Banks accused BIR of violating court TRO

BANKS accused the Bureau of Internal Revenue (BIR) of still issuing assessment notices despite a restraining order issued by the Makati City Regional Trial Court against the implementation of its rule restricting deductions that can be made to arrive at taxable income.

During the hearing, Atty. Stephen George S.D. Aquino said three of the petitioner banks -Deutsche Bank AG, Philippine Bank of Communications and Bank of America—each received Final Assessment Notices (FAN) on April 8 despite the issuance of a TRO.

“From our end, we were forthright about the urgency of the TRO. But, it appears there were some activities from their end. Nobody has an option not to follow it,” Aquino told the court.

On the other hand, Atty. Cesar Bernard R. Coloma of BPI, said that its representatives “refused to receive” the FAN served that day because of the freshly issued TRO.

Meanwhile, BIR counsel Andro Julio L. Quimpo said he would verify the claims of the counsels of the banks.

Makati RTC Branch 57 Judge Honorio E. Guanlao Jr. issued a 20-day restraining order after the Bankers Association of the Philippines (BAP) composed of several local and branches of foreign banks filed a petition for declaratory relief with application for a temporary restraining order and/or writ of preliminary injunction against Revenue Regulation No. 4-2011, which prescribes the rules on the proper allocation of cost and expenses among the income earnings of banks and other financial institutions for income tax reporting purposes.

The objective of RR 4-2011 is to set the rules on income and expenses allocations of banks among their various operations, which are governed by different income tax rules

RR 4-2011 provides that a bank may deduct only those costs and expenses attributable to the operation of the Regular Banking Unit (RBU) to arrive at its taxable income. Any cost or expense related to or incurred in the operation of the foreign currency deposit unit (FCDU)/expanded FCDU (EFCDU) or offshore banking unit (OBU) is not allowed as deduction from the RBU’s taxable income.

Failure to comply with the RR will subject officers of the banks and other financial institutions to criminal liability.

The banks filed a petition before the court to nullify RR 4-2011 after the BIR started issuing preliminary assessment notices (PANs) on several banks.

A PAN shows the deficiency tax assessment as well as the detailed facts and the law, rules and regulations or jurisprudence on which the proposed assessment is based.

Petitioner banks feared that issuance of PAN could lead to a distraint and levy of their properties.

“Should there be distraint and levy, the banks will be deprived possession of their properties, effectively crippling their business operations,” the petition stated.

During Monday hearing, the court gave counsels of both parties three days to submit their respective memoranda.

The restraining order will expire on April 28.