BIR Ruling

October 20, 1967 MEMORANDUM FOR: The Revenue Operations Head (Assessment) This is with reference to the 5% bank tax liability of the Development Bank of the Philippines, corner David-Muelle de Banco Sts., Manila. cdti A perusal of the records of the case disclosed that the Development Bank of the Philippines (DBP) is engaged principally in the business of granting loans. However, for the year 1961 DBP also derived income from the discounting of notes. (Profit and Loss Statement). It also received time and savings deposits. (Balance Sheet). The question now posed to be resolved is whether or not the DBP is exempt from the payment of the 5% Bank tax for the year 1961. Inasmuch as the DBP comes within the meaning of a "banking institution" under the 3rd paragraph of Section 249 of the Tax Code it should be made to pay the required 5% bank tax on all its taxable gross income. To hold otherwise is to contravene Section 249 of the Tax Code and Section 1 of Republic Act 104 quoted as follows: "All corporations, agencies, or instrumentalities owned or controlled by the Government shall pay such duties, taxes, fees and other charges upon their transaction, business, industry, sale or income as are imposed by law upon individuals, associations, or corporations engaged in any taxable business, industry or activity . . ". cdll That the above-quoted provision of law is amply sustained by the Secretary of Justice in his opinion No. 65, Series of 1951, quote: "Republic Act No. 104 was intended by Congress to apply to corporations or agencies owned or controlled by the government engaged in business or industry for profit . . .." It cannot be gainsaid that DBP is engaged in business or industry for profit in competition with private enterprises. As such therefore the Bank indubitably falls within the scope of Republic Act No. 104. In view of all the foregoing, he is hereby directed to take immediate action accordingly. llcd (SGD.) MISAEL P. VERA Commissioner of Internal Revenue