Alvarez v. Guingona GR No.

118303
Doctrine: A municipalitys Internal Revenue Allotment (IRA) is included in the calculation of its
minimum annual average income requirement for its conversion into a city
Facts: RA 7720 was assailed for, among others, providing for the conversion of the municipality
of Santiago, Isabela into a city, despite the fact that (according to the petitioners) it failed to meet
the minimum annual average income of PhP20 million required by the Local Government Code.
According to RA 7720, the annual average income of Santiago, Isabela was PhP20.9 million for
the two consecutive years immediately preceding 1991. However, the petitioners contend that
this calculation was wrong, because it included the IRA given by the national government to the
municipality of Santiago. According to them, IRA is not actually income but budgetary aid from
the national government. Without the IRA, the annual average income of Santiago would only be
about PhP13 million, falling way short of the minimum income required.
Issue: W/N a municipalitys IRA is included in the calculation of its annual income
Held: Yes. The IRA is a form of income because it forms 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.