SOURCE #1:

THIRD DIVISION

COMMISSIONER OF INTERNAL G.R. No. 159647

REVENUE,
Petitioner, Present:
Panganiban, J.,
Chairman,
Sandoval-Gutierrez,
- versus - Corona,
Carpio Morales, and
Garcia, JJ
CENTRAL LUZON DRUG Promulgated:
CORPORATION,
Respondent. April 15, 2005
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x

DECISION

PANGANIBAN, J.:

T he 20 percent discount required by the law to be given to senior citizens is a tax credit, not
merely a tax deduction from the gross income or gross sale of the establishment concerned. A tax
credit is used by a private establishment only after the tax has been computed; a tax deduction,
before the tax is computed. RA 7432 unconditionally grants a tax credit to all covered entities.
Thus, the provisions of the revenue regulation that withdraw or modify such grant are void. Basic
is the rule that administrative regulations cannot amend or revoke the law.

The Case

Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to set
aside the August 29, 2002 Decision[2] and the August 11, 2003 Resolution[3] of the Court of
Appeals (CA) in CA-GR SP No. 67439. The assailed Decision reads as follows:

WHEREFORE, premises considered, the Resolution appealed from

is AFFIRMED in toto. No costs.[4]
The assailed Resolution denied petitioners Motion for Reconsideration.

The Facts

The CA narrated the antecedent facts as follows:

Respondent is a domestic corporation primarily engaged in retailing of medicines

and other pharmaceutical products. In 1996, it operated six (6) drugstores under
the business name and style Mercury Drug.

From January to December 1996, respondent granted twenty (20%) percent sales
discount to qualified senior citizens on their purchases of medicines pursuant to
Republic Act No. [R.A.] 7432 and its Implementing Rules and Regulations. For the
said period, the amount allegedly representing the 20% sales discount granted by
respondent to qualified senior citizens totaled P904,769.00.

On April 15, 1997, respondent filed its Annual Income Tax Return for taxable year
1996 declaring therein that it incurred net losses from its operations.

On January 16, 1998, respondent filed with petitioner a claim for tax refund/credit
in the amount of P904,769.00 allegedly arising from the 20% sales discount
granted by respondent to qualified senior citizens in compliance with [R.A.] 7432.
Unable to obtain affirmative response from petitioner, respondent elevated its
claim to the Court of Tax Appeals [(CTA or Tax Court)] via a Petition for Review.

On February 12, 2001, the Tax Court rendered a Decision[5] dismissing

respondents Petition for lack of merit. In said decision, the [CTA] justified its ruling
with the following ratiocination:

x x x, if no tax has been paid to the government, erroneously or

illegally, or if no amount is due and collectible from the taxpayer,
tax refund or tax credit is unavailing. Moreover, whether the
recovery of the tax is made by means of a claim for refund or tax
credit, before recovery is allowed[,] it must be first established that
there was an actual collection and receipt by the government of the
tax sought to be recovered. x x x.
xxxxxxxxx
 Prescinding from the above, it could logically be deduced that tax
credit is premised on the existence of tax liability on the part of
taxpayer. In other words, if there is no tax liability, tax credit is not
available.

Respondent lodged a Motion for Reconsideration. The [CTA], in its assailed

resolution,[6] granted respondents motion for reconsideration and ordered herein
petitioner to issue a Tax Credit Certificate in favor of respondent citing the decision
of the then Special Fourth Division of [the CA] in CA G.R. SP No. 60057
entitled Central [Luzon] Drug Corporation vs. Commissioner of Internal
Revenue promulgated on May 31, 2001, to wit:

However, Sec. 229 clearly does not apply in the instant case
because the tax sought to be refunded or credited by petitioner was
not erroneously paid or illegally collected. We take exception to the
CTAs sweeping but unfounded statement that both tax refund and
tax credit are modes of recovering taxes which are either
erroneously or illegally paid to the government. Tax refunds or
credits do not exclusively pertain to illegally collected or erroneously
paid taxes as they may be other circumstances where a refund is
warranted. The tax refund provided under Section 229 deals
exclusively with illegally collected or erroneously paid taxes but
there are other possible situations, such as the refund of excess
estimated corporate quarterly income tax paid, or that of excess
input tax paid by a VAT-registered person, or that of excise tax paid
on goods locally produced or manufactured but actually exported.
The standards and mechanics for the grant of a refund or credit
under these situations are different from that under Sec. 229. Sec.
4[.a)] of R.A. 7432, is yet another instance of a tax credit and it
does not in any way refer to illegally collected or erroneously paid
taxes, x x x.[7]

Ruling of the Court of Appeals

The CA affirmed in toto the Resolution of the Court of Tax Appeals (CTA) ordering petitioner to
issue a tax credit certificate in favor of respondent in the reduced amount of P903,038.39. It
reasoned that Republic Act No. (RA) 7432 required neither a tax liability nor a payment of taxes
by private establishments prior to the availment of a tax credit. Moreover, such credit is not
tantamount to an unintended benefit from the law, but rather a just compensation for the taking
of private property for public use.

Hence this Petition.[8]

The Issues

Petitioner raises the following issues for our consideration:

Whether the Court of Appeals erred in holding that respondent may claim the 20%
sales discount as a tax credit instead of as a deduction from gross income or gross
sales.

Whether the Court of Appeals erred in holding that respondent is entitled to a

refund.[9]

These two issues may be summed up in only one: whether respondent, despite incurring a net
loss, may still claim the 20 percent sales discount as a tax credit.

The Courts Ruling

The Petition is not meritorious.

Sole Issue:
Claim of 20 Percent Sales Discount
as Tax Credit Despite Net Loss

Section 4a) of RA 7432[10] grants to senior citizens the privilege of obtaining a 20 percent discount
on their purchase of medicine from any private establishment in the country.[11] The latter may
then claim the cost of the discount as a tax credit.[12] But can such credit be claimed, even though
an establishment operates at a loss?

We answer in the affirmative.

Tax Credit versus

Tax Deduction
Although the term is not specifically defined in our Tax Code,[13] tax credit generally refers to an
amount that is subtracted directly from ones total tax liability.[14] It is an allowance against the
tax itself[15] or a deduction from what is owed[16] by a taxpayer to the government. Examples
of tax credits are withheld taxes, payments of estimated tax, and investment tax credits.[17]

Tax credit should be understood in relation to other tax concepts. One of these is tax deduction -
- defined as a subtraction from income for tax purposes,[18] or an amount that is allowed by law
to reduce income prior to [the] application of the tax rate to compute the amount of tax which is
due.[19] An example of a tax deduction is any of the allowable deductions enumerated in Section
34[20] of the Tax Code.

