1985.03.27

1980 (Gyo-Tsu) 15

Minshu Vol. 39, No. 2, at 247

Judgment to rule that the provisions in the Income Tax Law not allowing deduction for necessary expenses on actual terms in calculating the amount of employment income does not violate Article 14, paragraph 1 of the Constitution (Case of Salaried Workers' Taxation)

Case to seek the reversal of income taxation

Judgment of the Grand Bench, dismissed

Osaka High Court

1. To treat taxpayers distinctively for the reason of differences in the nature of income as categorized in the field of the Tax Code does not constitute a violation of Article 14, paragraph 1 of the Constitution, as far as the purpose of the legislation is justifiable AND unless the actual way of distinction is proven extremely unreasonable in relation to the said purpose.
2. Article 9, paragraph 1, item 5 of the Income Tax Law (before revised according to the 1965 Law No. 33) not allowing deduction for necessary expenses on actual terms in calculating the amount of salary income does not violate Article 14, paragraph 1 of the Constitution
(With regard to 1 and 2, there are supplementary opinions.)

(Concerning 1 and 2) The Constitution of Japan
Article 14, paragraph 1
All of the people are equal under the law and there shall be no discrimination in political, economic or social relations because of race, creed, sex, social tats or family origin.

Income Tax Law (before revised in accordance with the 1965 Law No. 33)
Article 9, paragraph 1
The basis of assessment of income tax shall be, for types of income stipulated in any of the following items except for item 6 and 7, the grand total of the total amount obtained according to the provisions of item 1 through 5 and item 10 plus the amount corresponding to five tenths (5/10) of the amount obtained by subtracting 150,000 yen from the total calculated according to the provisions of item 8 and item 9 (instead of 150,000 yen, if the said total is less than 300,000 yen, the same amount as the total shall apply, and if the said total is within the range exceeding 300,000 yen and under 450,000 yen, the amount obtained by subtracting the said total from 600,000 yen shall apply; hereinafter referred to as "the amount specially deductible from transfer income, etc.") (or, if the amount calculated according to the provision of item 8-(1) exceeds the amount specially deductible from transfer income, etc., the sum obtained by adding the said excess to the amount corresponding to five tenths (5/10) of the amount calculated according to the provisions of item 8-(2) and item 9) (hereinafter referred to as "the aggregated amount of income"), and for types of income stipulated in item 6 or item 7, the amount calculated according to the provision of the relevant item (or, if the provision of Article 9-3, paragraph 1, item 5 or item 6 is applicable, the amount arrived at after deduction according to the provision of the relevant item shall apply; hereinafter referred to as "the amount of retirement income" and "the amount of income from forestry", respectively).
1. Concerning income from interest on public bond, corporate bond or deposits paid, profits from joint trust, and distribution of revenue from bond investment trust (hereinafter referred to as "interest income") , the gross revenue for the year shall be applicable
2. Concerning share in profits or interest paid by the corporate body, distribution of surplus or distribution of gains from securities investment trust (excluding bond investment trust; the same rule shall apply hereinafter) (excluding types of income described in Article 6,item 10; hereinafter referred to as "dividend income"), the amount obtained by deducting interest on debt incurred in obtaining the said principle (excluding what is to be included in expenses necessary for calculating the amount of income described in Article 6, item 6-(1) or (2)) from the gross revenue for the year shall be applicable.
3. Concerning income from real estate or title thereto, of rent of shipping (including creation of surface right or perennial tenant right or rights causing a third party to use real estate or title thereto or shipping) (excluding the type of income stipulated in item 4 or item 8; hereinafter referred to as "real estate income"), the amount obtained by deducting all necessary expenses from the gross revenue in the year shall be applicable.
4. Concerning income from commerce, industry, agriculture, fishery, medical practice, literary profession and other business stipulated by order (excluding the type of income stipulated in item 7 and income from the transfer of fixed assets for business use; hereinafter referred to as "business income"), the amount obtained by deducting all necessary expenses from the gross revenue in the year shall be applicable.
5. Concerning remuneration, salary, wage, annual allowance, pension, public employees' pension and bonus, and allowances with these natures (hereinafter referred to as "employment income"), the amount obtained by deducting any of the following sums, according to the relevant income, from the gross revenue in the year shall be applicable.
(1) In case of the total income not more than 420,000 yen: the total of 20,000 yen plus the amount equal to two tenths (2/10) of the amount obtained by deducting 20,000 yen from the total income
(2) In case of the total income exceeding 420,000 yen and not more than 820,000 yen: the total of 100,000 yen plus the amount equal to a tenth (1/10) of the amount obtained by deducting 420,000 yen from the total income
(3) In case of the total income exceeding 820,000 yen: 140,000 yen
6. Concerning lump-sum public employees' pension and retirement, and allowances with these natures (hereinafter referred to as "retired income"), the amount equal to five tenths (5/10) of the amount obtained by deducting the amount calculated by the following measure from the gross revenue in the year shall be applicable.:
(1) To multiple 50,000 yen by the length of service calculated according to order
(2) If the amount of retirement income in the year exceeds the amount calculated under (1), and the said amount is not more than 200,000 yen, a sum of 200,000 yen ( or a sum equal to the said amount of earnings, if it is not more than 200,000 yen) shall apply)
(3) In case it is determined that a person retires directly due to disability, and if required by order, 500,000 yen shall be added to the amount calculated under (1)
7. Concerning income from tree felling or transfer of forestry (excluding income from tree felling or transfer of forestry within three years from the day of acquisition thereof; hereinafter referred to as "timber income"), the amount obtained by deducting costs for planting, acquiring, managing and felling and other necessary expense from the gross revenue in the year, from which (the balance) 150,000 yen (in case of the said balance not more than 300,000 yen, a sum equal to the said balance, and in case of the said balance exceeding 300,000 yen and less than 450,000 yen, a sum obtained by deducting the said balance from 600,000 yen) shall be deducted
8. Concerning the following type of income (excluding income from tree felling or transfer of forestry and income from continuous activity for profit-making purpose, and as to activities stipulated by order referred to (1) below, only income received lump-sum as a consideration therefor is to be included; hereinafter referred to as "capital gains"), the total amount obtained by deducting from the respective gross revenue in the year the value of acquisition of the relevant property, the cost of equipment, the cost of improvement and other expenses incurred in the said transfer
(1) Income from the transfer of assets (including activities to cause a third party to use for a long period of time real estate or title thereto under the creation of superficies or other agreement which are stipulated by order; the same shall apply in (2) below), which is drawn within three years from the day of income drawn and stipulated by order
(2) Income from the transfer of assets other than described in (1) above
9. Of income other than described in each of the foregoing items, regarding lump-sum income other than drawn from continuous profit-making activities, which does not have such nature as a consideration for labor or other service or the transfer of assets (hereinafter referred to as "occasional income"), the amount obtained by deducting the amount expended to earn such income from the gross revenue in the year
10. Concerning income other than described in each of the foregoing items (hereinafter referred to as "miscellaneous income"), the amount obtained by deducting all necessary expenses from the total income in the year

