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.
bureau of internal revenue
tax clearance requirement
banks under liquidation

Case Summary (G.R. No. L-51214)

Factual Background

The Monetary Board of the Bangko Sentral ng Pilipinas closed RBTI in its Resolution No. 1056 and designated PDIC as receiver, and later ordered liquidation by Resolution No. 675. PDIC conducted an evaluation, found RBTI insolvent, and filed a petition for assistance in liquidation under Section 30 of the New Central Bank Act, which the RTC docketed as Special Proceeding Case No. 97-SP-0100 and approved.

Trial Court Proceedings

During the liquidation proceedings the BIR intervened as a creditor and moved that the liquidation be suspended until PDIC secured a tax clearance under Section 52(C) of the Tax Code of 1997. On February 14, 2003 the RTC directed PDIC to secure the tax clearance and submit a comprehensive liquidation report, and on September 16, 2003 it denied PDIC’s motion for partial reconsideration insofar as it sought relief from the tax-clearance directive.

Proceedings in the Court of Appeals

PDIC filed a petition for certiorari under Rule 65 in the Court of Appeals, asserting that the RTC gravely abused its discretion in applying Section 52(C) to a bank closed and placed under liquidation by the Monetary Board pursuant to Section 30 of the New Central Bank Act. The Court of Appeals, however, agreed with the RTC and held in its Decision dated December 29, 2005 that banks under liquidation by PDIC are covered by Section 52(C), affirmed the RTC orders, and denied PDIC’s petition.

Issues Presented

The central issue presented to the Supreme Court was whether Section 52(C) of the Tax Code of 1997 applies to banks ordered placed under liquidation by the Monetary Board, and whether a tax clearance from the BIR is a prerequisite to the approval of the project of distribution of assets of a bank under liquidation by PDIC under Section 30 of the New Central Bank Act.

Parties' Contentions

PDIC contended that Section 52(C) did not apply to closed banks because banks closed and liquidated under Section 30 are governed by the Monetary Board and PDIC, not by the Securities and Exchange Commission, and thus are not “corporations contemplating liquidation” within the meaning of Section 52(C). The BIR maintained that the tax-clearance requirement of Section 52(C) applied to rural banks in liquidation, that BSP supervision did not preclude the application of tax obligations, and that the requirement ensured the collection of income taxes by obliging the liquidating corporation to report and settle tax liabilities.

Supreme Court's Analysis — Precedent and Controlling Principle

The Court relied on its prior decision in In Re: Petition for Assistance in the Liquidation of the Rural Bank of Bokod (Benguet), Inc., Philippine Deposit Insurance Corporation v. Bureau of Internal Revenue (540 Phil. 142), which held that Section 52(C) does not apply to banks placed under liquidation by the Monetary Board and that a tax clearance is not a prerequisite to approval of a bank’s project of distribution. The Court treated that holding as dispositive and controlling on the present controversy.

Supreme Court's Reasoning — Three Principal Grounds

First, the Court found that Section 52(C) and BIR-SEC Regulations No. 1 regulate the relation between the SEC and the BIR concerning corporations contemplating dissolution or reorganization, whereas banks under Section 30 are governed by special rules administered by the Monetary Board and PDIC, and Section 30 is silent on any tax-clearance requirement. The Court held that it could not read into Section 30 the tax-clearance requirement applicable to SEC dissolutions.

Second, the Court observed that the BIR’s legitimate interest in ascertaining tax liabilities is satisfied by requiring the liquidator to file a final tax return under the first paragraph of Section 52(C) read with Section 54 of the Tax Code of 1997, and that requiring a tax clearance prior to approval of the project of distribution would create an unreasonable and circular impediment: no tax clearance can be issued until taxes are paid, but taxes cannot be paid until the project of distribution is approved to allocate funds.

Third, the Court emphasized the separation of functions and the limits of judicial lawmaking. It held that any perceived gap among the BIR, the BSP, and PDIC on their interrelations must be addressed by the legislature and by the executive in regulation, not by judicial extension of Section 52(C) to Section 30 proceedings.

Legal Consequences — Preference of Credit and Statutory Consistency

The Court noted that Section 30 expressly directed the receiver to pay debts in accordance with the rules on concurrence and preference of credit under the Civil Code, and that taxes such as corporate income tax rank only ninth in the order of preference except when taxes enjoy priority by reference to specific movable or immovable property under Articles 2241(1) and 2242(1). The Court concluded that imposing a tax-clearance prerequisite would elevate tax claims to absolute priority in conflict with Article 2244 and the statutory scheme under Section 30.

Ruling and Relief Ordered

The Supreme Court granted the petition. It reversed and set aside the Decision dated December 29, 2005 and the Resolution dated May 5, 2006 of the Court of Appeals in CA-G.R. SP No. 80816. The Court nullified and set aside the RTC Orders dated February 14, 2003

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