broadened to deal with conditions which exist so as to bring out of them the greatest welfare of the people by promoting public convenience or general prosperity, and to everything worthwhile for the preservation of comfort of the inhabitants of the corporation (62 C.J.S. Sec. 128). Thus, it is deemed inadvisable to attempt to frame any definition which shall absolutely indicate the limits of police power. COA’s additional objection is based on its contention that ‘Resolution No. 60 is still subject to the limitation that the expenditure covered thereby should be for a public purpose, xxx should be for the benefit of the whole, if not the majority, of the inhabitants of the Municipality and not for the benefit of only a few individuals as in the present case.’ (Rollo, Annex ‘G’, p. 51). COA is not attuned to the changing of the times. Public purpose is not unconstitutional merely because it incidentally benefits a limited number of persons. As correctly pointed out by the Office of the Solicitor General, ‘the drift is towards social welfare legislation geared towards state policies to provide adequate social services (Section 9, Art. II, Constitution), the promotion of the general welfare (Section 5, ibid) social justice (Section 10, ibid) as well as human dignity and respect for human rights (Section 11, ibid).’ (Comment, p. 12)

The care for the poor is generally recognized as a public duty. The support for the poor has long been an accepted exercise of police power in the promotion of the common good.22 (Bold Emphasis supplied.)

The Expanded Senior Citizens Acts is similar to the municipal resolution in Binay because both accord benefits to a specific class of citizens, and both on their faces do not primarily intend to burden or regulate any person in giving such benefit. On the one hand, the Expanded Senior Citizens Act aims to achieve this by, among others, requiring select establishments to grant senior citizens the 20% discount for their goods or services, while, on the other, the municipal resolution in Binay appropriated money fromn the Municipal Treausry to achieve its goal of giving support the poor.

If the Court sustained in Binay a municipality’s exercise of police power to enact benevolent and beneficial resolutions, we have a greater reason to uphold the State’s exercise of the same power through the enactment of law of a similar nature. Indeed, it is but opportune for the Court to now make an unequivocal and definitive pronouncement on this new dimension of the State’s police power.

This case involves the constitutionality of Section 4 of Republic Act No. 7432 as amended vy Republic Act No. 92571 as well as the implementing rules and regulations issued by respondents Department of Social Welfare and Development and Department of Finance. The provisions allow the 20% discount given by business establishments to senior citizens only as a tax deduction from their gross income. The provisions amend an earlier law that allows the senior citizen discount as a tax credit from their total tax liability.

The enactment of the provision as well as its implementing rules is a proper exercise of the inherent power to tax and police power. However, I regret I cannot join my esteemed colleagues Justice Mariano del Castillo as the ponencia and Justice Antonio Carpio in his thoughful dissent that the power of eminent domain is also involved. It is for these reasons that the power of eminent domain also involved. It is for these reasons that IO offer this separate opinion.

Before us is a Petition for Prohibition2 filed by Manila Memorial Park, Inc. and La Funeraria Paz-Sucat, Inc. against the Secretaries of the Department of Social Welfare and Development and the Department of Finance. Petitioners are domestic corporations engaged in the business of providing funeral and burial services. On April 23, 1992, Republic Act No. 7432 was passed granting senior citizens privileges. Section 4(a) grants them a 20% discount from certain establishments provided "[t]hat private establishments may claim the cost as tax credit." On August 23, 1993, Revenue Regulation No. 02-94 was issued to implement Republic Act No. 7432. Section 2(i) on the definition of "tax credit" provides that the discount "shall be deducted by the said establishments from their gross income x x x." Section 4 on bookkeeping requirements for private establishments similarly states that "[t]he amount of 20% discount shall be deducted from the gross income for income tax purposes and from gross sales of the business enterprise concerned for purposes of VAT and other percentage taxes." Commissioner of Internal Revenue v. Central Luzon Drug Corporation3 later declared these sections of Revenue Regulation No. 02-94 as erroneous for contravening Republic Act No. 7432, which specifically allows establishments to claim a tax credit. On February 26, 2004, Republic Act No. 9257 was passed amending certain provisions of Republic Act No. 7432. Specifically, Section 4 now provides as follows:

The Secretary of Finance issued Revenue Regulation No. 4-2006 to implement Republic Act No. 9257. The Department of Social Welfare and Development also issued its own Rules and Regulations Implementing Republic Act No. 9257. Petitioners, thus, filed this Petition urging that Section 4 of Republic Act No. 7432 as amended by Republic Act No. 9257, as well as the implementing rules and regulations issued by respondents, be declared unconstitutional insofar as these allow business establishments to claim the 20% discount given as a tax deduction; that respondents be prohibited from enforcing them; and that the tax credit treatment of the 20% discount under the former Section 4(a) of Republic Act No. 7432 be reinstated.4

The most salient issue is as follows: whether Section 4 of Republic Act No. 7432 as amended by Republic Act No. 9257, as well as its implementing rules and regulations, insofar as they provide that the 20% discount to senior citizens may be claimed as a tax deduction by private establishments, is invalid and unconstitutional. The arguments of the parties as summarized in the ponencia are as follows: Petitioners contend that the tax deduction scheme contravenes Article III, Section 9 of the Constitution, which states that: "[p]rivate property shall not be taken for public use without just compensation."5

Moreover, petitioners cite Commissioner of Internal Revenue v. Central Luzon Drug Corporation6 ruling that the 20% discount privilege constitutes taking of private property for public use which requires the payment of just compensation,7 and Carlos Superdrug Corporation v. Department of Social Welfare and Development8 acknowledging that the tax deduction scheme does not meet the definition of just compensation.9

Petitioners also seek a reversal of the ruling in Carlos Superdrug that the tax deduction scheme is justified by police power.10

They assert that "[a]lthough both police power and the power of eminent domain have the general welfare for their object, there are still traditional distinctions between the two"11 and that "eminent domain cannot be made less supreme than police power."12

They claim that in amending Republic Act No. 7432, the legislature relied on an erroneous contemporaneous construction that prior payment of taxes is required for tax credit.13

Petitioners likewise argue that the tax deduction scheme violates Article XV, Section 4, and Article XIII, Section 11 of the Constitution because it shifts the State’s constitutional mandate or duty of improving the welfare of the elderly to the private sector.14

Under the tax deduction scheme, the private sector shoulders 65% of the discount because only 35% (now 30%) of it is actually returned by the government.15

Consequently, its implementation affects petitioners’ businesses,16 and there exists an actual case or controversy of transcendental importance.17

Respondents, on the other hand, question the filing of the instant Petition directly with this Court in disregard of the hierarchy of courts.18

They 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 the loss sustained" by them.19

On the constitutionality of Republic Act No. 9257 and its implementing rules and regulations, respondents argue that petitioners failed to overturn its presumption of constitutionality.20

They maintain that the tax deduction scheme is a legitimate exercise of the State’s police power.21

I Uncertain Burdens and Inchoate Losses What is in question here is not the actual imposition of a senior citizen discount; rather, it is the treatment of that senior citizen discount for taxation purposes. From being a tax credit, it is now only a tax deduction. The imposition of the senior citizen discount is an exercise of police power. The determination that it will be a tax deduction, not a tax credit, is an exercise of the power to tax. The imposition of a discount for senior citizens affects the price. It is thus an inherently regulatory function. However, nothing in the law controls the prices of the goods subject to such discount. Legislation interferes with the autonomy of contractual arrangements in that it imposes a two-tiered pricing system. There will be two prices for every good or service: one is the regular price for everyone except for senior citizens who get a twenty percent (20%) discount. Businesses’ discretion to fix the regular price or improve the costs of the goods or the service that they offer to the public — and therefore determine their profit — is not affected by the law. Of course, rational businesses will take into consideration economic factors such as price elasticity,22 the market structure, the kind of competition businesses face, the barriers to entry that will make possible the expansion of suppliers should there be a change in the prices and the profits that can be made in that industry. Taxes, which include qualifications such as exemptions, exclusions and deductions, will be part of the cost of doing business for all such businesses.

