ANTAM PAWNSHOP CORP VS. CIR
G.R. No. 167962
September 19, 2008
FACTS: The Commissioner of Internal Revenue (CIR) issued against Antam a pre-assessment notice for deficiency VAT, Documentary Stamp Tax (DST), and minimum corporate income tax (MCIT) for taxable year 1998.
The respondent issued Assessment Notices with corresponding Demand Letters for petitioner’s (a) deficiency VAT (b) deficiency MCIT (c) deficiency DST and (d) compromise penalties, all for the taxable year 1998.
Prior to the issuance of the above Assessment Notices, petitioner partially paid for the MCIT due.
Petitioner filed its written protest with the BIR. Due to the inaction of the BIR, Antam went up, on petition for review, to the CTA.
The CTA held that Antam is liable for VAT, deficiency interest for MCIT, the compromise penalties are cancelled, but Antam is not liable for DST, saying that pursuant to Section 3 of P.D. 114,a pawn ticket is neither security nor a printed evidence of indebtedness. Consequently, it cannot be considered as a document subject to DST under Section 195 of the NIRC. However, for failure to present proof of payment of tax, Antam was held liable for DST on subscribed capital stock.
Both parties filed their respective MRs which were subsequently denied by the CTA.
The CIR filed with the CA a petition for partial review to assail the cancellation by the CTA of deficiency DST on pawn tickets. (Antam filed as well)
In its Decision, the CA ruled that pawn tickets are subject to DST. It contended that a pawn ticket is an evidence of the contract of pledge and thus subject to DST pursuant to Section 195 of the NIRC. 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 a CTA Justice that the pawn ticket is the logical document evidencing a contract of pledge and thus subject to DST. The CA explained that the DST provided under Section 173 of the NIRC is levied on the documents but in respect to the transaction so had or accomplished. 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 include entering into a contract of pledge.
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.
Dissatisfied with the decision of the CA, Antam is now before Us with a petition under Rule 45.
ISSUE: ARE pawn tickets subject to documentary stamp tax?
HELD: the appealed decision is affirmed with modifications
YES; Section 195 of the NIRC imposes, among others, a DST on pledge of personal property made as a security for the payment of a sum of money.
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.
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. 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
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. 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 DST is not the ticket itself but the privilege of entering into a contract of pledge. 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
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 DST but the exercise of the privilege to enter into a contract of pledge. There is therefore no basis in petitioner’s assertion that a DST is literally a tax on a document and that no tax may be imposed on a pawn ticket.
Also. Section 199 of the NIRC enumerated certain documents which are not subject to stamp tax; but a pawnshop ticket is not one of them.