Article 10, paragraph 2 of the same law
Expenses to be deducted from the gross revenue under the provisions of Article 9, paragraph 1, item 3, item 4, item 7 and item 10 should be costs of purchasing seeds and saplings, silkworm seeds or fertilizer, costs of breeding livestock, costs of purchased goods, prices for raw materials, costs of repairing or renting land, house or other property, premium payable under non life insurance policy, depreciation cost of fixed assets as stipulated by order, national and local taxes in connection with land, house or other property or business, salary payable to employees, expenses necessary for drawing the relevant gross revenue including interest on debt and etc. (including losses incurred in connection with fixed assets for business and the like as stipulated by order); provided that expenses related to housekeeping and others related thereto as stipulated by order, delinquency tax or penalty for understatement, penalty for failure to file, additional tax on non-payment or fraud penalty related to national tax other than income tax, and penalty for understatement, fraud penalty or delinquency tax stipulated in the Local Tax Law are excluded are excluded.

Supplementary Provisions to the Law to Revise Part of the Income Tax Law (1964 Law No. 20), Article 3
Concerning tax income for 1964, the phrases listed in the middle column of the table below, which are contained in the provisions of the new Law listed in the left column of the table below, shall be replaced with the counterparts shown in the right column.
Article 9, para. 1, item 5
(1) In case of the total income not more than 420,000 yen: the total of 20,000 yen plus the amount equal to two tenths (2/10) of the amount obtained by deducting 20,000 yen from the total income
(2) In case of the total income exceeding 420,000 yen and not more than 820,000 yen: the total of 100,000 yen plus the amount equal to a tenth (1/10) of the amount obtained by deducting 420,000 yen from the total income
(3) In case of the total income exceeding 820,000 yen: 140,000 yen

(1) In case of the total income not more than 417,500 yen: the total of 17,500 yen plus the amount equal to two tenths (2/10) of the amount obtained by deducting 17,500 yen from the total income
(2) In case of the total income exceeding 417,500 yen and not more than 717,500 yen: the total of 97,500 yen plus the amount equal to a tenth (1/10) of the amount obtained by deducting 417,500 yen from the total income
(3) In case of the total income exceeding 717,500 yen and not more than 817,500 yen: the total of 127,500 yen plus the amount equal to 0.75/10 of the amount obtained by deducting 717,500 yen from the total income
(4) In case of the total income exceeding 817,500 yen: 135,000 yen

Article 11-2, para. 2, item 1
150,000 yen
143,800 yen

120,000 yen
113,800 yen
Article 11-2, para. 3, item 1
90,000 yen
86,300 yen
Article 11-7
20,000 yen
18,800 yen

30,000 yen
31,200 yen
Article 11-8, para. 1
10,000 yen
7,500 yen

2,000 yen
1,500 yen

8,000 yen
6,000 yen
Article 11-9
110,000 yen
108,800 yen
Article 11-10, para. 1, item 1
(1) A dependant aged 13 or older: 50, 000 yen
(2) A dependant aged younger than 13: 40,000 yen
(1) A dependant aged 15 or older: 50, 000 yen
(2) A dependant aged 14 or 13: 46,300 yen
(3) A dependant aged younger than 13: 38,800 yen
Article 11-10, para. 2, item 2
One of dependents aged 13 or older, if any
One of dependents aged 15 or older, if any; one of dependents aged 14 or 13 if there is no dependent aged 15 or older, if any
Article 11-10, para. 4
Aged 13 or older
Aged 15 or older, aged 14 or 13, or aged younger than 13

Every year
Year of 1964
Article 12
120,000 yen
117,500 yen
Article 40, para. 1, item 2
Annexed table 6, attached list
Supplementary Provisions to the Law to Revise Part of the Income Tax Law (1964 Law No. 20), Annexed table 2
Annexed table 6, note (1)
Attached list hereto
Supplementary Provisions to the Law to Revise Part of the Income Tax Law, Annexed table 2
Annexed table 6, note (1)-(3)
20,000 yen
18,800 yen

10,000 yen
9,400 yen

35,000 yen
34,400 yen
Annexed table 6, note (1)-(4)
10,000 yen
7,500 yen

2,000 yen
1,500 yen

8,000 yen
6,000 yen

This JOKOKU-appeal is hereby dismissed.
The litigation cost incurred in this appeal shall be borne by the Appellant's side.

I. Concerning the reasons for JOKOKU-appeal stated by Counsel Yamada Kinnosuke
According to the essence of the argument presented in this JOKOKU appeal:
On the ground that the stipulation concerning taxation on income (hereinafter referred to as "the said stipulation") in the Income Tax Law before revised in accordance with the 1965 Law No. 33 (the 1947 Law No.27; hereinafter referred to as the "old Income Tax Law), which is the basis of the taxation in question, imposes the unfairly heavy income tax burden on employment income earners compared to business income earners and others and treats employment income earners discriminatorily as discussed below, thus it violates the provision of Article 14, paragraph 1 of the Constitution and is invalid, the original judgment which determines the said stipulation as constitutional is challenged as discussed below:
1. The old Income Tax Law allows deduction for necessary expenses on actual terms incurred by business income earners, etc. in drawing the gross revenue in the year for calculating the amount of business income, etc., while it does not allow deduction for necessary expenses on actual terms incurred by employment income earners in earning the gross revenue in the year but only approves of deduction from employment income in a far smaller amount than the said actual amount of expenses.
2. In the self-assessment system under the old Income Tax Law, the rate of employment income captured is much higher than that of business income, etc., shifting an unfair income tax burden to employment income earners.
3. The old Income Tax Law imposes an excessive income tax burden on employment income earners, compared to business income earners, etc. who enjoy a variety of tax concessions without justifiable reasons.

II. First, with regard to deduction for necessary expenses concerning employment income, we judge as follows:
1. The old Income Tax Law divides taxable income into ten classes according to the nature of income, and for the purpose of calculating the amounts of real estate income, business income, timber income and miscellaneous income, provides that necessary expenses shall be deducted from the relevant gross revenue in the year in each case, that the said necessary expenses shall be expenses necessary for drawing the relevant gross revenue, and that expenses related to housekeeping and other related thereto (in case of expense the main portion of which is necessary for drawing the said gross revenue and such necessary portion of which is clearly classified, the relevant portion of such expense shall be excluded herefrom; the same rule shall apply below) shall not be included in necessary expenses. Likewise, for the purpose of calculating the amounts of dividend income, capital gains and occasional income, the old Income Tax Law sets forth deduction for "interest on debts incurred in obtaining the principal," " the value of acquisition of the relevant property, the cost of equipment, the cost of improvement and other expenses incurred in the said transfer" or "the amount expended to draw such revenue". On the other hand, the old Income Tax Law provides that the amount of employment income shall be arrived at by deducting the amount specified in the said law (in case of the total income not more than 420,000 yen, the total of 17,500 yen plus the amount equal to two tenths (2/10) of the amount obtained by deducting 17,500 yen from the said total income; in case of the total income exceeding 417,500 yen and not more than 717,500 yen, the total of 97,500 yen plus the amount equal to a tenth (1/10) of the amount obtained by deducting 417,500 yen from the said total income; in case of the total income exceeding 717,500 yen and not more than 817,500 yen, the total of 127,500 yen plus the amount equal to 0.75/10 of the amount obtained by deducting 717,500 yen from the total income; in case of the total income exceeding 817,500 yen, 135,000 yen) (such deduction shall be hereinafter referred to as "deduction from employment income"). By the way, while the incurrence of necessary expenses for earning income in connection with employment income is assumable, and in the light of a report submitted by the then Tax Commission and the legislative process, it is obvious that the said deduction from employment income is intended to include deduction of estimated expenses incurred related to the service of employment income earners, it can be said that the old Income Tax Law distinguishes between business income earners, etc. and employment income earners with regard to deduction of necessary expenses, by allowing the former to deduct actual expenses as necessary expenses related to business income, etc., while not allowing the latter to deduct actual expenses as necessary expenses related to employment income, instead introducing deduction of estimated expenses to the latter case.
2. Whether such distinction violates the provision of Article 14, para 1 of the Constitution is discussed as follows:
(1) Article 14, para.1 of the Constitution provides that all of the people are equal under the law an there shall be no discrimination in political, economic or social relations because of race, creed, sex, social status or family origin. Such equality guaranteed is one of the fundamental principles of the Constitution and extends to all acts of government by the State including the exercise of the right of taxation. In reality, however, the people differ each other in many respects, and if they are treated in a one and same way without regard to such difference, it is likely to cause imbalance among the people to the contrary, which is definitely against the purport of the provision of Article 14, para 1 of the Constitution. In other words, the said provision does not guarantee absolute equality for the people but prohibits discrimination without justifiable reasons, and in the light of the said purport, to treat for the legal purpose the people distinctively according to actual differences among the people is not deemed unconstitutional as far as such distinction is proven reasonable (Supreme Court Judgment 1950 (A) No. 0292 rendered by the Grand Bench on October 11, 1959, Keishu Co, 4, No. 10, at 2037; Supreme Court Judgment 1962 (O) No. 1472 rendered by the Grand Bench on May 27, 1964, Minshu Vol. 18, No. 4, at 678).
(2) Tax is, not as counter benefit to a particular benefit but pecuniary burden laid upon those who are qualified for specified requirements, collectable by the State based on its right of taxation for the purpose of generating fund appropriated to defray public expenses, and in any democratic state, expenses necessary for the maintenance and operation of the State are regarded as public expenditure to be borne by the people with sovereignty in accordance with what is to be established through their representatives, and the Constitution of Japan, from such point of view, provides that the people shall be liable to taxation as provided by law (Article 30), and that no new taxes shall be imposed of existing one modified except by law or under such conditions as law may prescribe (Article 84). Therefore, it is essential that taxation requirements and procedures for assessment and collection be explicitly prescribed by law, but the Constitution itself does not set forth what is to be contained therein, which is left to law for specific prescription. Tax today has, in addition to its original function to fulfil the financial needs of the State, various functions such as income redistribution, optimum allocation of resources, economic adjustment and so on, and to this end, it is obviously necessary not only to make a comprehensive decision in light of policy requirements for the whole field of national administration including fiscal, economic, social and other policies so as to determine the tax burden on the people, but also take a highly specialized and technical decision so as to provide for taxation and other requirements. Hence, it is held that when it comes to enactment of the Tax Code, there is no other way than to leave to the technical decision of the legislature in line with policy based on accurate material and data for the real state of national finance, socio-economy, national income, the people's living and the like, and that the court basically has no choice but to respect such legislative discretional decision. If that is the case, it is appropriate to construe that differentiated treatment on the ground of the difference in the nature of income as categorized in the field of the Tax Code and so forth cannot, as far as the object of a statute thereof is rightful and unless the form and manner of differentiation specifically introduced in the said legislature is deemed significantly irrational in relation to the said object, be negated as irrational or judged to conflict with the provisions set forth in Article 14, Paragraph 1 of the Constitution.
