Republic
of the
Supreme
Court
THIRD DIVISION
ANTAM PAWNSHOP G.R.
No. 167962
CORPORATION,
Petitioner, Present:
YNARES-SANTIAGO, J.,
- versus - Chairperson,
AUSTRIA-MARTINEZ,
CARPIO MORALES,*
CHICO-NAZARIO,
and
COMMISSIONER
OF INTERNAL REYES,
JJ.
REVENUE,
Respondent.
x - -
- - - - - - - - - - - - - - - - - - - - - - x
CHAMBER OF PAWNBROKERS Promulgated:
OF
THE PHILIPPINES, INC.,
Petitioner-In-Intervention. September 19, 2008
x - -
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - x
D E C I S I O N
REYES, R.T., J.:
Facts
Petitioner
Antam is a duly organized corporation engaged in the pawnshop business. Respondent Commissioner of Internal Revenue (
On
On
On P382,445.01;[4]
(b) deficiency MCIT in the
amount of P687.69;[5]
(c) deficiency P78,590.00;[6]
and (d) compromise penalties in the total amount of P28,200, all for the taxable
year 1998.
Meanwhile,
on P451.24[7]
for MCIT due for taxable year 1998.
On
In a Decision
dated P382, 445.01;[8]
(2) deficiency interest of P233.74 for late payment of MCIT;[9]
and (3) deficiency P15,000. However,
it cancelled the compromise penalty for late payment as there is no compromise
to speak of in the case.
The
Further, the
Anent the
assessment for deficiency MCIT, since petitioner already paid the basic
deficiency MCIT of P451.24,[11]
it is liable only for the payment of deficiency interest for late payment in
the amount of P233.74.[12]
Apropos the
assessment for
is neither security nor a printed evidence of indebtedness. Consequently, it cannot be considered as a
document subject to P15,000.00.
Both
parties filed their respective motions for reconsideration which were
subsequently denied by the
On
CA Decision
In its Decision dated
WHEREFORE,
the decision of the Court of Tax Appeals is REVERSED insofar as the cancellation of the deficiency documentary
tax assessment on the pledge loans is concerned. Respondent is ORDERED to PAY P31,810.00,[14]
inclusive of surcharge and interest thereon for the year 1998, plus 20%
delinquency interest from
The
Antam, on the other hand, argued that
for a document to be taxable under Section 195 of the NIRC, the document must
show on its face the existence of a debt.
The CA agreed with the dissenting opinion of
The CA
explained that the
The CA ratiocinated that although P.D.
No. 114 defines a pawn ticket as neither a security nor printed evidence of
indebtedness, the law also acknowledged that pawnshops enter into a contract of
pledge.[17]
Dissatisfied with the decision of the
CA, Antam is now before Us with a petition under Rule 45.
On
Issue
Submitted for
Our resolution is the issue of whether the CA erred in finding the petitioner
liable for
Pawn
tickets are subject to payment of documentary stamp tax.
It is petitioner’s
contention, shared by the intervenor, that a pawn ticket, being merely a
receipt for a pawn as defined in P.D. No. 114, is not subject to
Respondent
On the
prime issue, We rule for respondent.
Focal to this
ruling is the correct interpretation of Section 195 in relation to 173 of the NIRC.
Section
195. Stamp Tax on Mortgages, Pledges and
Deeds of Trust. – On every mortgage or pledge of lands, estate, or
property, real or personal, heritable or movable, whatsoever, where the same
shall be made as a security for the payment of any definite and certain sum of
money lent at the time or previously due and owing or forborne to be paid, being
payable, and on any conveyance of land, estate, or property whatsoever, in
trust or to be sold, or otherwise converted into money which shall be and
intended only as security, either by express stipulation or otherwise, there
shall be collected a documentary stamp tax at the following rates: x x x.
Section
173. Stamp Taxes Upon Documents, Loan
Agreements, Instruments and Papers. – Upon documents, instruments, loan
agreements and papers, and upon acceptances, assignments, sales and transfers
of the obligation, right or property incident thereto, there shall be levied,
collected and paid for, and in respect of the transaction so had or
accomplished, the corresponding documentary stamp tax prescribed in the
following sections of this Title, by the person making, signing, issuing,
accepting, or transferring the same wherever the document is made, signed,
issued, accepted, or transferred when the obligation or right arises from
Philippine sources or the property is situated in the Philippines, and at the
same time such act is done or transaction had: Provided, That whenever one party to the taxable document enjoys
exemption from the tax herein imposed, the other party thereto who is not
exempt shall be the one directly liable for the tax.
Section 195 of the NIRC imposes,
among others, a
A pledge may be defined as an
accessory, real, and unilateral contract by virtue of which the debtor or a
third person delivers to the creditor or third person movable property as
security for the performance of the principal obligation, upon fulfillment of
which the thing pledged with all its accessions and accessories shall be
returned to the debtor or third person.[18]
Section 3 of P.D. No. 114 defines a pawnshop
as a person or entity engaged in the business of lending money on personal
property delivered as security for loans.
Thus, in essence, a pawnshop enters into a contract of pledge with the
pawner or the borrower.
At the time of every loan or pledge,
the pawnbroker or the pawnshop is required to deliver to each person pawning or
pledging a ticket signed by
the pawnbroker containing, among others: (1) the amount of the loan; (2) the date
the loan was granted; (3) rate of interest; and (4) the name and residence of
the pawnee.[19] Failure to do so shall subject the pawnshop
to penalties under Section 18[20]
of said law.
Considering
that the pawn ticket issued by the pawnshop should contain the foregoing, the
pawn ticket is evidently a proof of a contract of pledge. We agree with petitioner that the law does
not consider the pawn
ticket as a security nor a printed evidence of indebtedness. However, what is subject to
A
documentary stamp tax is in the nature of an excise tax. It is not imposed upon the business transacted
but is an excise upon the privilege, opportunity or facility offered at
exchanges for the transaction of the business. It is an excise upon the facilities used in
the transaction of the business separate and apart from the business itself.[21]
In general,
documentary stamp taxes are levied on the exercise by persons of certain
privileges conferred by law for the creation, revision, or termination of
specific legal relationships through the execution of specific instruments. Examples of such privileges, the exercise of
which, as effected through the issuance of particular documents, are subject to
the payment of documentary stamp taxes are leases of lands, mortgages, pledges,
and trusts and conveyances of real property.[22]
Thus, there
is no basis for petitioner’s assertion that a
In the 2006
case of Michel J. Lhuillier Pawnshop,
Inc. v. Commissioner of Internal Revenue,[23]
the Court held that for purposes of taxation, a pawn ticket is proof of an
exercise of a taxable privilege of concluding a contract of pledge and thus
subject to
Pledge
is among the privileges, the exercise of which is subject to
creditor or to a third person movable property as security for the performance
of the principal obligation, upon the fulfillment of which the thing pledged,
with all its accessions and accessories, shall be returned to the debtor or to
the third person. This is essentially
the business of pawnshops which are defined under Section 3 of Presidential
Decree No. 114, or the Pawnshop Regulation Act, as persons or entities engaged
in lending money on personal property delivered as security for loans.
Section 12 of the Pawnshop Regulation Act and Section 21 of the Rules and Regulations For Pawnshops issued by the Central Bank to implement the Act, require every pawnshop or pawnbroker to issue, at the time of every such loan or pledge, a memorandum, or ticket signed by the pawnbroker and containing the following details: (1) name and residence of the pawner; (2) date the loan is granted; (3) amount of principal loan; (4) interest rate in percent; (5) period of maturity; (6) description of pawn; (7) signature of pawnbroker or his authorized agent; (8) signature or thumb mark of pawner or his authorized agent; and (9) such other terms and conditions as may be agreed upon between the pawnbroker and the pawner. In addition, Central Bank Circular No. 445, prescribed a standard form of pawn tickets with entries for the required details on its face and the mandated terms and conditions of the pledge at the dorsal portion thereof.
Section 3 of the Pawnshop Regulation Act defines a pawn ticket as follows:
“Pawn
ticket” is the pawnbrokers’ receipt for a pawn. It is neither a security nor a
printed evidence of indebtedness.
True,
the law does not consider said ticket as an evidence of security or
indebtedness. However, for purposes of
taxation, the same pawn ticket is proof of an exercise of a taxable privilege
of concluding a contract of pledge. At
any rate, it is not said ticket that creates the pawnshop’s obligation to pay
The
settled rule is that tax laws must be construed in favor of the taxpayer and
strictly against the government; and that a tax cannot be imposed without clear
and express words for that purpose. Taking our bearing from the foregoing
doctrines, we scrutinized Section 195 of the NIRC, but there is no way that
said provision may be interpreted in favor of petitioner. Section 195 unqualifiedly subjects all pledges
to
The
onus of proving that pawnshops are not subject to
In
the instant case, there is no law specifically and expressly exempting pledges
entered into by pawnshops from the payment of
In the
motion for reconsideration,[25]
the Court further ruled in Lhuillier that for purposes of
Section 195 of the NIRC, a pawnshop ticket need not be an evidence of
indebtedness nor a debt instrument because it is taxed as a pledge
instrument. Said the Court:
Section
195 of the National Internal Revenue Code (NIRC) imposes a
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
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
Significantly,
the Court notes that
Petitioner
not liable for delinquency interest and surcharges.
