G.R. No. 172892 - Philippine Deposit Insurance Corporation vs. Bureau of Internal Revenue

By Resolution No. 1056 dated October 26, 1994, the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) prohibited RBTI from doing business in the Philippines and placed it under receivership pursuant to Section 30 of Republic Act No. 7653, the New Central Bank Act.
The Philippine Deposit Insurance Corporation (PDIC) was designated as receiver of RBTI.

PDIC evaluated RBTI's financial condition and found it insolvent, prompting the Monetary Board to issue Resolution No. 675 on June 6, 1997, directing PDIC to proceed with liquidation.
PDIC filed a petition for assistance in liquidation before the Regional Trial Court (RTC) of La Trinidad, Benguet, docketed as Special Proceeding Case No. 97-SP-0100.
The RTC, Branch 8, gave due course to the petition and approved it in an order dated September 4, 1997.

BIR intervened as a creditor and moved to suspend liquidation proceedings until PDIC secured a tax clearance under Section 52(C) of Republic Act No. 8424 (Tax Reform Act of 1997 or Tax Code of 1997).
Section 52(C) requires corporations contemplating dissolution or liquidation to secure a tax clearance from BIR prior to issuance of a Certificate of Dissolution or Reorganization by the Securities and Exchange Commission (SEC).

On February 14, 2003, the RTC ordered PDIC to secure the required tax clearance and submit a comprehensive liquidation report, allowing Bangko Sentral to pursue collection actions against individual borrowers.
PDIC moved for partial reconsideration to exclude closed banks from the tax clearance requirement, arguing that liquidation of closed banks is governed by Section 30 of the New Central Bank Act, not Section 52(C) of the Tax Code. The motion was denied on September 16, 2003.

PDIC filed a petition for Certiorari with the Court of Appeals arguing grave abuse of discretion by the trial court.
The Court of Appeals, in its Decision dated December 29, 2005, upheld the trial court’s ruling that Section 52(C) applies to banks undergoing liquidation, hence PDIC must secure the tax clearance.

PDIC filed a petition for review before the Supreme Court, contesting the applicability of Section 52(C) to banks placed under liquidation by the BSP’s Monetary Board.
BIR maintained that even banks under BSP supervision are subject to tax clearance requirements because the obligation to pay income taxes cannot be circumvented by banking regulations.

Whether Section 52(C) of the Tax Code of 1997, requiring a tax clearance from the BIR prior to the approval of liquidation proceedings for corporations, applies to banks placed under liquidation pursuant to Section 30 of the New Central Bank Act by the Monetary Board of the BSP.

Whether the PDIC, as liquidator of a closed bank, must first secure a tax clearance from the BIR before the RTC can approve the project of distribution of the bank's assets.