(3) Employment income earners, unlike business income earners, etc., are not supposed to undertake service in their own reckoning at their own risk but provide service in accordance with what is decided by their employers and receive benefits provided by their employers as considerations for such service, which they earn as incomes, and the amount of such benefit is almost fixed as set beforehand, while, as a rule, expenses for facilities, equipment and furniture necessary for service at workplace are usually borne by employers, and it is generally difficult to distinguish necessary expenses from expenses related to housekeeping and others related thereto, because in case the employment income earner pays for expenses related to employment, the way to expend and the amount expended vary depending on the nature of each individual and other subjective circumstances so that relevance to the amount of money earned is deemed indirect and unclear. In addition, it is concerned that with are a great number of employment income earners, it would involves considerable difficulty technically as well as in volume to assess the amount of necessary expenses individually based on each return filed and make deduction of actual expenses, and eventually result in increased expenses for tax collection and causing confusion to tax enforcement in no small way. Furthermore, it is not unlikely that a variety of subjective circumstances different between individual earners in combination with varying degrees of skill to prove cause inequality in the tax burden. It is obvious that the purpose of the estimated expenses deduction rule introduced for employment income instead of the rule of deduction on actual terms under the old Income Tax Law is to prevent the aforementioned adverse effects in consideration of balancing the tax burden between employment income earners and business income earners, etc., and we are of the opinion that the said purpose is justified on the ground that it is the fundamental principle of the Tax Code to distribute the tax burden equally among the people and collect taxes reliably, precisely and efficiently.
(4) In relation to the said purpose, whether or not the aforementioned deduction rule for employment income specifically introduced under the old Income Tax Law is reasonable should be determined by establishing whether or not the ratio of the amount deductible from employment income to the amount of necessary expenses related to employment income is appropriate. However, judging from the aforementioned report by the Tax Commission and the legislative progress, the said deduction rule for employment income is designed, as mentioned above, to make deduction of estimated expenses pertinent to employment income, in addition to which, however, (1) to adjust smaller earning capacity of employment income earners compared to business income earners, etc. because employment income ceases to accrue upon the principal's death and so forth, (2) to adjust relative easiness to capture employment income accurately compared to other types of income because employment income tax is collected by withholding at source, and (3) to adjust interests accrued in a time gap when employment income tax is collected about five months earlier on average compared to self-assessment are said to be purported. However, the extent of such adjustment is not clearly defined even in reference of the said report by the Tax Commission and the legislative progress, but it is a matter of legislative policy after all. Either the nature of the Tax Code or the provisions of Article 14, para. 1 of the Constitution do not necessary call for any kind of adjustment. Hence, in the context of the application of the provisions of Article 14, para. 1 of the Constitution, in order to determine whether or not the deduction rule for necessary expenses pertinent to employment income is well-balanced in comparison to the rule of deduction on actual terms for business income, etc., it is deemed appropriate to focus the issue of deduction from employment income on the issue of deduction for necessary expenses pertinent to employment income for discussion. In consideration of such practice that as a rule, expenses for facilities, equipment and furniture necessary for service at workplace are usually borne by employers and pecuniary benefits to cover business trips and commuting costs necessary for the performance of service, benefits in kind indispensable by the nature of service and so forth are generally treated as non-taxable income, even judging from the documentary material presented in this case, it is difficult to conclude that the amount of necessary experiences borne by employment income earners themselves generally exceeds the aforementioned deduction from employment income stipulated in the old Income Tax Law obviously, and we must admit that the aforementioned deduction from employment income is not deemed unreasonable compared to the amount of necessary expenses related to employment income.
(5) As discussed above, it is concluded that the aforementioned distinction in deduction for necessary expenses between business income earners, etc. and employment income earners introduced in the old Income Tax Law is reasonable and does not violate the provision of Article 14, para.1 of the Constitution.

