15 Tan vs. Del Rosario, as Sec. of Finance, and CIR
Also, the expenses paid or
G.R. No. 109289/109446 | October 3, 1994 | Vitug, J
SUMMARY –  paid by the partnership but are not considered as direct
This is a consolidated case assailing the validity of RA 7496 or the Simplified
Net Income Taxation Scheme, which amended provisions of NIRC, and the
RRs promulgated by the public respondents, on the ground that it violates
Article VI, Sec. 26(1), Sec. 28(1) and Article III, Sec. 1 of the Constitution.
DOCTRINE:  there is a clear contravention of inherent or constitutional
PROVISIONS APPLICABLE:
o Article VI, Section 26(1)-Every bill passed by the Congress shall
embrace only onesubject which shall be expressed in the title
thereof.
o Article VI, Section 28(1)- The rule of taxation shall be uniform and
equitable. TheCongress shall evolve a progressive system of
taxation.
o Article III, Section 1-
No person shall be deprived of xxx property without due process of
law, nor shall any person be denied the equal protection of the laws.
FACTS:
o in G.R. No. 109289, Petitioner contends that public respondents
exceeded their rule-making authority in applying SNIT to general
professional partnerships. Petitioner contends that the title of HB
34314, progenitor of RA 7496, is deficient for being merely entitled,
"Simplified Net Income Taxation Scheme for the Self-
Employed  and Professionals Engaged in the Practice of their
Profession"  when the full text of the title actually reads:
'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. Petitioners also contend it violated
due process.
o In G.R. No. 109446, petitioners, assailing Section 6 of Revenue
Regulations No. 2-93, argue that public respondents have
exceeded their rule-making authority in applying SNIT to general
professional partnerships. The questioned regulation reads:
o Sec. 6. General Professional Partnership  - The general
professional partnership (GPP) and the partners
comprising the GPP are covered by R. A. No. 7496.
Thus, in determining the net profit of the partnership, only
the direct costs mentioned in said law are to be deducted
from partnership income.
incurred by partners in their individual capacities in the
practice of their profession which are not reimbursed or
cost, are not deductible from his gross income.
ISSUES and RULING:
1. Whether or not the tax law is unconstitutional for violating due process?
o NO. The due process clause may correctly be invoked only when
limitations in the exercise of the tax power. No such transgression
is so evident to us.
o Petitioner intimates that Republic Act No. 7496 desecrates the
constitutional requirement that taxation "shall be uniform and
equitable" in that the law would now attempt to tax single
proprietorships and professionals differently from the manner it
imposes the tax on corporations and partnerships. The contention
clearly forgets, however, that such a system of income taxation
has long been the prevailing rule even prior to Republic Act No.
7496.
o Uniformity of taxation, like the kindred concept of equal protection,
merely requires that all subjects or objects of taxation, similarly
situated, are to be treated alike both in privileges and liabilities.
Uniformity does not forfend classification as long as:
1. the standards that are used therefor are substantial and
not arbitrary,
2. the categorization is germane to achieve the legislative
purpose,
3. the law applies, all things being equal, to both present
and future conditions, and
4. the classification applies equally well to all those
belonging to the same class
o What may instead be perceived to be apparent from the
amendatory law is the legislative intent to increasingly shift the
income tax system towards the schedular approach in the income
taxation of individual taxpayers and to maintain, by and large, the
present global treatment on taxable corporations. We certainly do
not view this classification to be arbitrary and inappropriate.
2. Whether or not public respondents exceeded their authority in
promulgating the RR?
o No. There is, then and now, no distinction in income tax liability
between a person who practices his profession alone or
individually and one who does it through partnership (whether
 registered or not) with others in the exercise of a common
profession. Indeed, outside of the gross compensation income tax
and the Final tax on passive investment income, under the present
income tax system all individuals deriving income from any source
whatsoever are treated in almost invariably the same manner and
under a common set of rules.
o The fact of the matter is that a general professional partnership,
unlike an ordinary business partnership (which is treated as a
corporation for income tax purposes and so subject to the
corporate income tax), is not itself an income taxpayer. The
income tax is imposed not on the professional partnership, which
is tax exempt, but on the partners themselves in their individual
capacity computed on their distributive shares of partnership
profits.
o Section 6 of Revenue Regulation No. 2-93 did not alter, but merely
confirmed, the above standing rule as now so modified by
Republic Act No. 7496 on basically the extent of allowable
deductions applicable to all individual income taxpayers on their
non-compensation income.
o There is no evident intention of the law, either before or after the
amendatory legislation, to place in an unequal footing or in
significant variance the income tax treatment of professionals who
practice their respective professions individually and of those who
do it through a general professional partnership.