G.R. No. 180529, 13 November 2013


Bank of Commerce (BOC) and Traders Royal Bank (TRB) executed a Purchase and Sale Agreement5 whereby it stipulated the TRB’s desire to sell and the BOC’s desire to purchase identified recorded assets of TRB in consideration of BOC assuming identified recorded liabilities. Under the Purchase and Sale Agreement, BOC and TRB shall continue to exist as separate corporations with distinct corporate personalities.

TRB (now Bank of Commerce) was ordered to pay deficiency documentary stamp taxes (DST) on Special Savings Deposit (SSD) account of TRB for taxable year 1999. BOC filed a Petition for Review praying that it be held not liable for the subject DST. BOC emphasized that there was no merger between it and TRB as it only acquired certain assets of TRB in return for its assumption of some of TRB’s liabilities. The CTA 2nd Division ruled that BOC was liable for the DST on TRB’s SSD accounts. CTA En Banc affirmed. On BOC’s Motion for Reconsideration, CTA en banc reversed itself and ruled that BOC could not be held liable for the deficiency DST of TRB on its SSD accounts.


Whether the deficiency assessment of TRB can be enforced and collected against respondent BOC because the latter assumed the obligations and liabilities of TRB pursuant to the purchase and sale agreement executed between them and the applicable law on merger of corporations.


The petition is denied for lack of merit.

A close reading of the Purchase and Sale Agreement shows the following self-explanatory provisions:

a) Items in litigation, both actual and prospective, against [TRB] are excluded from the liabilities to be assumed by the Bank of Commerce (Article II, paragraph 2); and

b) The Bank of Commerce and Traders Royal Bank shall continue to exist as separate corporations with distinct corporate personalities (Article III, paragraph 1).

Aside from the foregoing, the Purchase and Sale Agreement does not contain any provision that the [BOC] acquired the identified assets of [TRB] solely in exchange for the latter’s stocks. Merger is defined under Section 40 (C)(6)(b) of the Tax Code as follows:

“b) The term “merger” or “consolidation”, when used in this Section, shall be understood to mean: (i) the ordinary merger or consolidation, or (ii) the acquisition by one corporation of all or substantially all the properties of another corporation solely for stock: Provided, [t]hat for a transaction to be regarded as a merger or consolidation within the purview of this Section, it must be undertaken for a bona fide business purpose and not solely for the purpose of escaping the burden of taxation: x x x.”

Since the purchase and sale of identified assets between the two companies does not constitute a merger under the foregoing definition, the Bank of Commerce is considered an entity separate from petitioner. Thus, it cannot be held liable for the payment of the deficiency DST assessed against petitioner.

*Case Digest by Legine S. Ramayla, JD-IV, Andres Bonifacio College, SY: 2019-2020