Case Digest: G.R. No. L-2348. February 27, 1950. 85 Phil 522

Gregorio Perfecto, plaintiff-appellee, vs. Bibiano Meer, Collector of Internal Revenue, defendant-appellant.

Facts: In April, 1947 the Collector of Internal Revenue required plaintiff-appellee to pay income tax upon his salary as member of this Court during the year 1946. After paying the amount, he instituted this action in the Manila Court of First Instance contending that the assessment was illegal, his salary not being taxable for the reason that imposition of taxes thereon would reduce it in violation of the Constitution.

Issue: Whether or not the imposition of an income tax upon this salary in 1946 amount to a diminution thereof.

Ruling: The Supreme Court held that unless and until the Legislature approves an amendment to the Income Tax Law expressly taxing "that salaries of judges thereafter appointed", salaries of judges are not included in the word "income" taxed by the Income Tax Law. Two paramount circumstances may additionally be indicated, to wit: First, when the Income Tax Law was first applied to the Philippines 1913, taxable "income" did not include salaries of judicial officers when these are protected from diminution. That was the prevailing official belief in the United States, which must be deemed to have been transplanted here; and second, when the Philippine Constitutional Convention approved (in 1935) the prohibition against diminution off the judges’ compensation, the Federal principle was known that income tax on judicial salaries really impairs them.