In April 1993, House Bill 8817 (An Act Converting the Municipality of Santiago into an Independent Component City to be known as the City of Santiago) was passed in the House of Representatives.
In May 1993, a Senate Bill (SB 1243) of similar title and content with that of HB 8817 was introduced in the Senate.
In January 1994, HB 8817 was transmitted to the Senate. In February 1994, the Senate conducted a public hearing on SB 1243. In March 1994, the Senate Committee on Local Government rolled out its recommendation for approval of HB 8817 as it was totally the same with SB 1243. Eventually, HB 8817 became a law (RA 7720).
Now Senator Heherson Alvarez et al are assailing the constitutionality of the said law on the ground that the bill creating the law did not originate from the lower house and that City of Santiago was not able to comply with the income of at least P20M per annum in order for it to be a city. That in the computation of the reported average income of P20,974,581.97, the IRA (Internal Revenue Allotment) was included which should not be.
1. Whether or not RA 7720 is invalid for not being originally from the HOR.
2. Whether or not the IRA should be included in the computation of an LGU’s income.
HELD: 1. NO. The house bill was filed first before the senate bill as the record shows. Further, the Senate held in abeyance any hearing on the said SB while the HB was on its 1st, 2nd and 3rd reading in the HOR. The Senate only conducted its 1st hearing on the said SB one month after the HB was transmitted to the Senate (in anticipation of the said HB as well).
2. YES. The IRA should be added in the computation of an LGU’s average annual income as was done in the case at bar. The IRAs are items of income because they form part of the gross accretion of the funds of the local government unit. The IRAs regularly and automatically accrue to the local treasury without need of any further action on the part of the local government unit. They thus constitute income which the local government can invariably rely upon as the source of much needed funds.
To reiterate, IRAs are a regular, recurring item of income; nil is there a basis, too, to classify the same as a special fund or transfer, since IRAs have a technical definition and meaning all its own as used in the Local Government Code that unequivocally makes it distinct from special funds or transfers referred to when the Code speaks of “funding support from the national government, its instrumentalities and government-owned-or-controlled corporations.