Title
Philippine Deposit Insurance Corporation vs. Bureau of Internal Revenue
Case
G.R. No. 172892
Decision Date
Jun 13, 2013
PDIC contested BIR's tax clearance requirement for RBTI's liquidation, arguing it was inapplicable under the New Central Bank Act. Supreme Court ruled in favor of PDIC, exempting banks under liquidation from Section 52(C) of the Tax Code of 1997.

Case Summary (G.R. No. 172604)

Procedural Background and Chronology

The Monetary Board issued Resolution No. 1056 (Oct. 26, 1994) ordering RBTI closed and placed it under receivership, designating PDIC as receiver. PDIC evaluated RBTI and deemed it insolvent; the Monetary Board then directed PDIC to liquidate RBTI by Resolution No. 675 (June 6, 1997). PDIC filed a petition for assistance in liquidation in the RTC (Special Proceeding Case No. 97‑SP‑0100). The BIR intervened as a creditor and moved that liquidation proceedings be suspended until PDIC secured a tax clearance under Section 52(C) of the 1997 Tax Code. The RTC granted the BIR’s motion in an Order dated February 14, 2003 directing PDIC to secure the required tax clearance; PDIC’s motion for partial reconsideration (challenging the tax‑clearance directive) was denied on September 16, 2003. PDIC filed a petition for certiorari with the Court of Appeals, which affirmed the RTC in a Decision dated December 29, 2005 and a Resolution dated May 5, 2006. PDIC then sought review in the Supreme Court.

Legal Issue Presented

Whether Section 52(C) of the 1997 Tax Code—which conditions corporate dissolution or reorganization on securing a tax clearance from the BIR as a prerequisite for the Securities and Exchange Commission’s issuance of a Certificate of Dissolution or Reorganization—applies to banks ordered closed and placed under liquidation by the Monetary Board under Section 30 of the New Central Bank Act, thereby requiring PDIC, as receiver and liquidator, to secure a tax clearance before the liquidation court may approve the project of distribution of the bank’s assets.

Positions of the Parties

PDIC’s position: Section 52(C) does not apply to closed banks liquidated under Section 30 of the New Central Bank Act because bank closures and liquidations are governed by the Monetary Board and BSP, not by the SEC; applying Section 52(C) to closed banks would improperly subject banks to SEC‑centric procedures and intrude upon the special liquidation regime created by Section 30. BIR’s position: The tax‑clearance requirement under Section 52(C) should apply to rural banks under liquidation; BSP supervision over banks does not exclude the applicability of reasonable tax regulations, and the tax‑clearance requirement serves to assure collection of government taxes by requiring corporations undergoing dissolution or liquidation to report and settle tax liabilities.

Lower Courts’ Rulings

The RTC (liquidation court) found merit in the BIR’s motion and ordered PDIC to obtain the tax clearance before proceeding with approval of the project of distribution; PDIC’s motion for reconsideration on this point was denied. The Court of Appeals affirmed the RTC, holding that Section 52(C) applies to banks under liquidation and dismissing PDIC’s petition for certiorari.

Supreme Court Holding

The Supreme Court granted PDIC’s petition. The CA Decision and Resolution were reversed and set aside. The RTC orders dated February 14, 2003 and September 16, 2003 were nullified and set aside insofar as they directed PDIC to secure a tax clearance prior to approval of the project of distribution. The Supreme Court ordered PDIC, as liquidator, to submit RBTI’s final tax return in accordance with the first paragraph of Section 52(C) and Section 54 of the Tax Code of 1997, and directed the RTC to resume liquidation proceedings to determine and adjudicate creditor claims (including the National Government’s claim as presented by the BIR) and to approve the project of distribution guided by the Civil Code’s rules on concurrence and preference of credits.

Reasoning — Special Regulatory Scheme for Banks under Section 30

First, the Court explained that Section 52(C) and the BIR–SEC Regulations No. 1 regulate the relationship between the SEC and the BIR with respect to corporations contemplating dissolution or reorganization; those rules make a tax‑clearance prerequisite to SEC action. Banks placed under receivership and liquidation by the Monetary Board under Section 30 of the New Central Bank Act constitute a special statutory regime distinct from corporate dissolution under the SEC. Section 30 prescribes the receivership and liquidation procedure for banks and is silent on a BIR tax‑clearance prerequisite. To import Section 52(C) into Section 30’s regime would amount to judicial legislation because the statute and the regulations do not so provide; the Court declined to rewrite or extend the law beyond its terms.

Reasoning — Final Return and Administrative Practicality

Second, the Court held that the BIR’s legitimate interest in determining outstanding tax liabilities of the closed bank is satisfied by the filing of a final tax return by PDIC as receiver and liquidator (as required by Section 54 and the first paragraph of Section 52(C)), rather than by conditioning approval of the project of distribution on prior issuance of a tax clearance. Requiring a tax clearance before approval creates an unreasonable and practically impossible “chicken‑and‑egg” scenario: the BIR can issue a tax clearance only after the taxpayer has paid all tax liabilities, but PDIC cannot pay those liabilities until the liquidation court approves the project of distribution allocating assets for payment; without approval, PDIC lacks authority to disburse the funds to satisfy taxes, so a tax clearance cannot be obtained, and the project cannot be approved. The Court therefore held that the proper and sufficient administrative action is compliance with the filing requirement (final return), not a preapproval tax‑clearance prerequisite.

Reasoning — Separation of Roles and Legislative Competence

Third, the Court emphasized that it is not the judiciary’s role to fill perc

...continue reading

Analyze Cases Smarter, Faster
Jur helps you analyze cases smarter to comprehend faster, building context before diving into full texts. AI-powered analysis, always verify critical details.

About Privacy Terms