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PDIC v BIR

Facts: Monetary Board of the Bangko Sentral ng Pilipinas (BSP) prohibited the Rural Bank of Tuba(Benguet), Inc. (RBTI) from doing business in the Philippines, placed it under receivership in accordancewith Section 30 of Republic Act No. 7653, otherwise known as the "New Central Bank Act," and

designated the Philippine Deposit Insurance Corporation (PDIC) as receiver. PDIC conducted anevaluation of RBTIs financial condition and determined that RBTI remained insolvent. Thus, the

Monetary Board issued Resolution directing PDIC to proceed with the liquidation of RBTI. PDIC filedwith the Regional Trial Court (RTC) of La Trinidad, Benguet a petition for assistance in the liquidation ofRBTI. As an incident of the proceedings, the Bureau of Internal Revenue (BIR) intervened as one of thecreditors of RBTI. The BIR prayed that the proceedings be suspended until PDIC has secured a taxclearance required under Section 52(C) of Republic Act No. 8424, otherwise known as the "Tax Reform

Act of 1997" or the "Tax Code of 1997

Issue: Whether or not sec 52 of RA 8424 applies to closed banks under liquidation of PDIC

Ruling: NO, The Court ruled that Section 52(C) of the Tax Code of 1997 is not applicable to banksordered placed under liquidation by the Monetary Board,16 and a tax clearance is not a prerequisite tothe approval of the project of distribution of the assets of a bank under liquidation by the PDIC. First,Section 52(C) of the Tax Code of 1997 pertains only to a regulation of the relationship between the SEC

and the BIR with respect to corporations contemplating dissolution or reorganization. On the otherhand, banks under liquidation by the PDIC as ordered by the Monetary Board constitute a special casegoverned by the special rules and procedures provided under Section 30 of the New Central Bank Act,

which does not require that a tax clearance be secured from the BIR.

PAGCOR v BIR

Facts: PAGCOR was created pursuant to Presidential Decree (P.D.) No. 1067-A2 on January 1, 1977.Simultaneous to its creation, P.D. No. 1067-B3 was issued exempting PAGCOR from the payment of anytype of tax, except a franchise tax of five percent (5%) of the gross revenue.4 On January 1, 1998, R.A.No. 8424,8 otherwise known as the National Internal Revenue Code of 1997, took effect. Section 27 (c)of R.A. No. 8424 provides that government-owned and controlled corporations (GOCCs) shall paycorporate income tax, except petitioner PAGCOR, the Government Service and Insurance Corporation,the Social Security System, the Philippine Health Insurance Corporation, and the Philippine CharitySweepstakes Office. With the enactment of R.A. No. 933710 on May 24, 2005, certain sections of theNational Internal Revenue Code of 1997 were amended which now excludes PAGCOR from theenumeration of GOCCs that are exempt from payment of corporate income tax. PAGCOR assailed the

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validity of the law for being repugnant to both due process and equal protection clause of Sec.1 Art. 3 of

the Constitution.

Issue: whether or not PAGCOR is still exempt from corporate income tax and VAT with the enactment of

R.A. No. 9337

Ruling: NO, Legislative bodies are allowed to classify the subjects of legislation. If the classification isreasonable, the law may operate only on some and not all of the people without violating the equalprotection clause. The classification must, as an indispensable requisite, not be arbitrary and mustconform to the requirements. The exemption of PAGCOR from paying corporate income tax was notbased on a classification showing substantial distinctions which make for real differences, but toreiterate, the exemption was granted upon the request of PAGCOR that it be exempt from the payment

of corporate income tax.

With the subsequent enactment of R.A. No. 9337, amending R.A. No. 8424, PAGCOR has been excludedfrom the enumeration of GOCCs that are exempt from paying corporate income tax. The records of theBicameral Conference Meeting dated April 18, 2005, of the Committee on the Disagreeing Provisions ofSenate Bill No. 1950 and House Bill No. 3555, show that it is the legislative intent that PAGCOR besubject to the payment of corporate income tax

Taxation is the rule and exemption is the exception.23 The burden of proof rests upon the party claimingexemption to prove that it is, in fact, covered by the exemption so claimed.24 As a rule, tax exemptionsare construed strongly against the claimant.25 Exemptions must be shown to exist clearly andcategorically, and supported by clear legal provision. In this case, PAGCOR failed to prove that it is still

exempt from the payment of corporate income tax