G.R. No.

175356

December 3, 2013

MANILA MEMORIAL PARK, INC. AND LA FUNERARIA PAZ-SUCAT, INC., Petitioners,

vs.
SECRETARY OF THE DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT and THE
SECRETARY OF THE DEPARTMENT OF FINANCE, Respondents.
Doctrine: When a party challeges the constitutionality of a law, the burden of proof rests upon him.

Facts:
1. Petitioners assail the constitutionality of Section 4 of Republic Act (RA) No. 7432,3 as
amended by RA 9257,4 and the implementing rules and regulations issued by the DSWD and
DOF insofar as these allow business establishments to claim the 20% discount given to
senior citizens as a tax deduction.
2. On February 26, 2004, RA 92578 amended certain provisions of RA 7432, to wit:
SECTION 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 establishments, 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;
3. 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.
Issue:
-

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

Held:
-

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

Ratio:
-

Petitioners Arguments
Petitioners emphasize that they are not questioning the 20% discount
granted to senior citizens but are only assailing the constitutionality of the tax
deduction scheme prescribed under RA 9257 and the implementing rules
and regulations issued by the DSWD and the DOF.
Petitioners assert that Section 4(a) of the law is unconstitutional because it
constitutes deprivation of private property. Compelling drugstore owners and
establishments to grant the discount will result in a loss of profit and capital

because 1) drugstores impose a mark-up of only 5% to 10% on branded

medicines; and 2) the law failed to provide a scheme whereby drugstores will
be justly compensated for the discount.
Petitioners argue that we have previously ruled in Central Luzon Drug
Corporation37 that the 20% discount is an exercise of the power of eminent
domain, thus, requiring the payment of just compensation.

Respondents Arguments
Respondents, on the other hand, question the filing of the instant Petition
directly with the Supreme Court as this disregards the hierarchy of courts.

likewise assert that there is no justiciable controversy as petitioners failed to

prove that the tax deduction treatment is not a "fair and full equivalent of the
loss sustained" by them.
As to the constitutionality of RA 9257 and its implementing rules and
regulations, respondents contend that petitioners failed to overturn its
presumption of constitutionality
Court Ruling
o The law is a legitimate exercise of police power which, similar to the power of
eminent domain, has general welfare for its object.
Accordingly, it has been described as "the most essential, insistent and the
least limitable of powers, extending as it does to all the great public needs." 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."
The petitioners cannot claim that they will be at a loss due to small mark ups
and only a 32% recovery of the 20% discount. But they have not
substantiated this claim with income statements of their business.
While the Constitution protects property rights, petitioners must accept the
realities of business and the State, in the exercise of police power, can
intervene in the operations of a business which may result in an impairment
of property rights in the process.
We, thus, found that the 20% discount as well as the tax deduction scheme is
a valid exercise of the police power of the State.
o It is not an exercise by the state of the power of Eminent Domain
The 20% discount is intended to improve the welfare of senior citizens who,
at their age, are less likely to be gainfully employed, more prone to illnesses
and other disabilities, and, thus, in need of subsidy in purchasing basic
commodities. It may not be amiss to mention also that the discount serves to
honor senior citizens who presumably spent the productive years of their
lives on contributing to the development and progress of the nation.
The obiter in Central Luzon Drug Corporation,78 however, describes the 20%
discount as an exercise of the power of eminent domain and the tax credit,
under the previous law, equivalent to the amount of discount given as the just
compensation therefor. The flaw in this reasoning is in its premise. It
presupposes that the subject regulation, which impacts the pricing and,
hence, the profitability of a private establishment, automatically amounts to a
deprivation of property without due process of law. If this were so, then all
price and rate of return on investment control laws would have to be
invalidated.

The impact or effect of a regulation, such as the one under consideration,

must, thus, be determined on a case-to-case basis. Whether that line
between permissible regulation under police power and "taking" under
eminent domain has been crossed must, under the specific circumstances of
this case, be subject to proof and the one assailing the constitutionality of the
regulation carries the heavy burden of proving that the measure is
unreasonable, oppressive or confiscatory.
We adopted a similar line of reasoning in Carlos Superdrug
Corporation85 when we ruled that petitioners therein failed to prove that the
20% discount is arbitrary, oppressive or confiscatory. We noted that no
evidence, such as a financial report, to establish the impact of the 20%
discount on the overall profitability of petitioners was presented in order to
show that they would be operating at a loss due to the subject regulation or
that the continued implementation of the law would be unconscionably
detrimental to the business operations of petitioners.
On its face, we find that there are at least two conceivable bases to sustain
the subject regulations validity absent clear and convincing proof that it is
unreasonable, oppressive or confiscatory. Congress may have legitimately
concluded that business establishments have the capacity to absorb a
decrease in profits or income/gross sales due to the 20% discount without
substantially affecting the reasonable rate of return on their investments

(1) not all customers of a business establishment are senior citizens

(2) the level of its profit margins on goods and services offered to the
general public.
Hence, the present recourse must, likewise, fail. Because all laws enjoy the
presumption of constitutionality, courts will uphold a laws validity if any set of
facts may be conceived to sustain it.
In the case at bar, evidence is indispensable before a determination of a constitutional
violation can be made because of the following reasons. First, the assailed law, by imposing
the senior citizen discount, does not take any of the properties used by a business
establishment like, say, the land on which a manufacturing plant is constructed or the
equipment being used to produce goods or services. Second, rather than taking specific
properties of a business establishment, the senior citizen discount law merely regulates the
prices of the goods or services being sold to senior citizens by mandating a 20% discount.
Note that the law does not impose at what specific price the product shall be sold, only that a
20% discount shall be given to senior citizens based on the price set by the business
establishment. A business establishment is, thus, free to adjust the prices of the goods or
services it provides to the general public.

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