III. Next, it is pointed out in this JOKOKU-appeal that the rate of business income, etc captured is lower than that of employment income, and the essence of the argument is that as long as significant disparity in the rate of income captured exists permanently, it involves not only a practical matter such as varying degrees of tax collection skill but also a defect inherent in the rule itself, because of which the said stipulation amounts to violation of the Constitution.
Indeed, it can be derived from the material on the record in this case that the rate of business income, etc. captured has been lower than that of employment income for a significant long period of time, and it is deemed necessary to make efforts to redress such disparity from the viewpoint of the impartial taxation principle. However, the issue of disparity in the rate of income captured should be redressed through appropriate enforcement of tax administration in principle, and except that such disparity is remarkable to the extent against the principle of justice and equity and exists permanently, which is found attributable to the Tax Code system itself (the material on the record does not prove the existence of such circumstances), otherwise it cannot be judged that the Tax Code system itself is unconstitutional for the reason of such disparity, and accordingly, the said stipulation cannot be determined as unconstitutional against the provision of Article 12, para. 1 of the Constitution because of the existence of disparity in the rate of income captured.

IV. It is also argued that a variety of tax concessions without justifiable reasons are available. Even if tax concessions referred to in the argument are not reasonable, it is an issue only concerning the validity of the said stipulation, not relevant enough to prove that the said stipulation is unconstitutional and invalid.

V. As discussed above, because the said stipulation does not violate the provisions of Article 14, para. 1 of the Constitution, we uphold the conclusion arrived at in the original judgment. The argument to refute the original judgment, with regard to the portion of which does not affect the conclusion of the judgment, including an alleged violation of Article 32 of the Constitution, cannot be accepted. Thus, in accordance with Article 7 of the Code of Administrative Litigation, Article 396, Article 384, Article 95, Article 89, Article 93 of the Code of Civil Procedure, with supplementary opinions delivered by Justice KINOSHITA Tadayoshi, Justice ITO Masami, Justice TANIGUCHI Masataka, Justice KIDOGUCHI Hisaharu, Justice SHIMATANI Rokuro and Justice NAGASHIMA Atsushi respectively, the judgment is passed unanimously as described in the text.

Justice ITO Masami expresses the following supplementary opinion:
Like the opinion of the court, I understand that although the said stipulation, not approving deduction for necessary expenses on actual terms related to employment income by introducing deduction for estimated expenses instead, distinguishes employment income earners from business income earners, etc., it does not violate the provision of Article 14, para. 1 of the Constitution in itself. And as to the grounds for understanding to that effect, I have no objection to the grounds expounded in the opinion of the court. In the light of the nature of this case that concerns the relation between the Tax Code advocating equal and fair tax burden imposed on the people and the Constitution, however, I'd like to express my opinion supplementarily on the following two points:

I. As expounded in the opinion of the court, the Tax Code is highly strongly presumed to be constitutional and basically, its establishment is left to the legislature's broad discretion while the Court takes a stance to respect the legislature's decision, but it should not be overlooked that there exist exceptional cases to this picture. Even in the area of the Tax Code, if discrimination because of sex or other reasons stipulated in the latter half of Article 14, para. 1 of the Constitution is alleged for example, the presumed constitutionality should be put aside and the Court should determine according to rigorous criteria whether or not the alleged discrimination is reasonable, and it is very likely that such discrimination is determined to be against the principle of equality. Prohibition on discrimination because of sex or other reasons is essential requirement under democracy, which should not be disregarded in the Tax Code. In this case, however, it is not the type of discrimination arising from the aforementioned reason but the distinction of treatment according to the difference in nature of income and so forth that is brought into question, therefore obviously it is not the case that requires review according to rigorous criteria.