A tax credit differs from a tax deduction. On the one hand, a tax credit reduces the tax due,
including -- whenever applicable -- the income tax that is determined after applying the
corresponding tax rates to taxable income.[21] A tax deduction, on the other, reduces the income
that is subject to tax[22] in order to arrive at taxable income.[23] To think of the former as the latter
is to avoid, if not entirely confuse, the issue. A tax credit is used only after the tax has been
computed; a tax deduction, before.

Tax Liability Required

for Tax Credit

Since a tax credit is used to reduce directly the tax that is due, there ought to be a tax
liability before the tax credit can be applied. Without that liability, any tax credit application will
be useless. There will be no reason for deducting the latter when there is, to begin with, no
existing obligation to the government. However, as will be presented shortly, the existence of a
tax credit or its grant by law is not the same as the availment or use of such credit. While the
grant is mandatory, the availment or use is not.

If a net loss is reported by, and no other taxes are currently due from, a business establishment,
there will obviously be no tax liability against which any tax credit can be applied.[24] For the
establishment to choose the immediate availment of a tax credit will be premature and
impracticable. Nevertheless, the irrefutable fact remains that, under RA 7432, Congress has
granted without conditions a tax credit benefit to all covered establishments.

Although this tax credit benefit is available, it need not be used by losing ventures, since there is
no tax liability that calls for its application. Neither can it be reduced to nil by the quick yet callow
stroke of an administrative pen, simply because no reduction of taxes can instantly be effected.
By its nature, the tax credit may still be deducted from a future, not a present, tax liability,
without which it does not have any use. In the meantime, it need not move. But it breathes.

Prior Tax Payments Not

Required for Tax Credit
While a tax liability is essential to the availment or use of any tax credit, prior tax payments are
not. On the contrary, for the existence or grant solely of such credit, neither a tax liability nor a
prior tax payment is needed. The Tax Code is in fact replete with provisions granting or
allowing tax credits, even though no taxes have been previously paid.

For example, in computing the estate tax due, Section 86(E) allows a tax credit -- subject to
certain limitations -- for estate taxes paid to a foreign country. Also found in Section 101(C) is a
similar provision for donors taxes -- again when paid to a foreign country -- in computing for
the donors tax due. The tax credits in both instances allude to the prior payment of taxes, even
if not made to our government.

Under Section 110, a VAT (Value-Added Tax)- registered person engaging in transactions --
whether or not subject to the VAT -- is also allowed a tax credit that includes a ratable portion of
any input tax not directly attributable to either activity. This input tax may either be the VAT on
the purchase or importation of goods or services that is merely due from -- not necessarily paid
by -- such VAT-registered person in the course of trade or business; or the transitional input tax
determined in accordance with Section 111(A). The latter type may in fact be an amount
equivalent to only eight percent of the value of a VAT-registered persons beginning inventory of
goods, materials and supplies, when such amount -- as computed -- is higher than the actual VAT
paid on the said items.[25] Clearly from this provision, the tax credit refers to an input tax that is
either due only or given a value by mere comparison with the VAT actually paid -- then later
prorated. No tax is actually paid prior to the availment of such credit.

In Section 111(B), a one and a half percent input tax credit that is merely presumptive is allowed.
For the purchase of primary agricultural products used as inputs -- either in the processing of
sardines, mackerel and milk, or in the manufacture of refined sugar and cooking oil -- and for the
contract price of public work contracts entered into with the government, again, no prior tax
payments are needed for the use of the tax credit.

More important, a VAT-registered person whose sales are zero-rated or effectively zero-rated
may, under Section 112(A), apply for the issuance of a tax credit certificate for the amount of
creditable input taxes merely due -- again not necessarily paid to -- the government and
attributable to such sales, to the extent that the input taxes have not been applied against output
taxes.[26] Where a taxpayer
is engaged in zero-rated or effectively zero-rated sales and also in taxable or exempt sales, the
amount of creditable input taxes due that are not directly and entirely attributable to any one of
these transactions shall be proportionately allocated on the basis of the volume of sales. Indeed,
in availing of such tax creditfor VAT purposes, this provision -- as well as the one earlier
mentioned -- shows that the prior payment of taxes is not a requisite.
It may be argued that Section 28(B)(5)(b) of the Tax Code is another illustration of a tax
credit allowed, even though no prior tax payments are not required. Specifically, in this provision,
the imposition of a final withholding tax rate on cash and/or property dividends received by a
nonresident foreign corporation from a domestic corporation is subjected to the condition that a
foreign tax credit will be given by the domiciliary country in an amount equivalent to taxes that
are merely deemed paid.[27]Although true, this provision actually refers to the tax credit as
a condition only for the imposition of a lower tax rate, not as a deduction from the corresponding
tax liability. Besides, it is not our government but the domiciliary country that credits against the
income tax payable to the latter by the foreign corporation, the tax to be foregone or spared.[28]

In contrast, Section 34(C)(3), in relation to Section 34(C)(7)(b), categorically allows as credits,

against the income tax imposable under Title II, the amount of income taxes merely incurred --
not necessarily paid -- by a domestic corporation during a taxable year in any foreign country.
Moreover, Section 34(C)(5) provides that for such taxes incurred but not paid, a tax credit may
be allowed, subject to the condition precedent that the taxpayer shall simply give a bond with
sureties satisfactory to and approved by petitioner, in such sum as may be required; and further
conditioned upon payment by the taxpayer of any tax found due, upon petitioners
redetermination of it.

In addition to the above-cited provisions in the Tax Code, there are also tax treaties and special
laws that grant or allow tax credits, even though no prior tax payments have been made.

Under the treaties in which the tax credit method is used as a relief to avoid double
taxation, income that is taxed in the state of source is also taxable in the state of residence, but
the tax paid in the former is merely allowed as a credit against the tax levied in the
latter.[29] Apparently, payment is made to the state of source, not the state of residence. No tax,
therefore, has been previously paid to the latter.