There is no restriction in the law for businesses to attempt to recover the same amount of profits for the businesses affected by the law. To put this idea in perspective, let us assume that Company A is in the business of the sale of memorial lots. The demand for memorial lots is not usually influenced by price fluctuations. There will always be a static demand for memorial lots because it is strictly based on a non-negotiable preference of the purchaser. Let us also assume, for purposes of argument, that Company A acquired the plots of land at zero cost. This means that the price of the plot multiplied by the number of plots sold will always be considered revenue.23

Given these assumptions, let us presume that in any given year before the promulgation of any law for senior citizen discounting, Company A sells 1,600 square meters of memorial plots at the price of ₱100.00 per square meter. Considering the formula, the total profit of Company A will be:

Let us assume further that out of the 1,600 square meters sold, only 320 square meters are bought by senior citizens, and 1,280 square meters are bought by ordinary citizens. When Congress enacted Republic Act No. 7432, Company A was forced to give a 20% discount to senior citizens. There will be a price discrimination scheme wherein senior citizens can avail a square meter of a memorial plot for only ₱80.00 per square meter. The total revenue received by Company A will now constitute revenue derived from plots sold to senior citizens added to the revenue derived from plots sold to ordinary citizens. Hence, the formula becomes:

Obviously, the Total Revenue after the discount was applied is lower than the Revenue derived by Company A before the discount was imposed. The natural consequence of Company A, in order to maintain its profitability, is to increase the price per square meter of a memorial lot. Assume that the price increase was ₱10.00. This makes the price for ordinary citizens go up to ₱110.00 per square meter. Meanwhile, the discounted price for senior citizens becomes ₱88.00 per square meter. The effects of that with respect to total revenue of Company A become:

After Company A increases its prices, despite the application of the mandated discount rates, Company A becomes more profitable than it was before the implementation of Republic Act No. 7432. Again, nothing in the law prohibits Company A from increasing its prices for regular customers.24

The tax implications of Republic Act No. 7432 vis-à-vis the tax implications of the amendment introduced in Republic Act No. 9257 are also augmented by controlling the price. If we compute for the tax liability and the net income of Company A after the implementation of Republic Act No. 7432 and after treating the discount given to senior citizens becomes tax credit for Company A, we will get:

Keeping the number of units sold to senior citizens and ordinary citizens constant, Republic Act No. 9257 will mean a smaller net income for Company A. However, if Company A uses pricing to respond to Republic Act No. 9257, as discussed in the earlier example where Company A increased its prices from ₱100.00 to ₱110.00, the net income becomes:

It becomes apparent that despite converting the discount from tax credit to an income deduction, Company A could improve its net income than in the situation where the senior citizen discount was treated as a tax credit if it imposes a price increase. Note that the price increase we provided in this example was even less than the discount given to senior citizens.

The decision to increase price as well as its magnitude depends upon a number of non-legal factors. Businesses, for instance, will consider whether they are in a situation of near monopoly or a competitive market. They will want to know whether the change in their prices would encourage customers to shift their preferences to cremating their loved ones instead of burying them.25

They might also want to determine if the subsequent increase in relative profits will encourage the setting up of more competition into their market.

Losses, therefore, are not guaranteed by the change in legislation challenged in this Petition. Put simply, losses are not inevitable. On this basis alone, the constitutional challenge should fail. The case is premised on the inevitable loss to be suffered by the petitioners. There is no factual basis for that kind of certainty. We do not decide constitutional issues on the basis of inchoate losses and uncertain burdens.

Furthermore, income and profits are not vested rights. They are the results of good or bad business judgments occasioned by the proper response to their economic environment. Profits and the maintenance of a steady stream of income should be the reward of business acumen of entrepreneurship. Courts read law and in doing so provide the givens in a business environment. We should not allow ourselves to become the tools for good business results for some businesses.

Apart from increasing the price of goods and services, efficiency in the business can also maintain or even increase profits. A more restrictive business environment should occasion a review of the cost structure of the economic agent.26

We cannot simply assume that businesses, including the businesses of petitioners, are at their optimum level of efficiency. The change in the tax treatment of senior citizen’s discount, therefore, in some cases, can be better for the economy although it may, without any certainty, occasion some pain on some businesses. Our view should be more all-encompassing. Besides, compensating for the alleged losses of the petitioners assumes that we accept their current pricing as correct. That is, it is the price that covers their costs and provides them with profits that a competitive market can bear. We cannot have the situation where establishments can just set any price and come to court to recover whatever profit they were enjoying prior to a regulatory measure.

