MICHEL J. lhuillIer G.R. No. 166786
pawnshop, inc.,
Petitioner, Present:
Panganiban, C.J.
(Chairperson),
- versus - Ynares-Santiago,
Austria-Martinez,
Callejo, Sr., and
Chico-Nazario, JJ.
COMMISSIONER OF INTERNAL
REVENUE, Promulgated:
Respondent.
September 11, 2006
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YNARES-SANTIAGO, J.:
This resolves petitioner’s motion for reconsideration of the May 3, 2006
Decision of the Court holding that contracts of pledge entered into by
pawnshops are subject to Documentary Stamp Tax (DST). We ruled therein that DST is essentially an
excise tax; it is not an imposition on the document itself but on the privilege
to enter into a taxable transaction of pledge.
The gist of the motion for
reconsideration is that before an exercise of a taxable privilege may be
subject to DST, it is indispensable that the transaction must be embodied in and
evidenced by a document. Since a pawn
ticket as defined in Presidential Decree (P.D.) No. 114 or the Pawnshop
Regulation Act is merely the pawnbrokers’ receipt for a pawn and not a security
nor a printed evidence of indebtedness, it cannot be considered as among the
documents subject to DST. In the
alternative, petitioner contends that should the Court rule otherwise, it
cannot be made to pay surcharges and interest because it acted in good faith
and the confusion as to whether it is liable to pay DST is partly attributable
to the divergent rulings of the Bureau of Internal Revenue (BIR) on the matter.
The motion for reconsideration is
partly meritorious.
Section 195 of the National Internal
Revenue Code (NIRC) imposes a DST on every
pledge regardless of whether the same is a conventional pledge governed by the
Civil Code or one that is governed by the provisions of P.D. No. 114. All pledges are subject to DST, unless there
is a law exempting them in clear and categorical language. This explains why the Legislature did not see
the need to explicitly impose a DST on pledges entered into by pawnshops. These
pledges are already covered by Section 195 and to create a separate provision
especially for them would be superfluous.
Then too, it is the exercise of the
privilege to enter into an accessory contract of pledge, as distinguished from
a contract of loan, which gives rise to the obligation to pay DST. If the DST under Section 195 is levied on the
loan or the exercise of the privilege to contract a loan, then there would be
no use for Section 179 of the NIRC, to separately impose stamp tax on all debt
instruments, like a simple loan agreement.[1] It is for this reason why the definition of
pawnshop ticket, as not an evidence of indebtedness, is inconsequential to and
has no bearing on the taxability of contracts of pledge entered into by
pawnshops. For purposes of Section 195,
pawnshop tickets need not be an evidence of indebtedness nor a debt instrument
because it taxes the same as a pledge instrument. Neither should the definition of pawnshop
ticket, as not a security, exempt it from the imposition of DST. It was correctly defined as such because the
ticket itself is not the security but the pawn or the personal property pledged
to the pawnbroker.
The law is clear and needs no further
interpretation. No law on legal hermeneutics could change the fact that the
entries contained in a pawnshop ticket spell out a contract of pledge and that
the exercise of the privilege to conclude such a contract is taxable under
Section 195 of the NIRC. The rationale
for the issuance of and the spirit that gave rise to the Pawnshop Regulation
Act cannot justify an interpretation that obviously supplies an exemption which
is simply and clearly not found in the law.
Nothing in P.D. No. 114 exempts pawnshops or pawnshop tickets from
DST. There is no ambiguity in the
provisions thereof; any vagueness arises only from the circuitous construction
invoked by petitioner. If then President
Ferdinand E. Marcos intended to exempt pawnshops or pawnshop tickets from DST,
he would have expressly so provided for said exemption in P.D. No. 114. Since no such exemption appear in the decree,
the only logical conclusion is that no such exemption is intended and that
pawnshops or pawnshop tickets are subject to DST.
Significantly, the Court notes that rural banks and their borrowers and
mortgagors are exempt from documentary stamp tax on instruments relating to
loans. Under P.D. No. 122,[2]
the exemption is up to the amount of P5,000.00 loan and
charges are collectible only on the
amount in excess of
P5,000.00.[3] This provision was adopted by R.A. No. 7353,
the Rural Banks Act of 1992 but the threshold amount was increased to
P50,000.00, and documentary tax is levied only on any amount in excess of P50,000.00,
if there is any.[4]
P.D. No. 122 was approved by then President Marcos on
Moreover, it should be pointed out that the provisions of the NIRC on DST
has recently been amended by R.A. No. 9243. Among the highlights thereof were the
amendments to Section 199,[5]
which incorporated 12 more categories of documents in addition to the initial
two categories exempted from DST. As
stated in our
Nevertheless, all is not lost for petitioner. The settled rule is that good faith and
honest belief that one is not subject to tax on the basis of previous
interpretation of government agencies tasked to implement the tax law, are
sufficient justification to delete the imposition of surcharges and interest.[6] In Connell
Bros. Co. (Phil.) v. Collector of Internal Revenue,[7] it
was held that:
We are convinced that appellant, in preparing its sales invoices as it did, was not guilty of an intentional violation of the law. It did not delay filing the returns for the sales taxes corresponding to the period in question, let alone did so purposely. The delay was in the payment of the deficiency, which arose from a mistaken understanding of the regulations laid down by appellee. The ensuing controversy was, in our opinion, generated in good faith and should furnish no justification for the imposition of a penalty.
WHEREFORE, modified by eliminating the surcharge of 25%
imposed upon appellant, the judgment appealed from is affirmed, without costs.
This ruling was subsequently reiterated in Tuason, Jr. v. Lingad,[8] where we deleted the order to pay
interest and surcharges, and in Commissioner
of Internal Revenue v. Republic Cement Corporation,[9]
where the same surcharge was dispensed with because of the taxpayer’s good
faith and the BIR’s previous erroneous interpretation of the laws
involved. We see no reason not to apply
the same doctrine in the instant case which settles the divergent rulings of
the BIR on DST and establishes the foremost categorical pronouncement of the
Court that pledge transactions entered into by pawnshops are subject to DST.
WHEREFORE, the motion for reconsideration is partly
GRANTED. The December 29, 2004
Decision of the Court of Appeals in CA-G.R. SP No. 67667 ordering petitioner
Michel J. Lhuillier Pawnshop, Inc. to pay deficiency documentary stamp tax is AFFIRMED with the MODIFICATION that surcharges and all the interests imposed thereon
are DELETED.
SO ORDERED.
CONSUELO YNARES-SANTIAGO
Associate Justice
WE CONCUR:
ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson
MA. ALICIA
AUSTRIA-MARTINEZ ROMEO J. CALLEJO, SR.
Associate Justice Associate Justice
MINITA V. CHICO-NAZARIO
Associate Justice
CERTIFICATION
Pursuant
to Section 13, Article VIII of the Constitution, it is hereby certified that
the conclusions in the above Resolution were reached in consultation before the
case was assigned to the writer of the opinion of the Court’s Division.
ARTEMIO
V. PANGANIBAN
Chief Justice
[1] As
amended by Republic Act (R.A.) No. 9243, (AN ACT RATIONALIZING THE PROVISIONS
ON THE DOCUMENTARY STAMP TAX OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS
AMENDED, AND FOR OTHER PURPOSES.
Approved on
SEC. 179. Stamp Tax on All Debt
Instruments. – On every original issue of debt instruments, there shall be
collected a documentary stamp tax of One peso (P1.00) on each Two hundred pesos
(P200), or a fractional part thereof, of the issue price of any such debt
instrument; Provided, That for such debt instruments with terms of less than
one (1) year, the documentary stamp tax to be collected shall be of a
proportional amount in accordance with the ratio of its term in number of days
to three hundred sixty-five (365) days: provided, further, That only one
documentary stamp tax shall be imposed on either loan, agreement or promissory
notes issued to secure such loan.
For purposes of this section, the term debt instrument shall
mean instruments representing borrowing and lending transactions including but
not limited to debentures, certificates of indebtedness, due bills, bonds, loan
agreements, including those signed abroad wherein the object of contract is
located or used in the Philippines, instruments and securities issued by the
government or any of its instrumentalities, deposit substitute debt
instruments, certificates or other evidences of deposits that are either
drawing interest significantly higher than the regular savings deposit taking
into consideration the size of the deposit or the risks involved or drawing
interest and having a specific maturity date, orders for payment of any sum of
money otherwise than at sight or on demand, promissory notes, whether
negotiable or nonnegotiable, except bank note issued for circulation.
[2]
Amending Certain Sections of Republic Act Numbered Seven Hundred Twenty,
Otherwise Known As the “Rural Banks Act.” (Approved on January 29, 1973)
[3]
SEC. 17. Any Register of Deeds shall
accept from any Rural Bank and its borrowers or mortgagors for registration
free from all charges, fees, and documentary stamp tax, collectible under
existing laws, any instrument, whether voluntary or involuntary, relating to
loans or transactions extended by a Rural Bank in an amount not exceeding five
thousand pesos; Provided, however, That charges, if any, shall only be
collectible on the amount in excess of five thousand pesos; and that in
instruments related to assignments of several mortgages, consolidated in a single deed, charges and
fees, if any, shall be levied only on the amount in excess of five thousand
pesos of the consideration in the assignment of each mortgage.
[4]
SEC. 21. Any Register of Deeds shall accept from any Rural Bank and its
borrowers or mortgagors for registration, free from all charges, fees and
documentary stamp tax, collectible under existing laws, any instrument, whether
voluntary or involuntary, relating to loans or transactions extended by a rural
bank in an amount not exceeding Fifty thousand pesos (P50,000); Provided,
however, That charges, if any, shall be collectible on the amount in excess of
Fifty thousand pesos (P50,000); and that in instruments related to assignments
of several mortgages consolidated in a single deed, if any, shall be levied
only on the amount in excess of Fifty thousand pesos (P50,000)of the
consideration in the assignments of each mortgage, or of such amount as the
Secretary of Finance, upon recommendation of the Monetary Board, may prescribe
as may be necessary to promote and expand the rural economy.
[5]
Section 199. Documents and Papers Not
Subject to Stamp Tax. – The provisions of Section 173 to the contrary
notwithstanding, the following instruments, documents, and papers shall be
exempt from the documentary stamp tax:
(a) Policies
of insurance or annuities made or granted by a fraternal or beneficiary
society, order, association or cooperative company, operated on the lodge
system or local cooperation plan and organized and conducted solely by the
members thereof for the exclusive benefit of each member and not for profit.
(b) Certificates
of oaths administered to any government official in his official capacity or of
acknowledgment by any government official in the performance of his official
duties, written appearance in any court by any government official, in his
official capacity; certificates of the administration of oaths to any person as
to the authenticity of any paper required to be filed in court by any person or
party thereto, whether the proceedings be civil or criminal; papers and
documents filed in courts by or for the national, provincial, city or municipal
governments; affidavits of poor persons for the purpose of proving poverty;
statements and other compulsory information required of persons or corporations
by the rules and regulations of the national, provincial, city or municipal
governments exclusively for statistical purposes and which are wholly for the
use of the bureau or office in which they are filed, and not at the instance or
for the use or benefit of the person filing them; certified copies and other
certificates placed upon documents, instruments, and papers for the national,
provincial, city or municipal governments, made at the instance and for the
sole use of some other branch of the national, provincial, city or municipal
governments; and certificates of the assessed value of lands, not exceeding Two
hundred pesos (P200) in value assessed, furnished by the provincial, city or
municipal Treasurer to applicants for registration of title to land.
(c) Borrowing and lending of securities executed under the
Securities Borrowing and Lending Program of a registered exchange, or in accordance
with regulations prescribed by the appropriate regulatory authority: Provided,
however, That any borrowing or lending of securities agreement as contemplated
hereof shall be duly covered by a master securities borrowing and lending
agreement acceptable to the appropriate regulatory authority, and which
agreement is duly registered and approved by the Bureau of Internal Revenue
(BIR).
(d) Loan agreements or promissory notes, the aggregate of
which does not exceed Two hundred fifty thousand pesos (P250,000), or any such
amount as may be determined by the Secretary of Finance, executed by an
individual for his purchase on installment for his personal use or that of his
family and not for business or resale, barter or hire of a house, lot, motor
vehicle, appliance or furniture: Provided, however, That the amount to be set
by the Secretary of Finance shall be in accordance with a relevant price index
but not to exceed ten percent (10%) of the current amount and shall remain in
force at least for three (3) years.
(e)
(f) Assignment or transfer of any mortgage, lease or policy
of insurance, or the renewal or continuance of any agreement, contract,
charter, or any evidence of obligation or indebtedness, if there is no change
in the maturity date or remaining period of coverage from that of the original
instrument.
(g) Fixed income and other securities traded in the secondary
market or through an exchange.
(h) Derivatives: Provided, That for purposes of this
exemption, repurchase agreements and reverse repurchase agreements shall be
treated similarity as derivatives.
(i) Interbranch or interdepartmental advances within the same
legal entity.
(j) All forbearances arising from sales or service contracts
including credit card and trade receivables: Provided, That the exemption be
limited to those executed by the seller or service provider itself.
(k) Bank deposit accounts without a fixed term or maturity.
(l) All contracts, deeds, documents and transactions related
to the conduct of business of the Bangko Sentral ng Pilipinas.
(m) Transfer of property pursuant to Section 40(c)(2) of the
National Internal Revenue Code of 1997, as amended.
(n) Interbank call loans with maturity of not more than seven
(7) days to cover deficiency in reserves against deposit liabilities, including
those between or among banks and quasi-banks.
[6] Connell
Bros. Co. (Phil.) v. Collector of Internal Revenue, 119 Phil. 40, 46
(1963).
[7]
[8]
157 Phil. 159, 167-168 (1974).
[9]
G.R. Nos. L-35668-72, L-35683 & L-35677,