602 Phil. 817
QUISUMBING, J.:
WHEREFORE, in view of all the foregoing, the instant Petition for Review is hereby PARTIALLY GRANTED. Accordingly, petitioner is hereby ORDERED to PAY deficiency VAT assessment.... However, finding that petitioner is not subject to the documentary stamp tax under Section 195 of the Tax Code, Assessment Notice No. 32-97 dated April 11, 2001 for deficiency documentary stamp tax is hereby CANCELLED and SET ASIDE.The CIR's motion for reconsideration was denied by the CTA. Thus, the CIR elevated the case to the Court of Appeals. The appellate court ruled in favor of the CIR and decreed:
SO ORDERED.[8]
WHEREFORE, premises considered, Petition for Partial Review by the Commissioner of Internal Revenue is hereby GRANTED and the assailed March 18, 2003 Decision of the Court of Tax Appeals, ..., in so far as it cancelled the deficiency documentary stamp tax assessment of Php 50,910.00 against respondent TAMBUNTING, is hereby MODIFIED in that respondent TAMBUNTING is hereby ordered to pay petitioner Commissioner of Internal Revenue, the amount of Php50,910.00 as 1997 deficiency documentary stamp tax assessment, plus 25% surcharge, 20% deficiency interest, and 20% delinquency interest thereon from May 11, 2001 until fully paid pursuant to Section 248 and 249 (B) of the Tax Code.Tambunting now before us raises the following issue:
SO ORDERED.[9]
WHETHER OR NOT THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING PETITIONER LIABLE FOR DST ON PAWN TICKETS.[10]Stated simply, is Tambunting liable for documentary stamp taxes based on the pawn tickets that it issued?
Sec. 4322P Pawn Ticket. Pawnshops shall at the time of the loan, deliver to each pawner a pawn ticket which shall contain the following:Notably, a pledge is an accessory, real and unilateral contract by virtue of which the debtor or a third person delivers to the creditor or to a 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 to the third person.[13] The pawn ticket is required to contain the same essential information that would be found in a pledge agreement. Only the nomenclature of the requirements in the pawn ticket is changed to refer to the specific kind of pledge transactions undertaken by pawnshops. The property or thing pledged is referred to as the pawn, the creditor (pledgee) is referred to as the pawnee[14] and the debtor (pledgor) is referred to as the pawner.
- Name and residence of the pawner;
- Date the loan is granted;
- Amount of the principal loan;
- Interest rate in percent;
- Period of maturity;
- Description of the pawn;
- Expiry date of redemption period;
- Signature of the pawnshop's authorized representative;
- Signature or thumbmark of the pawner or his authorized representative; and
- Such other terms and conditions as may be agreed upon between the pawnshop and the pawner.
SEC. 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 taxes prescribed in the following Sections... (Emphasis supplied.)The law imposes DST on documents issued in respect of the specified transactions, such as pledge, and not only on papers evidencing indebtedness. Therefore, a pawn ticket, being issued in respect of a pledge transaction, is subject to documentary stamp tax.
SEC. 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:
(a) When the amount secured does not exceed Five thousand pesos (P5,000), Twenty pesos (P20.00).
(b) On each Five thousand pesos (P5,000), or fractional part thereof in excess of Five thousand pesos (P5,000), an additional tax of Ten pesos (P10.00). (Emphasis supplied.)
x x x x
x x x xcontract is taxable under Section 195 of the NIRC.[17]
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....
x x x x
... 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
SEC. 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 of ticket.Thus the ticket is simply a receipt and nothing more. It does NOT document the pledge. Such purpose is accomplished by the pawnbroker in the memorandum book which is governed by Sec. 11 which reads:
SEC. 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 pain 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.From the foregoing, the entries in the memorandum book document the loan or pledge agreement and not the pawn ticket.
SEC. 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 taxes prescribed in the following Sections x x x. (Emphasis supplied.)Based on the abovequoted provision, the ponencia argues that the "law imposes DST on documents issued in respect of the specified transactions, such as pledge and not only on papers evidencing indebtedness."
SEC. 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, 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:While it can be conceded that a pawn ticket is a paper issued in respect of the pledge, it is my view that a pawn ticket is excluded from the coverage of Sec. 195 of the NIRC and the pledge that relates to the ticket is an exempt transaction anchored on PD 114, a special law which must prevail over the NIRC, a general law.
(a) When the amount secured does not exceed Five thousand pesos (P5,000), Twenty pesos (P20.00).
(b) On each Five thousand pesos (P5,000), or fractional part thereof in excess of Five thousand pesos (P5,000), an additional tax of Ten pesos (P10.00). (Emphasis supplied.)
x x x x
Article 2096. A pledge shall not take effect against third persons if a description of the thing pledged and the date of the pledge do not appear in a public instrument.While Art. 1358 does not require a pledge in a public document, it requires that all other contracts where the amount involved exceeds five hundred pesos must appear in writing, even a private one.
LAW PERTINENT PROVISIONS ACT NO. 2339 (An Act Revising And Consolidating The Laws Relative To Internal Revenue 1), 27 February 1914 SECTION 30. Stamp Tax Upon Documents and Papers.--Upon documents, instruments, and papers, and upon acceptances, assignments, sales, and transfers of the obligation, right, or property incident thereto documentary taxes for and in respect of the transaction so had or accomplished shall be paid as hereinafter prescribed, by the persons making, signing, issuing, accepting, or transferring the same, and at the time such act is done or transaction had:
x x x x(w) 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:
- When the amount for which the mortgage or deed of trust is given is not less than one thousand pesos nor more than three thousand pesos, fifty centavos;
- On each three thousand pesos, or fractional part thereof, in excess of three thousand pesos, an additional tax of fifty centavos;
COMMONWEALTH ACT NO. 466 (An Act To Revise, Amend And Codify The Internal Revenue Laws Of The Philippines), 15 June 1939 SECTION 232. 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:(a) When the amount for which the mortgage or deed of trust is given exceeds one thousand pesos and does not exceed three thousand pesos, one peso.(b) On each three thousand pesos or fractional part thereof in excess of three thousand pesos, an additional tax of one peso. REPUBLIC ACT NO. 40 (An Act To Amend Certain Sections Of The National Internal Revenue Code, Relative To Documentary Stamp Taxes), 1 October 1946 SEC. 232. 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:
(a) When the amount for which the mortgage or deed of trust is given exceeds one thousand pesos and does not exceed three thousand pesos, one peso and fifty centavos.
(b) On each three thousand pesos or fractional part thereof in excess of three thousand pesos, an additional tax of one peso and fifty centavos. REPUBLIC ACT NO. 567 (An Act To Amend Title VI Of Commonwealth Act Numbered Four Hundred And Sixty-Six, Otherwise Known As The National Internal Revenue Code), 31 August 1950 SECTION 5. Section two hundred and thirty-two of Commonwealth Act Numbered Four hundred and sixty-six, as amended by section twenty-one of Republic Act Numbered Forty, is hereby further amended to read as follows:Sec. 232. 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:(a) When the amount for which the mortgage or deed or trust is given exceeds one thousand pesos and does not exceed three thousand pesos, one peso and fifty centavos.(b) On each three thousand pesos or fractional part thereof in excess of three thousand pesos, an additional tax of one peso and fifty centavos.On any mortgage, pledge, or deed of trust, where the same shall be made as a security for the payment of a fluctuating account or future advances without fixed limit, the documentary stamp tax on such mortgage, pledge or deed of trust shall be computed on the amount actually loaned or given at the time of the execution of the mortgage, pledge or deed of trust. However, if subsequent advances are made on such mortgage, pledge or deed of trust, additional documentary stamp tax shall be paid which shall be computed on the basis of the amount advanced or loaned at the rates specified above: Provided, however, That if the full amount of the loan or credit granted under the mortgage, pledge, or deed of trust, the documentary stamp tax prescribed in this section shall be paid and computed on the full amount of the loan or credit granted. REPUBLIC ACT NO. 1980 (An Act To Further Amend Section Two Hundred Twenty-Seven Of The National Internal Revenue Code), 22 June 1957 The law increased the rate of DST on bills of ladings or receipt. REPUBLIC ACT NO. 6110 (An Act Amending Certain Provisions Of The National Internal Revenue Code, As Amended), 4 August 1969 The law increased the DST rate on some of the documents mentioned in CA 466. The law also introduced additional documents and papers not subject to stamp tax. PRESIDENTIAL DECREE NO. 69 (Amending Certain Sections Of The National Internal Revenue Code), 24 November 1972 DST of the Tax Code, there was no amendment on Section 232. PRESIDENTIAL DECREE NO. 1158 (A Decree To Consolidate And Codify All The Internal Revenue Laws Of The Philippines), 3 June 1977 Section 232 was renumbered to Section 195.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 the following rates:(a) When the amount secured does not exceed five thousand pesos, ten pesos.(b) On each five thousand pesos, or fractional part thereof in excess of five thousand pesos, an additional tax of five pesos. PRESIDENTIAL DECREE NO. 1959 (Amending Certain Sections Of The National Internal Revenue Code, As Amended), 10 October 1984 The law renumbered and increased the rates of DST on certain documents. Section 195 was renumbered to Section 244, without increase in the rate of DST. PRESIDENTIAL DECREE NO. 1994 (Further Amending Certain Provisions Of The National Internal Revenue Code), 1 January 1986 Section 244 was renumbered to Section 195. There was no change in the rate. REPUBLIC ACT NO. 7660 (An Act Rationalizing Further The Structure And Administration Of The Administration Of The Documentary Stamp Tax, Amending For The Purpose Certain Provisions Of The National Internal Revenue Code, As Amended, Allocating Funds For Specific Programs, And For Other Purposes), 23 December 1993 SECTION 19. Section 195 of the National Internal Revenue Code, as amended, is hereby further amended to read as follows:Sec. 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:(a) When the amount secured does not exceed Five thousand pesos, Twenty pesos (P20.00);(b) On each Five Thousand pesos, or fractional part thereof in excess of Five thousand pesos, an additional tax of Ten pesos (P10.00). REPUBLIC ACT NO. 8424 (An Act Amending The National Internal Revenue Code, As Amended, And For Other Purposes), 1 January 1998 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:(a) When the amount secured does not exceed Five thousand pesos (P5,000), Twenty pesos (P20.00).(b) On each Five thousand pesos (P5,000), or fractional part thereof in excess of Five thousand pesos (P5,000), an additional tax of Ten pesos (P10.00).
Under Section 195 of the Tax Code, documentary stamp tax is imposed on every pledge of personal property "where the same (personal property) 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, x x x" In other words, a document evidencing a pledge of personal property which is made as a security for payment of a loan is subject to the documentary stamp tax. This implies that, under the document subject to tax, the pledgor is indebted to the pledge and, therefore, the former has pledged personal property to secure payment of the debt.The BIR cannot now be allowed to change the interpretation it gave to the pertinent legal provisions on DST.
In the case of the pawnshop business, the pawnee (pawnshop or pawnbroker) issues a "pawn ticket" to the pawner (borrower from a pawnshop). The pawn is the personal property delivered by the pawner to the pawnee as security for a loan. The "pawn ticket" is the pawnbroker's receipt for a pawn. It is neither a security nor a printed evidence of indebtedness. (Sec. 3, P.D. No. 114 or the Pawnshop Regulation Act) Accordingly, considering that the document taxable under Section 195 of the Tax Code must show the existence of debt and inasmuch as, under the law, a pawn ticket is not a printed evidence of indebtedness, such pawn ticket cannot be considered as a document subject to the documentary stamp tax imposed by Section 195 of the Tax Code.