Such inherent power of the State anchors on its "social contract with its citizens [which] obliges it to promote public interest and common good."28

The scope of the legislative power to tax necessarily includes not only the power to determine the rate of tax but the method of its collection as well.29

We have held that Congress has the power to "define what tax shall be imposed, why it should be imposed, how much tax shall be imposed, against whom (or what) it shall be imposed and where it shall be imposed."30

In fact, the State has the power "to make reasonable and natural classifications for the purposes of taxation x x x [w]hether it relates to the subject of taxation, the kind of property, the rates to be levied, or the amounts to be raised, the methods of assessment, valuation and collection, the State’s power is entitled to presumption of validity x x x."31

This means that the power to tax also allows Congress to determine matters as whether tax rates will be applied to gross income or net income and whether costs such as discounts may be allowed as a deduction from gross income or a tax credit from net income after tax. While the power to tax has been considered the strongest of all of government’s powers32 with taxes as the "lifeblood of the government," this power has its limits. In a number of cases,33 we have referred to our discussion in the 1988 case of Commissioner of Internal Revenue v. Algue,34 as follows:

Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. On the other hand, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself. It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, which is the promotion of the common good, may be achieved. x x x x It is said that taxes are what we pay for civilized society. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate it. Hence, despite the natural reluctance to surrender part of one's hard-earned income to the taxing authorities, every person who is able to must contribute his share in the running of the government. The government, for its part, is expected to respond in the form of tangible and intangible benefits intended to improve the lives of the people and enhance their moral and material values. This symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those in the seat of power.

But even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure.

If it is not, then the taxpayer has a right to complain and the courts will then come to his succor. For all the awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate, as it has here, that the law has not been observed.35 (Emphasis supplied)

The Constitution provides for limitations on the power of taxation. First, "[t]he rule of taxation shall be uniform and equitable."36

This requirement for uniformity and equality means that "all taxable articles or kinds of property of the same class [shall] be taxed at the same rate."37

The tax deduction scheme for the 20% discount applies equally and uniformly to all the private establishments covered by the law. Thus, it complies with this limitation. Second, taxes must neither be confiscatory nor arbitrary as to amount to a "[deprivation] of property without due process of law."38

In Chamber of Real Estate and Builders’ Associations, Inc. v. Executive Secretary Romulo,39 petitioners questioned the constitutionality of the Minimum Corporate Income Tax (MCIT) alleging among others that "pegging the tax base of the MCIT to a corporation’s gross income is tantamount to a confiscation of capital because gross income, unlike net income, is not ‘realized gain.’"40

In dismissing the Petition, this Court discussed the due process limitation on the power to tax:

As a general rule, the power to tax is plenary and unlimited in its range, acknowledging in its very nature no limits, so that the principal check against its abuse is to be found only in the responsibility of the legislature (which imposes the tax) to its constituency who are to pay it. Nevertheless, it is circumscribed by constitutional limitations. At the same time, like any other statute, tax legislation carries a presumption of constitutionality. The constitutional safeguard of due process is embodied in the fiat "[no] person shall be deprived of life, liberty or property without due process of law." In Sison, Jr. v. Ancheta, et al., we held that the due process clause may properly be invoked to invalidate, in appropriate cases, a revenue measure when it amounts to a confiscation of property. But in the same case, we also explained that we will not strike down a revenue measure as unconstitutional (for being violative of the due process clause) on the mere allegation of arbitrariness by the taxpayer. There must be a factual foundation to such an unconstitutional taint. This merely adheres to the authoritative doctrine that, where the due process clause is invoked, considering that it is not a fixed rule but rather a broad standard, there is a need for proof of such persuasive character. (Citations omitted)41

In the present case, there is no showing that the tax deduction scheme is confiscatory. The portion of the 20% discount petitioners are made to bear under the tax deduction scheme will not result in a complete loss of business for private establishments. As illustrated earlier, these establishments are free to adjust factors as prices and costs to recoup the 20% discount given to senior citizens. Neither is the scheme arbitrary. Rules and Regulations have been issued by agencies as respondent Department of Finance to serve as guidelines for the implementation of the 20% discount and its tax deduction scheme. In fact, this Court has consistently upheld the doctrine that "taxing power may be used as an implement of police power"42 in order to promote the general welfare of the people.