II. The said stipulation itself does not violate the provision of Article 14, para. 1 of the Constitution, but it is not sufficient to conclude that a particular taxation based on the said stipulation is not always consistent with the said provision. For a particular employment income earner, if it is found that the amount of necessary expenses related to his/her employment income (it is open to argument what expenses are to be defined as necessary expenses, but as pointed out in the opinion of the court, the incurrence of necessary expenses is assumable for earning employment income as well) markedly exceeds the amount deductible from employment income applicable to the said earner, it is obviously unreasonable to apply the said stipulation to the said employment income earner and impose a tax on the said amount in excess, and in such case, the said stipulation should be said to violate the provision of Article 14, para. 1 of the Constitution to the extent applicable to the said employment income earner (needless to say, it should be carefully deliberated whether or not such income truly falls under employment income intended by the old Income Tax Law if the amount of necessary expenses markedly exceeds the amount deductible from employment income).
To put this case in this context, as it is obvious in the light of the view expounded in the original judgment that the amount of necessary expenses in this case is not markedly in excess of the amount deductible from employment income, it can be hardly concluded that the taxation according to the said stipulation is not a violation of the provision of Article 14, para. 1 of the Constitution.

Justice KINOSHITA Tadayoshi and Justice NAGASHIMA Atsushi agree to the second point of the supplementary opinion expressed by Justice ITO Masami.

Justice TANIGUCHI Masataka expresses a supplementary opinion as follows:
I agree to the point expounded by Justice ITO to amplify the opinion of the court rejecting the appellant's argument that it is out of balance not to approve deduction for necessary expenses on actual terms by applying the deduction rule under the old IL to employment income earners compared to the rule of deduction on actual terms applicable to business income earners, etc., therefore the said stipulation violates the provision of Article 14, para.1 of the Constitution. However, it is limited to the discussion whether the said stipulation violates the said provision or not. In other words, it is discussed in terms of discriminated treatment compared to the rule of deduction on actual terms applicable to business income, etc., supposing that the amount of necessary expenses incurred by an employment income earner in earning employment income exceeds the said deduction from employment income, and it is concluded that such case gives rise to the question of unconstitutionality against the provision of Article 14, para. 1 of the Constitution. However, although it is obvious that the amount of necessary expenses incurred by the employment income earner exceeds the said deduction from employment income, it is not clarified what extent such excess is marked. I am of the opinion that such case does not give rise to the question of unconstitutionality from the outset. Because it is sufficiently connoted by the view to tolerate reasonable discrimination developed by the opinion of the court in relation to the said provision.
However, in case the amount of necessary expenses is founded to exceed the amount deductible from employment income applicable to employment income earners, as long as such excess is evident, regardless of the degree of such excess, it should be put in question whether or not there is virtually no income accruing given such excess present. Indeed, we have to admit that policy consideration affects to a great extent what standard is to be referred to in calculating the amount of necessary expenses incurred in earning employment income. But even if such policy consideration is to be taken, it is not deniable that there exist necessary expenses incurred by employment income earners, and in particular we must admit that some of these necessary expenses are inevitably spent for such earners to earn incomes, which should be beyond policy consideration. It is understood that this is a premise made by the opinion of the court. In this respect, it is rightful to assume the case where the amount of necessary expenses evidently exceeds the amount deductible from employment income applicable to employment income earners and refer to such case. Even in such case, as far as there exists what is to be counted as employment income, some people are of the opinion that it can be left to the legislative discretion to impose a tax on the employment income earner according to a nominal amount of income. However, I don't find such opinion acceptable at all. All in all, if the amount of necessary expenses exceeds the amount deductible from employment income as mentioned above, the amount in excess should not be considered compatible with the notion of income; otherwise it would result in imposing a tax on where no income accrues, which is contrary to the basic principle of taxation on income.
I am of the opinion that it raises a doubt on constitutionality to assess and collect an income tax on what cannot be defined as income, even if it does not violate the provision of Article 14, para. 1 of the Constitution.
However, as it is obvious based on the material on the record that the specific amount of necessary expenses expended in this case does not exceed the amount deductible from employment income, this issue should not be taken up as the point in dispute.

