Verifying the Books and Records of Rural Banks Organized under RA No. 720

August 11, 1959 BIR RULING NO. 396-59 The Regional Director B.I.R Regional District No. 5 San Pablo City S i r : With reference to your letter dated June 18, 1959, requesting opinion as to whether or not this Office can verify the books and records of Rural Banks organized under Republic Act No. 720 as amended by Republic Act No. 1097, for the purpose of determining their internal revenue tax liability, it is the opinion of this Office that we can verify the books and records of Rural Banks, notwithstanding section 78 of the Rules and Regulations governing Rural Banks in the Philippines prohibiting the disclosure of any information relating to the transactions land operations of the Rural Bank. Moreover, a careful reading of Republic Act No. 720 as amended by Republic Act No. 1097 does not show any provision which states that books and records of any Rural Bank are exempt from investigation and/or verification by the Commissioner of Internal Revenue or his deputies. It is stated in this connection that the power of taxation is supreme and not negated by general prohibition. Therefore, the Commissioner of Internal Revenue or his deputies can verify or inspect the books and records of any Rural Bank, notwithstanding the rules and regulations promulgated by the Central Bank of the Philippines prohibiting the disclosure of any information relating to the transactions and operations of the Rural Bank unless permitted by resolution of the Board of Directors of the Rural Bank or by the Central Bank or ordered by the Courts. Anent your further queries contained in your letters dated April 7, April 21, June 16 and June 18, 1959, you are informed as follows: The term net assets as used in section 14 of Republic Act No. 720, as amended by Republic Act No. 1097, simply means gross assets less liabilities. Tax cases of delinquent taxpayers who fail or refuse to pay their tax liabilities should be filed in court. Tax cases which are about to prescribe and those involving substantial amounts should be given preferential attention. This Office has on even date requested the Central Bank to furnish it with a list of rural banks having net assets exceeding P700,000.00. You will be furnished with a copy of this list as soon as it is received. Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue