Supreme Court facade. INQUIRER FILE PHOTO
The Supreme Court (SC) has ordered the Department of Finance (DOF) and the Bureau of Internal (BIR) to grant a refund or a claim for tax credits to taxpayers whose incomes for taxable year 2008 have been subjected to prorated increase in personal and additional tax exemption.
Refund also covers all minimum wage earners (MWEs) whose minimum wage incomes were subjected to tax for their receipt of the l3th month pay and other bonuses and benefits.
In a 56-page decision, the high court, through Chief Justice Maria Lourdes Sereno also nullified provisions of Revenue Regulation No.10-2008 restricting the enforcement of Republic Act No. 9504 which provides for tax exemption for MWEs.
The high court specifically nullified Sections 1 and 3 of RR No.10-2008 insofar as they disqualify MWEs who earn purely compensation income from the privilege of the MWE exemption in case they receive bonuses and other compensation-related benefits exceeding the statutory ceiling of P30,000.
The high court also nullified Section 3 that provides for the prorated application of the personal and additional exemptions under R.A 9504 for taxable year 2008, and for the period of applicability of the MWE exemption to begin only on July 6, 2008.
The case stemmed from the consolidated petitions filed by several lawmakers, individuals and labor groups who argued that it departed from the actual intent of R.A. 9504 as it restricts the implementation of the MWEs’ income tax exemption only to the period starting from July 6 2008, instead of applying the exemption to the entire year 2008.
Petitioners challenged the BIR’s adoption of the prorated application of the new set of personal and additional exemptions for taxable year 2008 as well as the validity of the RR’s imposition of a condition for the availment by MWEs of the exemption provided by R.A. 9504.
Under the law, in the event they receive other benefits in excess of P30,000, they can no longer avail themselves of that exemption.
The petitioners contend that the law provides for the unconditional exemption of MWEs from income tax.
The high court, in its decision, said the DOF and the BIR committed grave abuse of discretion in promulgating the revenue regulation particularly Sections 1 and 3.
“Sections 1 and 3 of RR l0-2008 add a requirement not found in the law by effectively declaring that an MWE who receives other benefits in excess of the statutory limit of P30,000 is no longer entitled to the exemption provided by R.A. 9504,” the SC declared.
The high court said that the increased exemptions were already available much earlier than the required time of filing of the return on April 15, 2009 while R.A. 9504 came into law on July 6, 2008 or more than nine months before the deadline for the filing of the income tax return for taxable year 2008.
“Here, not only did R.A. 9504 take effect before the deadline for the filing of the return and payment for the taxes due for taxable year 2008, it took effect way before the close o f that taxable year. Therefore, the operation o f the new set of personal and additional exemption in the present case was all the more prospective,” the court held.
It added that there was nothing in R.A. 9504 that provides or even suggests a prorated application of the exemptions for taxable year 2008.
Thus, the SC said DOF and the BIR went beyond the enforcement of the law in issuing the subject revenue regulations mandating the prorated application of the new amounts of personal and additional exemptions for 2008.
“Therefore, there is no legal basis for the BIR to reintroduce the prorating of the new personal and additional exemptions. In so doing, respondents overstepped the bounds of their rule-making power. It is an established rule that administrative regulations are valid only when these are the laws they administer,” the high tribunal added. RAM