BIR Ruling [DA-212-96]

June 25, 1996 BIR RULING [DA-212-96] Philippine Deposit Insurance Corporation 2228 Pasong Tamo St., Makati City Attention: Mr . Ernest Leung President Gentlemen : This refers to your letter dated May 28, 1996 relative to the claim by this Bureau against Banco Primero Development Bank (BPDB) in the total amount of P115,799,243.66 representing unremitted tax collection broken down as follows: Basic Tax P67,870,780.96 Penalties P47,928,462.70 Total P115,799,243.66 It appears that BPDB was closed and placed under receivership and administration by the Philippine Deposit Insurance Corporation (PDIC); that in the process of liquidating its assets an investigation was also conducted and that in the course of investigation the bank was found to have incurred the above tax liabilities before closure by reason of bankruptcy; that on March 6, 1989, by way of settling the above tax liabilities the BIR and the former liquidator of BPDB agreed to a compromise settlement in the form of cash of P10,527,248.77 and fifteen real properties with estimated market value then of P3,454,600.00 to be auctioned off jointly by BIR and the Liquidator; that the amount of P10,527,248.77 was paid by BPDB on March 29, 1989 for which a confirmation receipt was issued by BIR; that on August 28, 1989, the process of sale of the three (3) properties amounting to P3,905,445.00 were remitted to BIR for which a confirmation receipt was likewise issued by the BIR; that on November 29, 1989, the liquidator submitted to BIR (to Atty. Manuel Mina, Chief of Seized and Forfeited Properties Section) the Deed of Conveyance on the 12 unsold properties together with the TCTs and other pertinent documents; that because of a legal opinion issued by the Solicitor General that unremitted tax collections do not fall within the umbrella of the Commissioner's authority to compromise, the aforesaid compromise agreement was withdrawn by the BIR and that there was no arrangement made on the twelve (12) unsold properties but the TCTs thereof remained with the BIR. Based on the foregoing facts, you raised the following issues: 1) Whether or not the penalty component of the claim corresponding to the period after the bank closure in the total amount of P46,689,705.18 is still collectible by the BIR; 2) Whether or not the BIR is agreeable to the settlement scheme of the remaining liabilities by way of transfer or conveyance of twelve (12) parcels of land covered by TCT Nos. T-197658; T-88752; T-103932; T-208759; T-208761; T-208762; T-208760; T-114171 (TD# 5424); T-114172; T-114173; T-114171 (TD#5421); T-199214 as full and complete settlement of the aforesaid liabilities. In reply, please be informed as follows: 1) We fully concur with your observation that a closed bank is not liable to pay interest during the period of bank closure; hence, for delayed remittance of tax collection you are only liable to P1,238,757.52 instead of P47,928,462.70, representing the penalty due on unremitted tax collection up to July 13, 1984, which is the date of bank closure. 2) We are not agreeable to accept your proposal of settling the balance of Banco Primero's tax liabilities incurred prior to its closure on July 13, 1984 in the total amount of P54,676,844.71 by way of conveyance of twelve (12) parcels of land covered by the aforestated TCTs at its present zonal value. Instead, as receiver/liquidator of Banco Primero Development Bank, PDIC should now pay in full the aforesaid amount of P54,676,844.71 representing unremitted tax collection in 1984. cdtech Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue