G.R. No. 109289 and G.R. No. 109446, October 3, 1994.
RUFINO R. TAN, petitioner, vs. RAMON R. DEL ROSARIO, JR., as SECRETARY OF FINANCE & JOSE U. ONG, as COMMISSIONER OF INTERNAL REVENUE, respondents. ( G.R. No. 109289 )

CARAG, CABALLES, JAMORA AND SOMERA LAW OFFICES, CARLO A. CARAG, MANUELITO O. CABALLES, ELPIDIO C. JAMORA, JR. and BENJAMIN A. SOMERA, JR., petitioners, vs. RAMON R. DEL ROSARIO, in his capacity as SECRETARY OF FINANCE and JOSE U. ONG, in his capacity as COMMISSIONER OF INTERNAL REVENUE, respondents. (G.R. No. 109446)

FACTS

These are two consolidated special civil actions for prohibition. In G.R. No. 109289 , petitioner Rufino R. Tan challenges the constitutionality of Republic Act No. 7496 (the Simplified Net Income Taxation Scheme or “SNIT”), which amends certain provisions of the National Internal Revenue Code. In G.R. No. 109446, petitioners (a law firm and its partners) challenge the validity of Section 6 of Revenue Regulations No. 2-93, promulgated by the public respondents to implement R.A. No. 7496 . All petitioners claim to be taxpayers adversely affected by the law’s implementation.
In G.R. No. 109289 , Tan asserts that R.A. No. 7496 violates: (1) Article VI, Section 26(1) of the Constitution (the one-title-one-subject rule); (2) Article VI, Section 28(1) (the rule on uniform, equitable, and progressive taxation); and (3) Article III, Section 1 (the due process and equal protection clauses). He argues the law’s title is deficient, it creates an inequitable and non-uniform tax system by treating individual taxpayers differently from corporations, and it is confiscatory.
In G.R. No. 109446, the petitioners argue that public respondents exceeded their rule-making authority in applying SNIT to general professional partnerships (GPPs) under Section 6 of Revenue Regulations No. 2-93. They cite congressional deliberations indicating the law was intended to apply only to individuals, not to partnerships.

ISSUE

1. In G.R. No. 109289 : Whether Republic Act No. 7496 is unconstitutional for violating the one-title-one-subject rule, the constitutional requirements of uniformity, equity, and progressivity in taxation, and the due process and equal protection clauses.
2. In G.R. No. 109446: Whether public respondents exceeded their authority in promulgating Section 6 of Revenue Regulations No. 2-93 by applying SNIT to general professional partnerships.

RULING

The Supreme Court DISMISSED both petitions.
1. On the constitutionality of R.A. No. 7496 ( G.R. No. 109289 ):
One-Title-One-Subject Rule: The Court held the title of the law, “An Act Adopting the Simplified Net Income Taxation Scheme For The Self-Employed and Professionals Engaged In The Practice of Their Profession, Amending Sections 21 and 29 of the National Internal Revenue Code, as Amended,” sufficiently complies with constitutional requirements. The title fairly apprises the legislature and the public of the subject matter and objectives of the law, preventing log-rolling, surprise, or fraud.
Uniformity and Equity of Taxation: The Court ruled that the law does not violate uniformity. Uniformity allows for classification provided it is based on substantial distinctions, germane to the law’s purpose, applies equally to all members of the class, and applies to both present and future conditions. The classification between individual taxpayers (subject to a more schedular approach under SNIT) and corporations (subject to global treatment) is not arbitrary. Such differential treatment has long existed in the tax system.
Due Process and Equal Protection: The power to tax is primarily legislative. The Court found no clear contravention of inherent or constitutional limitations. The law is not so unconscionable or unjust as to amount to confiscation of property. The limitation of allowable deductions does not transform the net income tax into a gross income tax, as significant deductions are still provided.
2. On the validity of Revenue Regulations No. 2-93, Section 6 (G.R. No. 109446):
The Court upheld the regulation. It explained that under the Tax Code, a general professional partnership is an “exempt partnership” it is not considered an independent taxable entity. The partnership files a return, but the individual partners are liable for income tax on their distributive shares. Therefore, applying SNIT to the partners of a GPP is consistent with the law’s application to individual professionals. The regulation merely confirms that partners, as individual taxpayers, are subject to SNIT’s rules on allowable deductions when computing their taxable income from the partnership. There was no intent to treat professionals practicing individually differently from those practicing through a GPP.