Soriano vs. Sec.

Of Department of Finance
Gr No. 184450
January 24, 2017
Sereno, CJ

Facts

Petitioners assail the subject RR as an unauthorized departure from the

legislative intent of R.A. 9504. The regulation allegedly restricts the implementation of
the MWEs' income tax exemption only to the period starting from 6 July 2008, instead of
applying the exemption to the entire year 2008. They further challenge the BIR's
adoption of the prorated application of the new set of personal and additional
exemptions for taxable year 2008.

On 24 September 2008, the BIR issued RR 10-2008, dated 08 July 2008,

implementing the provisions of R.A. 9504, which was an act enacted amending certain
provisions of the National Internal Revenue Code.

Issue

Whether or not Sections 1 and 3 of RR 10-2008 are consistent with the law and within
the powers of the BIR to issue.

Ruling

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 consistent with the law. 43 Respondents cannot amend, by
mere regulation, the laws they administer. 44 To do so would violate the principle of non-
delegability of legislative powers.

The prorated application of the new set of personal and additional exemptions for
the year 2008, which was introduced by respondents, cannot even be justified under the
exception to the canon of non-delegability; that is, when Congress makes a delegation
to the executive branch.46 The delegation would fail the two accepted tests for a valid
delegation of legislative power; the completeness test and the sufficient standard
test.47 The first test requires the law to be complete in all its terms and conditions, such
that the only thing the delegate will have to do is to enforce it. 48 The sufficient standard
test requires adequate guidelines or limitations in the law that map out the boundaries of
the delegate's authority and canalize the delegation.

In this case, respondents went beyond enforcement of the law, given the
absence of a provision in R.A. 9504 mandating the prorated application of the new
amounts of personal and additional exemptions for 2008. Further, even assuming that
the law intended a prorated application, there are no parameters set forth in R.A. 9504
that would delimit the legislative power surrendered by Congress to the delegate. In
contrast, Section 23(d) of the 1939 Tax Code authorized not only the prorating of the
exemptions in case of change of status of the taxpayer, but also authorized the
Secretary of Finance to prescribe the corresponding rules and regulations.