Justice KIDOGUCHI Hisaharu expresses a supplementary opinion as follows:
I uphold that the stipulation concerning taxation on income in the old Income Tax Law itself does not violate the provision of Article 14, para. 1 of the Constitution, as expounded in the opinion of the court.
At the same time, however, it cannot be denied that employment income earners generally find it unfair to be subject to heavier tax burden than business income earners, etc., even if the said stipulation is judged not to be against the provision of Article 14, para. 1 of the Constitution in the eye of the law.
Referring to the material on the record, in FY1964, the year in question, the percentage of taxpayers in the total of income earners by the type of income is as follows: 79.3% for employment income earners (private-sector employment income earners in service throughout the year), 7.2% for agricultural income earners (full-time farmers and TYPE I farmers with side jobs), and 24.9% for business income earners excluding agricultural income earners; and the ratio of taxable incomes to national income is: 76.3% for employment income earners, 6.9% for agricultural income earners, and 27.0% for business income earners excluding agricultural income earners. These indexes did not show sharp fluctuations in years before and after the year in question. And as widely known, in terms of the percentage of taxpayers in the total of income earners by the type of income, it has reached about 90% for employment income earners (defined the same as above) in recent years, while remaining unchanged around 15% for agricultural income earners (defined the same as above) and about 40% for business income earners excluding agricultural income earners. Even though it cannot be denied that such relative differences in the percentage of taxpayers as well as taxable incomes are attributable to substantial differences in income to some extent, these are also in no small ways caused by the imbalance in grasping incomes mainly due to the difference in tax collection system between withholding at source and self-assessment and other tax concessions. In this respect, the said relative differences show that the tax burden on business income earners, etc. is much lighter than that on employment income earners, and such situation is not a phenomenon unique to a particular fiscal year but has continued for a significant period of time, which in my opinion has caused a sense of unfairness on the part of employment income earners.
The principle of equal tax burden under Article 14, para. 1 of the Constitution prohibits not only treating a particular party disadvantageously without justifiable reasons in enacting and enforcing the Tax Code but also granting special interests a particular party. As pointed out above, Lower ratio of incomes captured means that business income earners are unreasonably exempted from tax burden, and various tax concessions, if reduced to be unreasonable in the light of the relevant legislative purpose, would provide unreasonable interests for business income earners. If the relative difference in substantial tax burden between business income earners and employment income earners due to such omission in capturing incomes and unreasonable tax concessions becomes constant and finally reaches a marked level, such situation is likely to give rise to the question of unconstitutionality against the provision of Article 14, para. 1 of the Constitution. Although it is not necessarily clear what level such relative differences have actually reached, it is a reality that the tax burden on business income earners is lighter than that on employment income earners, as discussed above, and the fact is that the sense of unfairness regarding tax burden held by employment income earners has become not negligible, which in my opinion should be redressed in a prompt and active manner.
As discussed above, in the light of the widely spread sense of unfairness regarding taxation on employment income as the background of this JOKOKU-appeal filed by the late P, I have delivered a supplementary opinion.

Justice SHIMATANI Rokuro expresses a supplementary opinion as follows:
The Appellants and others argue that it is unfair not to allow employment income earners to deduct necessary expenses on actual terms as applied to business income earners, etc. under the old Income Tax Law.
It is true, as expounded in the opinion of the court, that the deduction from employment income applicable to employment income earners includes deduction of estimated expenses in the purport of the said law, and judging from the view expounded in the original judgment, it is obvious that the actual amount of necessary expenses specifically expended does not exceed the amount deductible from employment income set forth in the old Income Tax Law in this case.
Generally speaking, however, we cannot deny the possibility that the actual amount of necessary expenses incurred by the employment income earner exceeds the amount deductible from employment income, and if the amount in excess is considered notable, then it gives rise to the question of unconstitutionality of applying the stipulation concerning taxation on income, and in this respect I agree to the second point of the supplementary opinion delivered by Justice ITO.
Even if the said amount in excess is not considered notable, as far as the excess exists, a tax is supposed to be imposed on where no income accrues, which should not be easily overlooked in the light of the basic principle of taxation on net income under the Tax Code even though it does not give directly rise to the question of unconstitutionality.
Hence, in order to prevent the said taxation from being implemented, it is required to study the system of deduction from employment income extensively, including the introduction of an alternative system which approves deduction for necessary expenses on actual terms for employment income earners as well while leaving the option to choose deduction of estimated expenses or deduction of actual expenses open to them.

Justice TERADA Jiro
Justice FUJISAKI Masato
Justice KINOSHITA Tadayoshi
Justice SHIONO Yasuyoshi
Justice ITO Masami
Justice TANIGUCHI Masataka
Justice OHASHI Susumu
Justice KIDOGUCHI Hisaharu
Justice MAKI Keiji
Justice WADA Seiichi
Justice YASUOKA Mitsuhiko
Justice TSUNODA Reijiro
Justice YAGUCHI Koichi
Justice SHIMATANI Rokuro
Justice NAGASHIMA Atsushi