Case Digest (G.R. No. 88158)
Facts:
In Commissioner of Internal Revenue v. First Express Pawnshop Company, Inc., G.R. Nos. 172045-46, decided on June 16, 2009, the Commissioner of Internal Revenue (petitioner) issued on December 28, 2001 four notices of assessment against First Express Pawnshop Company, Inc. (respondent) for deficiency income tax (₱20,712.58), VAT (₱601,220.18), documentary stamp tax (DST) on deposit on subscription (₱12,328.45), and DST on pawn tickets (₱62,128.87), with respective compromise penalties. The respondent received these notices on January 3, 2002 and protested on February 1, 2002, attaching its General Information Sheet (GIS) and audited Balance Sheet (showing ₱800,000 as “Deposit on Subscription,” ₱500,000 as subscribed capital, and ₱250,000 as paid-up capital). Petitioner requested additional proof of DST payment for the subscription deposit, which the respondent could not provide because no stock certificates had been issued. Petitioner neither acted on the protest within 180 daysCase Digest (G.R. No. 88158)
Facts:
- Issuance of assessment notices and administrative protest
- On 28 December 2001, the Commissioner of Internal Revenue (CIR) issued four assessment notices against First Express Pawnshop Company, Inc.:
- Assessment No. 31-1-98 for P20,712.58 deficiency income tax with P3,000 compromise penalty
- Assessment No. 31-14-000053-98 for P601,220.18 deficiency VAT with P16,000 penalty
- Assessment No. 31-14-000053-98 for P12,328.45 deficiency DST on deposits on subscription with P2,000 penalty
- Assessment No. 31-1-000053-98 for P62,128.87 deficiency DST on pawn tickets with P8,500 penalty
- Respondent received the notices on 3 January 2002, filed its written protest on 1 February 2002, and, after the CIR failed to act within 180 days, elevated the dispute to the Court of Tax Appeals (CTA) on 28 August 2002.
- Contentions before the Court of Tax Appeals
- Respondent argued that the CIR overlooked supporting documents on interest expenses and donations, that pawnshops are not VAT-liable lenders, and that Sections 180 and 195 of the Tax Code do not cover deposits on subscription and pawn tickets, respectively.
- The CIR maintained the validity and correctness of the assessments, invoked VAT liability under RA No. 7716 (EVAT law), and relied on BIR Ruling No. 221-91 to assert DST on pawnshop tickets.
- CTA First Division and En Banc decisions
- On 24 September 2004, the CTA First Division partially granted the petition: it cancelled the DST assessments on pawn tickets and deposits on subscription, but affirmed the VAT assessment (P601,220.18) with 25% surcharge and 20% interest. Motions for Reconsideration by both parties were denied.
- On 24 March 2006, the CTA En Banc affirmed VAT liability, ordered DST on pawnshop tickets, but held that the P12,328.45 deposit on subscription was not subject to DST for lack of any binding subscription agreement or issuance of shares.
- Elevation to the Supreme Court
- Aggrieved by the CTA En Banc’s ruling on DST finality and liability, the CIR filed a Petition for Review under Rule 45 of the Rules of Court.
- The CIR’s sole issue: whether the CTA erred as a matter of law in disregarding the finality of assessments under Section 228 of the Tax Code and in refusing to uphold the DST assessment of P12,328.45 on deposit on subscription.
Issues:
- Whether the CTA erred in disregarding the finality of assessments under Section 228 of the Tax Code.
- Whether respondent is liable to pay P12,328.45 as documentary stamp tax on the deposit on subscription of capital stock.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)