G.R. No. L-59431 July 25, 1984
ANTERO M. SISON, JR., petitioner, vs. RUBEN B. ANCHETA, Acting Commissioner, Bureau of Internal Revenue; ROMULO VILLA, Deputy Commissioner, Bureau of Internal Revenue; TOMAS TOLEDO, Deputy Commissioner, Bureau of Internal Revenue; MANUEL ALBA, Minister of Budget, FRANCISCO TANTUICO, Chairman, Commissioner on Audit, and CESAR E. A. VIRATA, Minister of Finance, respondents.

FACTS

Petitioner Antero M. Sison, Jr., a taxpayer and lawyer, filed a suit for declaratory relief or prohibition challenging the constitutionality of Section 1 of Batas Pambansa Blg. 135. This law amended the National Internal Revenue Code by imposing a higher tax rate on taxable net income derived from business or profession compared to the rate imposed on taxable compensation income. Petitioner alleged that this differential tax treatment constituted undue discrimination against professionals like himself. He argued the law was arbitrary, oppressive, capricious, and amounted to class legislation, thereby transgressing the constitutional guarantees of equal protection and due process, as well as the rule requiring uniformity and equity in taxation.
Respondents, represented by the Solicitor General, admitted the factual allegations but denied the legal conclusions, asserting that BP 135 was a valid exercise of the state’s inherent taxing power. They prayed for the dismissal of the petition for lack of merit. The Court required the filing of an answer, which was duly submitted, leading to the resolution of the case on its merits.

ISSUE

Whether or not Section 1 of Batas Pambansa Blg. 135, which imposes a higher income tax rate on income from business or profession than on compensation income, violates the constitutional principles of equal protection, due process, and uniformity in taxation.

RULING

The Supreme Court DISMISSED the petition and upheld the constitutionality of the assailed law. The Court emphasized that the power to tax is a fundamental attribute of sovereignty, essential for the state to perform its expanding functions and meet increasing social challenges. While this power is plenary, it is not unconfined and is subject to constitutional limits, including the due process and equal protection clauses. However, the presumption of constitutionality lies heavily upon every statute.
The Court found that the petitioner failed to overcome this presumption. A mere allegation of arbitrariness is insufficient; there must be a clear and convincing factual foundation demonstrating the constitutional infirmity. The petitioner did not provide such a factual basis to prove that the classification between compensation earners and professionals/business practitioners was unreasonable or oppressive. The equal protection clause permits classification provided it is based on substantial distinctions, germane to the law’s purpose, and applies equally to all members of the same class. The distinction here, based on the source and nature of income, is a classic and reasonable subject of legislative discretion in crafting a progressive tax system. The law did not amount to confiscation or a clear abuse of power. Absent a strong showing of invalidity, the legislative judgment in imposing different tax rates to achieve fiscal and social objectives must be respected.