GR 180529; (November, 2013) (Digest)
G.R. No. 180529 November 13, 2013
COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. BANK OF COMMERCE, Respondent.
FACTS
The Commissioner of Internal Revenue (CIR) assessed deficiency Documentary Stamp Tax (DST) for the taxable year 1999 against “TRADERS ROYAL BANK (now Bank of Commerce).” The assessment stemmed from Traders Royal Bank’s (TRB) Special Savings Deposit (SSD) accounts. Prior to this, in 2001, Bank of Commerce (BOC) and TRB had executed a Purchase and Sale Agreement where BOC purchased identified assets of TRB and assumed certain liabilities. The agreement explicitly stated that both banks would continue to exist as separate corporations with distinct personalities; it was not a merger. TRB filed a protest against the assessment, which the CIR denied. BOC then filed a Petition for Review with the Court of Tax Appeals (CTA), arguing it was not liable for TRB’s tax deficiency.
ISSUE
The primary issue is whether Bank of Commerce can be held liable for the deficiency Documentary Stamp Tax assessed against Traders Royal Bank for the year 1999.
RULING
The Supreme Court denied the CIR’s petition and upheld the CTA En Banc’s ruling that BOC is not liable. The legal logic rests on the nature of the transaction between BOC and TRB and the principle of separate corporate personality. The Purchase and Sale Agreement constituted a mere sale of assets and assumption of liabilities, not a merger or consolidation. Consequently, TRB retained its separate juridical identity and remained the entity responsible for its own pre-existing tax liabilities. The CIR’s own ruling in BIR Ruling No. 10-2006, which confirmed the absence of a merger between the two banks, was binding. The Court emphasized that tax liability is personal to the corporation upon which it is imposed. Since BOC did not assume this specific tax liability under the agreement and no merger occurred, the assessment issued against “TRB (now BOC)” was erroneous. The fact that BOC participated in the protest proceedings did not constitute an admission of liability, as the issue of proper party is jurisdictional and can be raised at any time. Therefore, BOC, as a distinct corporation, cannot be held answerable for the tax obligations of TRB.