Under special laws that particularly affect businesses, there can also be tax credit incentives. To
illustrate, the incentives provided for in Article 48 of Presidential Decree No. (PD) 1789, as
amended by Batas Pambansa Blg. (BP) 391, include tax credits equivalent to either five percent
of the net value earned, or five or ten percent of the net local content of exports.[30] In order to
avail of such credits under the said law and still achieve its objectives, no prior tax payments are
necessary.

From all the foregoing instances, it is evident that prior tax payments are not indispensable to
the availment of a tax credit. Thus, the CA correctly held that the availment under RA 7432 did
not require prior tax payments by private establishments concerned.[31] However, we do not agree
with its finding[32] that the carry-over of tax credits under the said special law to succeeding
taxable periods, and even their application against internal revenue taxes, did not necessitate the
existence of a tax liability.
The examples above show that a tax liability is certainly important in the availment or use, not
the existence or grant, of a tax credit. Regarding this matter, a private establishment reporting
a net loss in its financial statements is no different from another that presents a net income. Both
are entitled to the tax creditprovided for under RA 7432, since the law itself accords that
unconditional benefit. However, for the losing establishment to immediately apply such credit,
where no tax is due, will be an improvident usance.

Sections 2.i and 4 of Revenue

Regulations No. 2-94 Erroneous

RA 7432 specifically allows private establishments to claim as tax credit the amount of discounts
they grant.[33] In turn, the Implementing Rules and Regulations, issued pursuant thereto, provide
the procedures for its availment.[34] To deny such credit, despite the plain mandate of the law
and the regulations carrying out that mandate, is indefensible.

First, the definition given by petitioner is erroneous. It refers to tax credit as the amount
representing the 20 percent discount that shall be deducted by the said establishments from
their gross income for income tax purposes and from their gross sales for value-added tax or
other percentage tax purposes.[35] In ordinary business language, the tax credit represents the
amount of such discount. However, the manner by which the discount shall be credited against
taxes has not been clarified by the revenue regulations.

By ordinary acceptation, a discount is an abatement or reduction made from the gross amount
or value of anything.[36] To be more precise, it is in business parlance a deduction or lowering of
an amount of money;[37] or a reduction from the full amount or value of something, especially a
price.[38] In business there are many kinds of discount, the most common of which is that affecting
the income statement[39] or financial report upon which the income tax is based.

Business Discounts
Deducted from Gross Sales

A cash discount, for example, is one granted by business establishments to credit customers for
their prompt payment.[40] It is a reduction in price offered to the purchaser if payment is made
within a shorter period of time than the maximum time specified.[41] Also referred to as a sales
discount on the part of the seller and a purchase discount on the part of the buyer, it may be
expressed in such
terms as 5/10, n/30. [42]

A quantity discount, however, is a reduction in price allowed for purchases made in large
quantities, justified by savings in packaging, shipping, and handling.[43] It is also called
a volume or bulk discount.[44]
A percentage reduction from the list price x x x allowed by manufacturers to wholesalers and by
wholesalers to retailers[45] is known as a trade discount. No entry for it need be made in the
manual or computerized books of accounts, since the purchase or sale is already valued at the
net price actually charged the buyer.[46] The purpose for the discount is to encourage trading or
increase sales, and the prices at which the purchased goods may be resold are also
suggested.[47] Even a chain discount -- a series of discounts from one list price -- is recorded at
net.[48]

Finally, akin to a trade discount is a functional discount. It is a suppliers price discount given to a
purchaser based on the [latters] role in the [formers] distribution system.[49] This role usually
involves warehousing or advertising.

Based on this discussion, we find that the nature of a sales discount is peculiar. Applying generally
accepted accounting principles (GAAP) in the country, this type of discount is reflected in
the income statement[50]as a line item deducted -- along with returns, allowances, rebates and
other similar expenses -- from gross sales to arrive at net sales.[51] This type of presentation is
resorted to, because the accounts receivable and salesfigures that arise from sales discounts, --
as well as from quantity, volume or bulk discounts -- are recorded in the manual and
computerized books of accounts and reflected in the financial statements at the gross amounts
of the invoices.[52] This manner of recording credit sales -- known as the gross method -- is most
widely used, because it is simple, more convenient to apply than the net method, and produces
no material errors over time.[53]

However, under the net method used in recording trade, chain or functional discounts, only the
net amounts of the invoices -- after the discounts have been deducted -- are recorded in the books
of accounts[54] and reflected in the financial statements. A separate line item cannot be
shown,[55] because the transactions themselves involving both accounts
receivable and sales have already been entered into, net of the said discounts.

The term sales discounts is not expressly defined in the Tax Code, but one provision adverts to
amounts whose sum -- along with sales returns, allowances and cost of goods sold[56] -- is
deducted from gross sales to come up with the gross income, profit or margin[57] derived from
business.[58] In another provision therein, sales discounts that are granted and indicated in the
invoices at the time of sale -- and that do not depend upon the happening of any future event --
may be excluded from the gross sales within the same quarter they were given.[59] While
determinative only of the VAT, the latter provision also appears as a suitable reference point for
income tax purposes already embraced in the former. After all, these two provisions affirm
that sales discounts are amounts that are always deductible from gross sales.

Reason for the Senior Citizen Discount:

The Law, Not Prompt Payment
A distinguishing feature of the implementing rules of RA 7432 is the private establishments
outright deduction of the discount from the invoice price of the medicine sold to the senior
citizen.[60] It is, therefore, expected that for each retail sale made under this law, the discount
period lasts no more than a day, because such discount is given -- and the net amount thereof
collected -- immediately upon perfection of the sale.[61] Although prompt payment is made for an
arms-length transaction by the senior citizen, the real and compelling reason for the private
establishment giving the discount is that the law itself makes it mandatory.

What RA 7432 grants the senior citizen is a mere discount privilege, not a sales discount or any
of the above discounts in particular. Prompt payment is not the reason for (although a necessary
consequence of) such grant. To be sure, the privilege enjoyed by the senior citizen must be
equivalent to the tax creditbenefit enjoyed by the private establishment granting the discount.
Yet, under the revenue regulations promulgated by our tax authorities, this benefit has been
erroneously likened and confined to a sales discount.

To a senior citizen, the monetary effect of the privilege may be the same as that resulting from
a sales discount. However, to a private establishment, the effect is different from a simple
reduction in price that results from such discount. In other words, the tax credit benefit is not the
same as a sales discount. To repeat from our earlier discourse, this benefit cannot and should
not be treated as a tax deduction.

To stress, the effect of a sales discount on the income statement and income tax return of an
establishment covered by RA 7432 is different from that resulting from the availment or use of
its tax credit benefit. While the former is a deduction before, the latter is a deduction after,
the income tax is computed. As mentioned earlier, a discount is not necessarily a sales discount,
and a tax credit for a simple discount privilege should not be automatically treated like a sales
discount. Ubi lex non distinguit, nec nos distinguere debemus. Where the law does not
distinguish, we ought not to distinguish.

Sections 2.i and 4 of Revenue Regulations No. (RR) 2-94 define tax credit as the 20 percent
discount deductible from gross income for income tax purposes, or from gross sales for VAT or
other percentage tax purposes. In effect, the tax credit benefit under RA 7432 is related to a sales
discount. This contrived definition is improper, considering that the latter has to be deducted
from gross sales in order to compute the gross income in the income statement and cannot be
deducted again, even for purposes of computing the income tax.

When the law says that the cost of the discount may be claimed as a tax credit, it means that the
amount -- when claimed -- shall be treated as a reduction from any tax liability, plain and simple.
The option to avail of the tax credit benefit depends upon the existence of a tax liability, but to
limit the benefit to a sales discount -- which is not even identical to the discount privilege that is
granted by law -- does not define it at all and serves no useful purpose. The definition must,
therefore, be stricken down.
Laws Not Amended
by Regulations

Second, the law cannot be amended by a mere regulation. In fact, a regulation that operates to
create a rule out of harmony with
the statute is a mere nullity; it cannot prevail.
[62]

It is a cardinal rule that courts will and should respect the contemporaneous construction placed
upon a statute by the executive officers whose duty it is to enforce it x x x.[63] In the scheme of
judicial tax administration, the need for certainty and predictability in the implementation of tax
laws is crucial.[64]Our tax authorities fill in the details that Congress may not have the opportunity
or competence to provide.[65] The regulations these authorities issue are relied upon by taxpayers,
who are certain that these will be followed by the courts.[66] Courts, however, will not uphold
these authorities interpretations when clearly absurd, erroneous or improper.

In the present case, the tax authorities have given the term tax credit in Sections 2.i and 4 of RR
2-94 a meaning utterly in contrast to what RA 7432 provides. Their interpretation has muddled
up the intent of Congress in granting a mere discount privilege, not a sales discount. The
administrative agency issuing these regulations may not enlarge, alter or restrict the provisions
of the law it administers; it cannot engraft additional requirements not contemplated by the
legislature.[67]

In case of conflict, the law must prevail.[68] A regulation adopted pursuant to law is
law.[69] Conversely, a regulation or any portion thereof not adopted pursuant to law is no law and
has neither the force nor the effect of law.[70]

Availment of Tax
Credit Voluntary

Third, the word may in the text of the statute[71] implies that the
availability of the tax credit benefit is neither unrestricted nor mandatory. There is no absolute
[72]

right conferred upon respondent, or any similar taxpayer, to avail itself of the tax credit remedy
whenever it chooses; neither does it impose a duty on the part of the government to sit back and
allow an important facet of tax collection to be at the sole control and discretion of the
taxpayer.[73] For the tax authorities to compel respondent to deduct the 20 percent discount from
either its gross income or its gross sales[74] is, therefore, not only to make an imposition without
basis in law, but also to blatantly contravene the law itself.

What Section 4.a of RA 7432 means is that the tax credit benefit is merely permissive, not
imperative. Respondent is given two options -- either to claim or not to claim the cost of the
discounts as a tax credit. In fact, it may even ignore the credit and simply consider the gesture
as an act of beneficence, an expression of its social conscience.

Granting that there is a tax liability and respondent claims such cost as a tax credit, then the tax
credit can easily be applied. If there is none, the credit cannot be used and will just have to be
carried over and revalidated[75] accordingly. If, however, the business continues to operate at a
loss and no other taxes are due, thus compelling it to close shop, the credit can never be applied
and will be lost altogether.

In other words, it is the existence or the lack of a tax liability that determines whether the cost
of the discounts can be used as a tax credit. RA 7432 does not give respondent the unfettered
right to avail itself of the credit whenever it pleases. Neither does it allow our tax administrators
to expand or contract the legislative mandate. The plain meaning rule or verba legis in statutory
construction is thus applicable x x x. Where the words of a statute are clear, plain and free from
ambiguity, it must be given its literal meaning and applied without attempted interpretation.[76]

Tax Credit Benefit

Deemed Just Compensation

Fourth, Sections 2.i and 4 of RR 2-94 deny the exercise by the State of its power of eminent
domain. Be it stressed that the privilege enjoyed by senior citizens does not come directly from
the State, but rather from the private establishments concerned. Accordingly, the tax
credit benefit granted to these establishments can be deemed as their just compensation for
private property taken by the State for public use.[77]

The concept of public use is no longer confined to the traditional notion of use by the public, but
held synonymous with public interest, public benefit, public welfare, and public
convenience. The discount privilege to which our senior citizens are entitled is actually a benefit
[78]

enjoyed by the general public to which these citizens belong. The discounts given would have
entered the coffers and formed part of the gross sales of the private establishments concerned,
were it not for RA 7432. The permanent reduction in their total revenues is a forced subsidy
corresponding to the taking of private property for public use or benefit.

As a result of the 20 percent discount imposed by RA 7432, respondent becomes entitled to a just
compensation. This term refers not only to the issuance of a tax credit certificate indicating the
correct amount of the discounts given, but also to the promptness in its release. Equivalent to
the payment of property taken by the State, such issuance -- when not done within a reasonable
time from the grant of the discounts -- cannot be considered as just compensation. In effect,
respondent is made to suffer the consequences of being immediately deprived of its revenues
while awaiting actual receipt, through the certificate, of the equivalent amount it needs to cope
with the reduction in its revenues.[79]

Besides, the taxation power can also be used as an implement for the exercise of the power of
eminent domain.[80] Tax measures are but enforced contributions exacted on pain of penal
sanctions[81] and clearly imposed for a public purpose.[82] In recent years, the power to tax has
indeed become a most effective tool to realize social justice, public welfare, and the equitable
distribution of wealth.[83]

While it is a declared commitment under Section 1 of RA 7432, social justice cannot be invoked
to trample on the rights of property owners who under our Constitution and laws are also entitled
to protection. The social justice consecrated in our [C]onstitution [is] not intended to take away
rights from a person and give them to another who is not entitled thereto.[84] For this reason, a
just compensation for income that is taken away from respondent becomes necessary. It is in
the tax credit that our legislators find support to realize social justice, and no administrative body
can alter that fact.

To put it differently, a private establishment that merely breaks even[85] -- without the discounts
yet -- will surely start to incur losses because of such discounts. The same effect is expected if
its mark-up is less than 20 percent, and if all its sales come from retail purchases by senior
citizens. Aside from the observation we have already raised earlier, it will also be grossly unfair
to an establishment if the discounts will be treated merely as deductions from either its gross
income or its gross sales. Operating at a loss through no fault of its own, it will realize that the tax
credit limitation under RR 2-94 is inutile, if not improper. Worse, profit-generating businesses will
be put in a better position if they avail themselves of tax credits denied those that are losing,
because no taxes are due from the latter.

Grant of Tax Credit

Intended by the Legislature

Fifth, RA 7432 itself seeks to adopt measures whereby senior citizens are assisted by the
community as a whole and to establish a program beneficial to them.[86] These objectives are
consonant with the constitutional policy of making health x x x services available to all the people
at affordable cost[87] and of giving priority for the needs of the x x x elderly.[88] Sections 2.i and 4
of RR 2-94, however, contradict these constitutional policies and statutory objectives.

Furthermore, Congress has allowed all private establishments a simple tax credit, not a deduction.
In fact, no cash outlay is required from the government for the availment or use of such
credit. The deliberations on February 5, 1992 of the Bicameral Conference Committee Meeting
on Social Justice, which finalized RA 7432, disclose the true intent of our legislators to treat
the sales discounts as a tax credit, rather than as a deduction from gross income. We quote from
those deliberations as follows:
"THE CHAIRMAN (Rep. Unico). By the way, before that ano, about deductions from
taxable income. I think we incorporated there a provision
na - on the responsibility of the private hospitals and
drugstores, hindi ba?

SEN. ANGARA. Oo.

THE CHAIRMAN. (Rep. Unico), So, I think we have to put in also a provision here
about the deductions from taxable income of that private
hospitals, di ba ganon 'yan?

MS. ADVENTO. Kaya lang po sir, and mga discounts po nila affecting government
and public institutions, so, puwede na po nating hindi isama
yung mga less deductions ng taxable income.

THE CHAIRMAN. (Rep. Unico). Puwede na. Yung about the private hospitals. Yung
isiningit natin?

MS. ADVENTO. Singit na po ba yung 15% on credit. (inaudible/did not use the
microphone).

SEN. ANGARA. Hindi pa, hindi pa.

THE CHAIRMAN. (Rep. Unico) Ah, 'di pa ba naisama natin?

SEN. ANGARA. Oo. You want to insert that?

THE CHAIRMAN (Rep. Unico). Yung ang proposal ni Senator Shahani, e.

SEN. ANGARA. In the case of private hospitals they got the grant of 15% discount,
provided that, the private hospitals can claim the expense
as a tax credit.

REP. AQUINO. Yah could be allowed as deductions in the perpetrations of

(inaudible) income.

SEN. ANGARA. I-tax credit na lang natin para walang cash-out ano?

REP. AQUINO. Oo, tax credit. Tama, Okay. Hospitals ba o lahat ng establishments
na covered.
 THE CHAIRMAN. (Rep. Unico). Sa kuwan lang yon, as private hospitals lang.

REP. AQUINO. Ano ba yung establishments na covered?

SEN. ANGARA. Restaurant lodging houses, recreation centers.

REP. AQUINO. All establishments covered siguro?

SEN. ANGARA. From all establishments. Alisin na natin 'Yung kuwan kung ganon.
Can we go back to Section 4 ha?

REP. AQUINO. Oho.

SEN. ANGARA. Letter A. To capture that thought, we'll say the grant of 20%
discount from all establishments et cetera, et cetera,
provided that said establishments - provided that private
establishments may claim the cost as a tax credit. Ganon ba
'yon?

REP. AQUINO. Yah.

SEN. ANGARA. Dahil kung government, they don't need to claim it.

THE CHAIRMAN. (Rep. Unico). Tax credit.

SEN. ANGARA. As a tax credit [rather] than a kuwan - deduction, Okay.

REP. AQUINO Okay.

SEN. ANGARA. Sige Okay. Di subject to style na lang sa Letter A".[89]

Special Law
Over General Law

Sixth and last, RA 7432 is a special law that should prevail over the Tax Code -- a general law. x
x x [T]he rule is that on a specific matter the special law shall prevail over the general law, which
shall
be resorted to only to supply deficiencies in the former.[90] In addition, [w]here there are two
statutes, the earlier special and the later general -- the terms of the general broad enough to
include the matter provided for in the special -- the fact that one is special and the other is general
creates a presumption that the special is to be considered as remaining an exception to the
general,[91] one as a general law of the land, the other as the law of a particular case.[92] It is a
canon of statutory construction that a later statute, general in its terms and not expressly
repealing a prior special statute, will ordinarily not affect the special provisions of such earlier
statute.[93]

RA 7432 is an earlier law not expressly repealed by, and therefore remains an exception to, the
Tax Code -- a later law. When the former states that a tax credit may be claimed, then the
requirement of prior tax payments under certain provisions of the latter, as discussed above,
cannot be made to apply. Neither can the instances of or references to a tax deduction under the
Tax Code[94] be made to restrict RA 7432. No provision of any revenue regulation can supplant or
modify the acts of Congress.

WHEREFORE, the Petition is hereby DENIED. The assailed Decision and Resolution of the Court
of Appeals AFFIRMED. No pronouncement as to costs.

SO ORDERED.

ARTEMIO V. PANGANIBAN
Associate Justice
Chairman, Third Division

W E C O N C U R:

ANGELINA SANDOVAL-GUTIERREZ RENATO C. CORONA

Associate Justice Associate Justice

CONCHITA CARPIO MORALES CANCIO C. GARCIA

Associate Justice Associate Justice
ATTESTATION

I attest that the conclusions in the above decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Courts Division.

