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Lutz v Araneta
GR No L-7859 December 22, 1955

FACTS: Appellant in this case Walter Lutz in his capacity as

the Judicial Administrator of the intestate of the deceased
Antonio Jayme Ledesma, seeks to recover from the Collector
of the Internal Revenue the total sum of fourteen thousand six
hundred sixty six and forty cents (P 14, 666.40) paid by the
estate as taxes, under section 3 of Commonwealth Act No. 567,
also known as the Sugar Adjustment Act, for the crop years
1948-1949 and 1949-1950. Commonwealth Act. 567 Section 2
provides for an increase of the existing tax on the manufacture
of sugar on a graduated basis, on each picul of sugar
manufacturer; while section 3 levies on the owners or persons
in control of the land devoted tot he cultivation of sugarcane
and ceded to others for consideration, on lease or otherwise - "a
tax equivalent to the difference between the money value of the
rental or consideration collected and the amount representing
12 per centum of the assessed value of such land. It was alleged
that such tax is unconstitutional and void, being levied for the
aid and support of the sugar industry exclusively, which in
plaintiff's opinion is not a public purpose for which a tax may
be constitutionally levied. The action was dismissed by the CFI
thus the plaintiff appealed directly to the Supreme Court.

ISSUE: Whether the tax is valid in supporting an industry.

HELD:
Yes. The tax is levied with a regulatory purpose, i.e. to provide
means for the rehabilitation and stabilization of the threatened
sugar industry. The act is primarily an exercise of police power
and is not a pure exercise of taxing power.
As sugar production is one of the great industries of the
Philippines and its promotion, protection and advancement
redounds greatly to the general welfare, the legislature found
that the general welfare demanded that the industry should be
stabilized, and provided that the distribution of benefits had to
sustain.
Further, it cannot be said that the devotion of tax money to
experimental stations to seek increase of efficiency in sugar
production, utilization of by-products, etc., as well as to the
improvement of living and working conditions in sugar mills
and plantations without any part of such money being
channeled directly to private persons, constitute expenditure of
tax money for private purposes.
Hence, the tax is valid.