Even assuming that the losses and the burdens can be determined and are specific, these are not enough to show that eminent domain is involved. It is not enough to conclude that there is a violation of Article III, Section 9 of the Constitution. This provision mandates that "[p]rivate property shall not be taken for public use without just compensation." Petitioners claim that there is taking by the government of that portion of the 20% discount they are required to give senior citizens under Republic Act No. 9257 but are not allowed to deduct from their tax liability in full as a tax credit. They argue that they are inevitably made to bear a portion of the loss from the 20% discount required by law. In their view, these speculative losses are to be provided with just compensation. Thus, they seek to declare as unconstitutional Section 4 of Republic Act No. 7432 as amended by Republic Act No. 9257, as well as the implementing rules and regulations issued by respondents Department of Social Welfare and Development and Department of Finance, for only allowing the 20% discount as a tax deduction from gross income, and not as a tax credit from total tax liability. Petitioners cannot be faulted for this view.

Carlos Superdrug Corporation v. Department of Social Welfare and Development,43 cited in the ponencia, hinted: The permanent reduction in their total revenues is a forced subsidy corresponding to the taking of private property for public use or benefit. This constitutes compensable taking for which petitioners would ordinarily become entitled to a just compensation. Just compensation is defined as the full and fair equivalent of the property taken from its owner by the expropriator. The measure is not the taker’s gain but the owner’s loss. The word just is used to intensify the meaning of the word compensation, and to convey the idea that the equivalent to be rendered for the property to be taken shall be real, substantial, full and ample. A tax deduction does not offer full reimbursement of the senior citizen discount. As such, it would not meet the definition of just compensation. Having said that, this raises the question of whether the State, in promoting the health and welfare of a special group of citizens, can impose upon private establishments the burden of partly subsidizing a government program. The Court believes so.44

The ponencia is, however, open to the possibility that eminent domain will apply. While the main opinion held that the 20% senior citizen discount is a valid exercise of police power, it explained that this is due to the absence of any clear showing that the discount is unreasonable, oppressive or confiscatory as to amount to a taking under eminent domain requiring the payment of just compensation.45 Alalayan v. National Power Corporation46 and Carlos Superdrug Corp. v. Department of Social Welfare and Development47 were cited as examples when there was failure to prove that the limited rate of return for franchise holders, or the required 20% senior citizens discount, "were arbitrary, oppressive or confiscatory."48

It found that petitioners similarly did not establish the factual bases of their claims and relied on hypothetical computations.49

The ponencia refers to City of Manila v. Hon. Laguio, Jr.50 citing the U.S. case of Pennsylvania Coal v. Mahon in that we must determine on a case to case basis as to when the regulation of property becomes a taking under eminent domain.51 It cites the U.S. case of Munn v. Illinois52 in that the State can employ police power measures to regulate pricing pursuant to the common good "provided that the regulation does not go too far as to amount to ‘taking’."53

This concept of regulatory taking, as opposed to ordinary taking, is amorphous and has not been applied in our jurisdiction. What we have is indirect expropriation amounting to compensable taking. In National Power Corporation v. Sps. Gutierrez,54 for example, we held that "the easement of right-of-way [due to electric transmission lines constructed over the property] is definitely a taking under the power of eminent domain. x x x the limitation imposed by NPC against the use of the land for an indefinite period deprives private respondents of its ordinary use."55

The ponencia also compares the tax deduction scheme for the 20% discount with price controls or rate of return on investment control laws which are valid exercises of police power. While it acknowledges that there are differences between these laws and the subject tax deduction scheme,56 it held that "the 20% discount may be properly viewed as belonging to the category of price regulatory measures which affects the profitability of establishments subjected thereto."57

I disagree. The eminent domain clause will still not apply even if we assume, without conceding, that the 20% discount or a portion of it is lost profits for petitioners. Profits are intangible personal property58 for which petitioners merely have an inchoate right. These are types of property which cannot be "taken."

Eminent domain has been defined as "an inherent power of the State that enables it to forcibly acquire private lands intended for public use upon payment of just compensation to the owner."59

Most if not all jurisprudence on eminent domain involves real property, specifically that of land. Although Rule 67 of the Rules of Court, the rules governing expropriation proceedings, requires the complaint to "describe the real or personal property sought to be expropriated,"60 this refers to tangible personal property for which the court will deliberate as to its value for purposes of just compensation.61

In a sense, the forced nature of a sale under eminent domain is more justified for real property such as land. The common situation is that the government needs a specific plot, for the construction of a public highway for example, and the private owner cannot move his land to avoid being part of the project. On the other hand, most tangible personal or movable property need not be subject of a forced sale when the government can procure these items in a public bidding with several able and willing private sellers.