ARTEMIO V. PANGANIBAN
 Associate Justice
Chairman, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Chairmans Attestation, it is hereby
certified that the conclusions in the above Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Courts Division.

HILARIO G. DAVIDE, JR.

Chief Justice

[1]
Rollo, pp. 9-31.
[2]
Id., pp. 33-41. Penned by Justice Rebecca de Guia-Salvador, with the concurrence of Justices
Godardo A. Jacinto (Fourth Division chair) and Eloy R. Bello Jr. (member, now retired).
[3]
Id., p. 43.
[4]
CA Decision, p. 9; rollo, p. 41.
[5]
Penned by Judge Ramon O. De Veyra with the concurrence of Judge Amancio Q. Saga.
Presiding Judge (now Presiding Justice) Ernesto D. Acosta dissented.
[6]
Penned by Presiding Judge (now Presiding Justice) Ernesto D. Acosta with the concurrence of
Judge (now Justice) Juanito C. Castaeda, Jr. Judge Amancio Q. Saga dissented.
[7]
Id., pp. 2-4 & 34-36.
[8]
The Petition was deemed submitted for decision on June 10, 2004, upon receipt by the Court
of respondents Memorandum, signed by Atty. Joy Ann Marie G. Nolasco. Petitioners
Memorandum -- signed by Solicitor General Alfredo L. Benipayo, Assistant Solicitor
General Ma. Antonia Edita C. Dizon, and Solicitor Magtanggol M. Castro -- was filed on
June 2, 2004.
[9]
Petitioners Memorandum, p. 5; rollo, p. 96. Original in upper case.
[10]
Entitled An Act to Maximize the Contribution of Senior Citizens to Nation Building, Grant
Benefits and Special Privileges and for other purposes, this law took effect in 1992.
See Santos, Jr. v. Llamas, 379 Phil. 569, 577, January 20, 2000.
[11]
4.a of RA 7432.
[12]
Ibid.
[13]
Republic Act No. (RA) 8424 as amended by RAs 8761 and 9010.
Likewise, the term tax credit is not defined in Presidential Decree No. (PD) 1158, otherwise known
as the National Internal Revenue Code of 1977 as amended.
[14]
Garner (ed.), Blacks Law Dictionary (8th ed., 1999), p. 1501.
[15]
Smith, Wests Tax Law Dictionary (1993), pp. 177-178.
[16]
Oran and Tosti, Orans Dictionary of the Law (3rd ed., 2000), p. 124.
[17]
Malapo-Agato and San Andres-Francisco, Dictionary of Accounting Terms (2003), p. 258.
[18]
Oran and Tosti, supra, p. 135.
[19]
Smith, supra, p. 196.
[20]
The itemized deductions considered as allowable deductions from gross income include
ordinary and necessary expenses, interest, taxes, losses, bad debts, depreciation,
depletion of oil and gas wells and mines, charitable and other contributions, research and
development expenditures, and pension trust contributions.
[21]
While taxable income is based on the method of accounting used by the taxpayer, it will
almost always differ from accounting income. This is so because of a fundamental
difference in the ends the two concepts serve. Accounting attempts to match cost against
revenue. Tax law is aimed at collecting revenue. It is quick to treat an item as income,
slow to recognize deductions or losses. Thus, the tax law will not recognize deductions
for contingent future losses except in very limited situations. Good accounting, on the
other hand, requires their recognition. Once this fundamental difference in approach is
accepted, income tax accounting methods can be understood more easily. Consolidated
Mines, Inc. v. CTA, 157 Phil. 608, August 29, 1974, per Makalintal, CJ. Underscoring
supplied.
[22]
Smith, supra, pp. 177-178.
[23]
Id., p. 196.
[24]
BPI-Family Savings Bank, Inc. v. CA, 386 Phil. 719, 727, April 12, 2000.
[25]
4.105-1 of BIR Revenue Regulations No. (RR) 7-95.
[26]
Commissioner of Internal Revenue v. Seagate Technology (Phils.), Inc., GR No. 153866,
February 11, 2005, pp. 13-15.
[27]
Commissioner of Internal Revenue v. Procter & Gamble Philippine Manufacturing Corp., 204
SCRA 377, 388, December 2, 1991.
[28]
Deoferio Jr. and Tan Torres, Know Your CTRP: Comments on the Amendments to the National
Internal Revenue Code under Republic Act No. 8424 (2nd printing, 1999), p. 61.
[29]
Commissioner of Internal Revenue v. S.C. Johnson and Son, Inc., 368 Phil. 388, 405-406,
June 25, 1999.
[30]
Pilipinas Kao, Inc. v. CA, 423 Phil. 834, 838-839, 851, December 18, 2001.
[31]
CA Decision, p. 9; rollo, pp. 40-41.
[32]
Id., pp. 7-8; id., pp. 39-40.
[33]
4.a of RA 7432.
[34]
D. and E. of Rule V of the Rules And Regulations in the Implementation of RA 7432, The Act
to Maximize the Contribution of Senior Citizens to Nation Building, Grant Benefits and
Special Privileges and for other purposes, approved per Resolution No. 1 (Series 1993)
issued by the National Economic and Development Authority (NEDA) Social Development
Committee.
[35]
2.i of RR 2-94, issued August 23, 1993. See also 4 thereof.
[36]
Gove (Ed. in Chief), Websters Third New International Dictionary of the English Language,
Unabridged (1976), p. 646.
[37]
Oran and Tosti, supra, p. 149.
[38]
Garner (ed.), supra, p. 498.
[39]
An income statement, profit and loss statement, or statement of income and expenses is a
financial statement prepared from accounts and designed to show the several elements
entering into the computation of net income for a given period. Malapo-Agato and San
Andres-Francisco, Dictionary of Accounting Terms (2003), p. 136.
[40]
Valix and Peralta, Financial Accounting, Volume One (2002), p. 347.
[41]
Editorial Staff of Prentice-Hall, Inc., Encyclopedic Dictionary of Business Finance (2nd printing,
1962), pp. 117-118. See Malapo-Agato and San Andres-Francisco, supra, p. 49.
[42]
This means that the customer is entitled to a 5% discount, if payment is made within 10 days
from the invoice date. Beyond that, but within 30 days from the invoice date, the gross
amount of the invoice price is due. Valix and Peralta, supra, p. 347.
[43]
Editorial Staff of Prentice-Hall, Inc., supra, pp. 503-504.
[44]
Garner (Ed.), supra, p. 498.
[45]
Editorial Staff of Prentice-Hall, Inc., supra, pp. 607-609.
[46]
Valix and Peralta, supra, p. 453. See Malapo-Agato and San Andres-Francisco, supra, p. 263.
[47]
Id., p. 453.
[48]
Editorial Staff of Prentice-Hall, Inc., supra, pp. 607-609.
[49]
Garner (Ed.), supra, p. 498.
[50]
Functional, as opposed to the natural, presentation is the traditional and common form of
the income statement. Functionalpresentation classifies expenses according to their
function -- whether as part of cost of sales, selling activities, administrative activities, or
other operating activities. The Accounting Standards Council (ASC) in the Philippines does
not prescribe any format, the choice being based on that which fairly presents the
elements of the enterprise performance. If the functionalformat is used, an additional
disclosure of the nature of the expenses is necessary. Valix and Peralta, supra, pp. 155 &
162.
[51]
Garner (Ed.), supra, p. 1365. See Valix and Peralta, supra, pp. 156-160 & 453.
On the other hand, purchase discounts are deducted -- also along with returns, allowances,
rebates and other similar revenues -- from gross purchases to arrive at net purchases.
[52]
Valix and Peralta, supra, p. 347.
[53]
Id., pp. 347 & 456.
[54]
Id., p. 347.
[55]
Except when presented for managerial or cost accounting reports, these items are chiefly