Nonetheless,
all is not lost for petitioner. Good
faith and honest belief that one is not subject to tax on the previous
interpretation of the government instrumentality tasked to implement the tax
law are sufficient justification for petitioner to be spared of interest and
surcharges.[29]
The dispute
as to the tax liability of petitioner for
Under the said
circumstances, the surcharges and delinquency interest imposed on the disputed
assessment for
WHEREFORE, the petition is PARTLY GRANTED. The appealed Decision is AFFIRMED WITH MODIFICATION in that surcharges and delinquency interest
imposed against petitioner Antam are DELETED.
SO ORDERED.
RUBEN T. REYES
Associate Justice
WE
CONCUR:
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
MA. ALICIA
AUSTRIA-MARTINEZ CONCHITA CARPIO MORALES
Associate Justice
Associate Justice
MINITA V. CHICO-NAZARIO
Associate Justice
I
attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
Pursuant to Section 13,
Article VIII of the Constitution and the Division Chairperson’s Attestation, I
certify that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
REYNATO S. PUNO
Chief Justice
* Designated as additional member vice Associate Justice Antonio Eduardo B. Nachura. Justice Nachura participated as Solicitor General in the present case.
[1] Rollo,
pp. 26-34. Dated
[2] The Court of Appeals reversed the decision of
the Court of Tax Appeals (
[3] The letter was received by petitioner’s
representative on
[4] Computed as follows:
Unpaid VAT:
Taxable
Sales/Receipts P2,437,508.00
Output
Tax Due (10%) 243,750.80
Less
allowable tax credits/taxes already
Paid -
Add:
25% surcharge (non-filing and payment)
20%
interest per annum until
Total
Amount Due & Collectible P 382,445.01
[5] Computed as follows:
Unpaid MCIT:
Total
Income P2,437,508.00
Less
Direct Cost 2,297,934.54
Gross Income P
139,573.46
2%
MCIT due (Sec.27e) 2,791.47
Less
paid per return
- 2,340.23
Deficiency MCIT due P 451.24
Add
25% surcharge
20%
interest until
Total Amount Due &
Collectible P 687.69
[6] Computed as follows:
Pledge
Loan (P15,898,350/5,000) P
63,590.00
Subscribed
Capital Stock, Sec. 175 15,000.00
Deficiency Tax Due and
Collectible
P 78,590.00
[7] Evidenced by Metrobank Official Receipt No.
[8] Inclusive of 20% deficiency interest, plus
delinquency interest from
[9] Pursuant to Section 249(B) of the NIRC, plus
delinquency interest from
[10] Section
102(a) provides:
Sec. 102.
Value-added tax on sale of
services and use or lease of properties. – (a) Rate and base of tax. –
There shall be levied assessed and collected, a value-added tax equivalent to
ten percent (10%) of gross receipts derived from the sale or exchange of
services, including the use or lease of properties.
The
phrase “sale or exchange of services” means the performance of all kinds of
services in the Philippines for others for a fee, remuneration, or
consideration, including those performed or rendered by construction and
service contractors; stock, real estate, commercial, customs, and immigration
brokers; lessors of property, whether personal or real; warehousing services;
lessors or distributors of cinematographic films; persons engaged in milling,
processing, manufacturing, or repacking goods for others; proprietors,
operators or keepers of hotels, motels, resthouses, pension houses, inns,
resorts; proprietors or operators of restaurants, refreshment parlors, cafes, and
other eating places, including clubs and caterers; dealers in securities;
lending investors; transportation contractors on their transport of goods or
cargoes, including persons who transport goods or cargoes for hire and other
domestic common carriers by land, air, and water relative to their transport of
goods or cargoes; services of franchise grantees of telephone and telegraph,
radio and television broadcasting, and all other franchise grantees except
those under Section 117 of this Code; services of banks, non-bank financial
intermediaries, and finance companies; and non-life insurance companies (except
their crop insurances), including surety, fidelity, indemnity and bonding
companies; and similar services regardless of whether or not the performance
thereof calls for the exercise or use of the physical or mental faculties. The phrase “sale or exchange of services”
shall likewise include: x x x
[11]
Payment was evidenced by Metrobank Official Receipt No.
[12]
Twenty percent (20%) deficiency interest from
P451.24
x 20% x 945/365 days = P233.74
[13]
Otherwise known as the Pawnshop Regulation Act issued on
“Pawn ticket” is the pawnbrokers’
receipt for a pawn. It is neither a
security nor a printed evidence of indebtedness.