In Republic of the Philippines v. Vda. de Castelvi,62 this Court also laid down five (5) "circumstances [that] must be present in the ‘taking’ of property for purposes of eminent domain"63 as follows:

First, the expropriator must enter a private property.1âwphi1 x x x. Second, the entrance into private property must be for more than a momentary period. x x x. Third, the entry into the property should be under warrant or color of legal authority. x x x. Fourth, the property must be devoted to a public use or otherwise informally appropriated or injuriously affected. x x x. Fifth, the utilization of the property for public use must be in such a way as to oust the owner and deprive him of all beneficial enjoyment of the property. x x x.64

The requirement for "entry" or the element of "oust[ing] the owner" is not possible for intangible personal property such as profits. Profits are not only intangible personal property. They are also inchoate rights. An inchoate right means that the right "has not fully developed, matured, or vested."65

It may or may not ripen. The existence of profits, more so its specific amount, is uncertain.1avvphi1 Business decisions are made every day dealing with factors such as price, quantity, and cost in order to manage potential outcomes of profit or loss at any given point. Profits are thus considered as "future economic benefits" which, at best, entitles petitioners only to an inchoate right.66

This is not the private property referred in the Constitution that can be taken and would require the payment of just compensation.67

Just compensation has been defined "to be the just and complete equivalent of the loss which the owner of the thing expropriated has to suffer by reason of the expropriation."68

Petitioners’ position in seeking just compensation for the 20% discount assumes that the discount always translates to lost profits. This is not always the case. There may be taxable periods when they will be reporting a loss in their ending balance as a result of other factors such as high costs of goods sold. Moreover, not all their sales are made to senior citizens. At most, profits can materialize in the form of cash, but even then, this is not the private property contemplated by the Constitution and whose value will be deliberated by courts for purposes of just compensation. We cannot compensate cash for cash. Justice Carpio submits in his dissent that the Constitution speaks of private property without distinction, thus, the issue of profit or loss to private establishments like petitioners is immaterial. The 20% discount belongs to them whether they make a profit or suffer a loss.69

When the 20% discount is given to customers who are senior citizens, there is a perceived loss for the establishment for that same amount at that precise moment. However, this moment is fleeting and the perceived loss can easily be recouped by sales to ordinary citizens at higher prices. The concern that more consumers will suffer as a result of a price increase70 is a matter better addressed to the wisdom of the Congress. As it stands, Republic Act No. 9257 does not establish a price control. For non-profit establishments, they may cut down on costs and make other business decisions to optimize performance. Business decisions like these have been made even before the 20% discount became law, and will continue to be made to adapt to the ever changing market. We cannot consider this fluid concept of possible loss and potential profit as private property belonging to private establishments. They are inchoate. They may or may not exist depending on many factors, some of which are within the control of the private establishments. There is nothing concrete, earmarked, actual or specific for taking in this scenario. Necessarily, there is nothing to compensate. Our determination of profits as a form of personal property that can be taken in a constitutional sense as a result of valid regulation would invite untold consequences on our legal system. Loss of profits will be difficult to prove and will tax the imagination and speculative abilities of judges and justices. Every piece of legislation in the future would cause the filing of cases that will ask us to determine the loss or damage caused to an ongoing business. This certainly is not the intent of the eminent domain provisions in our bill of rights. This is not the sort of protection to property imagined by our constitutional order.

Article XIII was introduced in the 1987 Constitution to specifically address Social Justice and Human Rights. For this purpose, the state may regulate the acquisition, ownership, use and disposition of property and its increments, viz:

Section 1. The Congress shall give highest priority to the enactment of measures that protect and enhance the right of all the people to human dignity, reduce social, economic, and political inequalities, and remove cultural the acquisition, ownership, use, and disposition of property and its increments.71

Thus in the exercise of its police power and in promoting senior citizen’s welfare the government "can impose upon private establishments [like petitioners] the burden of partly subsidizing a government program."72

Accordingly, I vote to DENY the Petition and hold that the challenge to the constitutionality of Section 4 of Republic Act No. 7432 as amended by Republic Act No. 9257, as well as the implementing rules and regulations issued by respondents Department of Social Welfare and Development and Department of Finance, should fail.