internal and are neither disseminated to the general public nor attested to by the external
auditors.
[56]
Cost of goods sold is the most commonly used term referring to a particular section in the
financial statements, reports, or notes to financial statements of trading or merchandising
concerns. For a manufacturing business, however, the term used is cost of goods
manufactured and sold or cost of goods produced and sold; for a service enterprise, cost
 of services; and, in general, cost of salesof a business. See Malapo-Agato and San Andres-
Francisco, supra, p. 73.
[57]
Gross income, profit or margin is the difference between sales revenues and manufacturing
costs as an intermediate step in the computation of operating profits or net income. It is
also the excess of sales over the cost of goods sold. Malapo-Agato and San Andres-
Francisco, supra, p. 129.
More simply, gross sales less sales discounts, returns, allowances, rebates, and other similar
expenses equal net sales; and net sales less cost of sales equal gross income.
[58]
Paragraphs 7 to 10 of 27(A), Chapter IV, Title II of RA 8424 as amended.
[59]
106(D)(2), Chapter I, Title IV of RA 8424 as amended.
[60]
See D. of Rule V of the Rules And Regulations in the Implementation of RA 7432, The Act to
Maximize the Contribution of Senior Citizens to Nation Building, Grant Benefits and Special
Privileges and for other purposes, approved per Resolution No. 1 (Series 1993) issued by
the National Economic and Development Authority (NEDA) Social Development
Committee.
[61]
Theoretically, an allowance for sales discount account can also be set up by a business
establishment in its books of account at the end of its accounting period to reflect its
estimates of cash discounts on open accounts based on past experience. The accounting
entry for this account is then reversed at the beginning of the next accounting period, so
that such discounts can again be normally charged to the sales discount account. Valix
and Peralta, supra, p. 348.
[62]
Commissioner of Internal Revenue v. Vda. de Prieto, 109 Phil. 592, 597, September 30, 1960,
per Gutierrez David, J. (citing Miller v. US, 294 US 435, 439-441, 55 S.Ct. 440,442, March
4, 1935; and Lynch v. Tilden Produce Co., 265 US 315, 321-322, 44 S.Ct. 488, 490, May
26, 1924).
[63]
Molina v. Rafferty, 37 Phil. 545, 555, February 1, 1918, per Malcolm, J. (citing Government ex
rel. Municipality of Cardona v. Municipality of Binangonan, 34 Phil. 518, 520-521, March
29, 1916; In re Allen, 2 Phil. 630, 640, October 29, 1903; and Pennoyer v. McConnaughy,
11 S.Ct. 699, 706, April 20, 1891).
[64]
Lim Hoa Ting v. Central Bank of the Philippines, 104 Phil. 573, 580, September 24, 1958 (citing
Griswold, A Summary of the Regulations Problem, 54 Harvard Law Review 3, 398, 406,
January 1941).
[65]
Eastern Shipping Lines, Inc. v. Philippine Overseas Employment Administration, 166 SCRA
533, 544, October 18, 1988, per Cruz, J.
[66]
Lim Hoa Ting v. Central Bank of the Philippines, supra, p. 580.
[67]
Pilipinas Kao, Inc. v. CA, supra, p. 858.
[68]
Wise & Co., Inc. v. Meer, 78 Phil. 655, 676, June 30, 1947.
[69]
Macailing v. Andrada, 31 SCRA 126, 139, January 30, 1970, per Sanchez, J.
[70]
See Banco Filipino Savings and Mortgage Bank v. Hon. Navarro, 158 SCRA 346, 354, July 28,
1987; and Valerio v. Secretary of Agriculture & Natural Resources, 117 Phil. 729, 733,
April 23, 1963.
[71]
4.a of RA 7432.
[72]
See also Manufacturers Hanover Trust Co. and/or Chemical Bank v. Guerrero, 445 Phil. 770,
782, February 19, 2003 (citing Shauf v. CA, 191 SCRA 713, 738, November 27,
1990; Ayala Land, Inc. v. Spouses Carpo, 345 SCRA 579, 585, November 22, 2000; and In
re Guaria, 24 Phil. 37, 41, January 8, 1913).
[73]
San Carlos Milling Co., Inc. v. Commissioner of Internal Revenue, 228 SCRA 135, 142,
November 23, 1993, per Padilla, J.
[74]
2.i & 4 of RR 2-94.
[75]
230(B), Chapter III, Title VIII of RA 8424 as amended.
[76]
National Federation of Labor v. NLRC, 383 Phil. 910, 918, March 2, 2000, per De Leon Jr., J.
(quoting Fianza v. Peoples Law Enforcement Board, 243 SCRA 165, 178, March 31, 1995,
per Romero, J.).
[77]
See City of Cebu v. Spouses Dedamo, 431 Phil. 524, 532, May 7, 2002.
[78]
Reyes v. National Housing Authority, 443 Phil. 603, 610-611, January 20, 2003 (citing Heirs
of Juancho Ardona v. Hon. Reyes, 210 Phil. 187, 197-201, October 26, 1983).
[79]
See Land Bank of the Philippines v. De Leon, 437 Phil. 347, 359, September 10, 2002
(citing Estate of Salud Jimenez v. Philippine Export Processing Zone, 349 SCRA 240, 264,
January 16, 2001).
[80]
See Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform,
175 SCRA 343, 371, July 14, 1989 (citing Powell v. Pennsylvania, 127 US 678, 683, 8 S.Ct.
992, 995, April 9, 1888).
[81]
Republic v. COCOFED, 423 Phil. 735, 764, December 14, 2001, per Panganiban, J.
[82]
Id. at 765.
[83]
National Power Corp. v. City of Cabanatuan, 449 Phil. 233, 248, April 9, 2003 (citing Vitug and
Acosta, Tax Law and Jurisprudence[2nd ed., 2000], pp.1-2).
[84]
Salonga v. Farrales, 192 Phil. 614, 624, July 10, 1981, per Fernandez, J.
[85]
Break-even is the point at which a business neither generates an income nor incurs a loss
from its operations.
[86]
Items 1 & 2, 2nd paragraph of 1 of RA 7432.
[87]
1st paragraph of 1 of RA 7432 and 11 of Article XIII of the 1987 Constitution.
[88]
Ibid. The constitutional references are reiterated in the sponsorship speech delivered on
January 23, 1992 by Representative Dionisio S. Ojeda, regarding House Bill No. (HB)
35335, per Committee Report No. 01730, pp 38-39 (jointly submitted by the Committee
on Revision of Laws, the Committee on Family Relations and Population, and the
Committee on Ways and Means). HB 35335 was approved on second reading without any
amendment.
[89]
Deliberations of the Bicameral Conference Committee Meeting on Social Justice, February 5,
1992, pp. 22-24. Italics supplied.
[90]
Leyte Asphalt & Mineral Oil Co., Ltd. v. Block, Johnston & Greenbaum, 52 Phil. 429, 432,
December 14, 1928, per Romualdez, J.
[91]
City Mayor v. The Chief Police Constabulary, 128 Phil. 674, 687, October 31, 1967.
[92]
Manila Railroad Co. v. Rafferty, 40 Phil. 224, 229, September 30, 1919, per Johnson, J.
(citing State v. Stoll, 84 US 425, 431, 436, 17 Wall. 425, 431, 436, October term, 1873).
[93]
Ibid, per Johnson, J. (citing Minnesota v. Hitchcock, 185 US, 373, 396-397, 22 S.Ct. 650, 659,
May 5, 1902, Cass County v. Gillett, 100 US 585, 593, 10 Otto 585, 593, October term,
1879; and New Jersey Steamboat Co. v. Collector, 85 US 478, 490-491, 18 Wall 478, 490-
491, October term, 1873).
[94]
Not even the provisions of PD 1158 -- reiterated later in RA 8424 as amended -- change the
Courts observations on tax liability, prior tax payments, sales discount, tax deduction,
and tax credit. PD 1158 was a general law that preceded RA 7432, a special law; thus,
the latter prevails over the former. With all the more reason should the rules on statutory
construction apply.
SOURCE #2:

Tax Case Digest: Commissioner of Internal Revenue vs Central Luzon Drug Corporation GR No
159647
By Pacta Sunt Servanda - July 08, 2014
Commissioner of Internal Revenue vs. Central Luzon Drug Corporation
G.R. No. 159647 April 15, 2005

Facts:
Respondents operated six drugstores under the business name Mercury Drug. From January to
December 1996 respondent granted 20% sales discount to qualified senior citizens on
their purchases of medicines pursuant to RA 7432 for a total of ₱ 904,769.

On April 15, 1997, respondent filed its annual Income Tax Return for taxable year 1996
declaring therein net losses. On Jan. 16, 1998 respondent filed with petitioner a claim
for tax refund/credit of ₱ 904,769.00 allegedly arising from the 20% sales discount.
Unable to obtain affirmative response from petitioner, respondent elevated its claim to
the Court of Tax Appeals. The court dismissed the same but upon reconsideration, the
latter reversed its earlier ruling and ordered petitioner to issue a Tax Credit Certificate in
favor of respondent citing CA GR SP No. 60057 (May 31, 2001, Central Luzon Drug Corp.
vs. CIR) citing that Sec. 229 of RA 7432 deals exclusively with illegally collected or
erroneously paid taxes but that there are other situations which may warrant a tax
credit/refund.

CA affirmed Court of Tax Appeal's decision reasoning that RA 7432 required neither a tax
liability nor a payment of taxes by private establishments prior to the availment of a tax
credit. Moreover, such credit is not tantamount to an unintended benefit from the law,
but rather a just compensation for the taking of private property for public use.

Issue:
Whether or not respondent, despite incurring a net loss, may still claim the 20% sales discount
as a tax credit.

Ruling:
Yes, it is clear that Sec. 4a of RA 7432 grants to senior citizens the privilege of obtaining a 20%
discount on their purchase of medicine from any private establishment in the country.
The latter may then claim the cost of the discount as a tax credit. Such credit can be
claimed even if the establishment operates at a loss.

A tax credit generally refers to an amount that is “subtracted directly from one’s total tax
liability.” It is an “allowance against the tax itself” or “a deduction from what is owed” by
a taxpayer to the government.
A tax credit should be understood in relation to other tax concepts. One of these is tax
deduction – which is subtraction “from income for tax purposes,” or an amount that is
“allowed by law to reduce income prior to the application of the tax rate to compute the
amount of tax which is due.” In other words, whereas a tax credit reduces the tax due,
tax deduction reduces the income subject to tax in order to arrive at the taxable income.

A tax credit is used to reduce directly the tax that is due, there ought to be a tax liability before
the tax credit can be applied. Without that liability, any tax credit application will be
useless. There will be no reason for deducting the latter when there is, to begin with,
no existing obligation to the government. However, as will be presented shortly, the
existence of a tax credit or its grant by law is not the same as the availment or use of
such credit. While the grant is mandatory, the availment or use is not. If a net loss is
reported by, and no other taxes are currently due from, a business establishment, there
will obviously be no tax liability against which any tax credit can be applied. For the
establishment to choose the immediate availment of a tax credit will be premature and
impracticable.