[14] Computed as follows:
Pledge
loans: P15,898,350.00
First
P5,000 P 20.00
P15,893,350.00/P5,000
= P3,178.67
equivalent
to 3179 x P10.00 31,790.00
Deficient
[15] Rollo, p. 33.
[16]
Citing Philippine Home Assurance
Corporation v. Court of Appeals, G.R. No. 119446,
[17] Presidential
Decree No. 114 defined a pawn as a personal property delivered by the pawner to
the pawnee as security for the loan.
[18] See Civil
Code, Arts. 2085, 2087 & 2093.
[19] Section
12 in relation to Sec. 11 of Presidential Decree No. 114 provide:
SECTION
12. Pawn
ticket. – Every pawnbroker shall, at the time of every such loan or pledge,
deliver to each person pawning or pledging any article or thing a memorandum or
ticket signed by such pawnbroker and containing the substance of the record
required to be kept in such pawnbroker's memorandum book in section eleven
hereof, excluding the description of the person so pawning or pledging such
article or thing, and no compensation of any kind whatsoever shall be received
by any pawnbroker for any such memorandum or ticket.
SECTION
11. Maintenance
of records. – Every pawnbroker shall keep a memorandum book in which shall be
entered, in ink, at the time of each loan or pledge, an accurate account and
description, in Pilipino or English with corresponding translation in the local
dialect of every pawn, the amount of money loaned thereon, the date of pawning
or pledging the same, the rate of interest to be paid on the loan, and the name
and residence of each pawner, together with a particular description of such
pawner, including his or her nationality, sex, and general appearance, and no
pawnbroker or other person shall alter or erase any entry made in such book. Every person pawning or pledging any article
or thing with a pawnbroker shall sign his name and give his address to said
pawnbroker and such name and address shall be made part of the record
heretofore described in this section: Provided, That a person who is unable to
write shall imprint his thumbmark, and his name shall be written by a competent
person, who shall sign his own name as witness to said thumbmark.
The 2000 Manual of Regulations of
Non-Bank Financial Institutions (New Manual) comprises substantially the
regulatory issuances of the BSP, as well as those of its predecessor agency,
the Central Bank of the
SECTION
4322P. Pawn Ticket. – Pawnshops shall at the time of the loan, deliver to
each pawner a pawn ticket which shall contain the following:
a. Name and
residence of the pawner;
b. Date the
loan is granted;
c. Amount of
the principal loan;
d. Interest
rate in percent;
e. Period of
maturity;
f. Description
of the pawn;
g. Expiry date
of redemption period;
h. Signature of
the pawnshop’s authorized representative;
i. Signature
or thumbmark of the pawner or his authorized representative; and
j. Such other
terms and conditions as may be agreed upon between the pawnshop and the pawner.
[20]
SECTION 18. Penalties. – A fine of not less than one hundred pesos (P100.00)
and not more than one thousand pesos (P1,000.00) or imprisonment for not
less than thirty days and not more than one year, or both, at the discretion of
the court, shall be imposed for violations of the provisions of this Decree and
its implementing rules and regulations: Provided, That if the violation is
committed by a corporation, partnership or an association, the penalty provided
for in this Decree shall be imposed upon the directors, officers, employees or
persons therein responsible for the offense, without prejudice to civil
liabilities arising from the criminal offense.
2000
Manual of Regulations of Non-Bank Financial Institutions also provides:
SUBSECTION 4322P.2. Sanctions.
– Any pawnshop which violates or fails to comply with the requirements of
Subsec. 4322P.1 shall pay a fine of P500 and shall be liable for such
other administrative sanctions as the BSP may impose. The owner, partner, manager, or
officer-in-charge of the pawnshop responsible for the violation or
non-compliance shall be jointly liable with the pawnshop.
[21] Thomas v. U.S., 192 US 363; Nicol v. Ames, 173 US 509; Du Pont v. U.S., 300 US 150, as cited in
Philippine Home Assurance Corporation v.
Court of Appeals, supra note 16, at 448, and Lincoln Philippine Life Insurance Company, Inc. v. Court of Appeals,
G.R. No. 118043,
[22] Philippine Home Assurance Corporation v.
Court of Appeals, supra note 16, at 447.
[23] G.R.
No. 166786,
[24] Michel J. Lhuillier Pawnshop, Inc. v.
Commissioner of Internal Revenue, id. at 153-155.
[25] Michel J. Lhuillier Pawnshop, Inc. v.
Commissioner of Internal Revenue, G.R. No. 166786,
[26]
[27] Dated
[28] Dated
[29] Michel J. Lhuillier Pawnshop, Inc. v.
Commissioner of Internal Revenue, supra note 25, at 460.