G.R. No. 240163 - Department of Fice vs. Asia United Bank

On March 15, 2011, the Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, promulgated Revenue Regulations No. 4-2011 prescribing rules for the allocation of costs and expenses among a bank’s Regular Banking Unit (RBU) and its Foreign Currency Deposit Unit/Expanded Foreign Currency Deposit Unit (FCDU/EFCDU) or Offshore Banking Unit (OBU).
The RR mandated that only costs and expenses specifically attributable to the RBU are deductible against its taxable income, while expenses of FCDU/EFCDU/OBU operations are disallowed; common expenses must be allocated by specific identification or by pro rata allocation based on gross income shares.

On April 6 and 15, 2015, various banks (Asia United Bank, BDO Unibank, Citibank, etc.) filed petitions for declaratory relief and preliminary injunctions in the Regional Trial Court (RTC) of Makati (Sp. Civil No. 15-287; Civil No. 15-291), assailing RR 4-2011 as beyond statutory authority, violative of the Tax Code (Sections 27(A), 28, 43, 50, 34) and the Constitution (due process, equal protection).
The RTC granted preliminary injunctions (April 25, 2015; February 28, 2018) enjoining enforcement of RR 4-2011 against the respondents.

The RTC upheld its jurisdiction under Rule 63 on declaratory relief to pass on the constitutionality and validity of a revenue regulation.
It declared RR 4-2011 null and void for being ultra vires—lacking basis in the Tax Code and violating equal protection—and made the injunctions permanent.

Whether the RTC had jurisdiction to entertain petitions challenging the validity of RR 4-2011.

Whether RR 4-2011 was validly issued under the Secretary of Finance’s rule-making power (Tax Code, Section 244).
Whether RR 4-2011 contravenes Sections 43 (accounting methods), 50 (allocation of income and deductions), and 34 (allowable deductions) of the Tax Code and is otherwise unconstitutional (due process, equal protection).