Tuesday, February 21, 2012

Antam Pawnshop Corporation vs. CIR [G.R. No. 167962 September 19, 2008 ]

Facts: Petitioner Antam is a duly organized corporation engaged in the pawnshop business. 

On November 23, 2001, CIR issued Assessment Notices, all bearing the number 32-1-98, with corresponding Demand Letters for petitioner’s (a) xxxxxxxx (bxxxxxxxxx (c) deficiency Documentary Stamp Tax in the amount of P78,590.00; and (d) xxxxx. 

On December 21, 2001, petitioner filed its written protest with the BIR. 

The CIR 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. A pawn ticket is issued upon receipt of a pawn and should be presented upon redemption. 

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. 

Issue: Whether or not PAWN TICKETS are subject to Documentary Stamp Tax. 

Held: Pawn tickets are subject to payment of documentary stamp tax. 

Focal to this ruling is the correct interpretation of Section 195 in relation to 173 of the NIRC. 

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. 

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. Failure to do so shall subject the pawnshop to penalties under Section 18 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 DST is not the ticket itself but the privilege of entering into a contract of pledge. 

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. 

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.

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