CIR v. Michel J. Lhuillier Pawnshop. GR NO. 150947. July 15, 2003. Davide, Jr., C.J.

FACTS: Several revenue memorandum orders were issued by the CIR imposing a 5%
lending investors tax on pawnshops. Since pawnshops were considered as lending
investors, they also become subjected to documentary stamp taxes. Pursuant to the
issuances, the BIR issued assessment against respondent demanding the latter
payment of deficiency percentage tax. In response, respondent questioned the
issuances before the Revenue Regional Director alleging that no law imposes
percentage tax on the income of pawnshops and that pawnshops are different from
lending investors. On October 12, 1998, the BIR issued a warrant of distraint against
the property of the respondent. The respondents claim before the Revenue Regional
Director and the BIR were not acted upon prompting respondent to appeal before
CTA. The tax court rendered a decision declaring the issuances null and void insofar
as it classified pawnshops as lending investors and dissolving the assessment. On
appeal, the CA affirmed the decision of the CTA. Dissatisfied, the petitioner appealed
before the SC alleging that the term lending investors as defined in Sec. 157 (u) of the
Tax Code is broad enough to include pawnshops since the principal business activity
of a pawnshop is lending money.
ISSUE: Whether pawnshops are lending investors and therefore subject to lending
investors tax.
DECISION: No. The SC held that under Sec. 157 (u) of the Tax Code, the term
lending investor includes all persons who make a practice of lending money for
themselves or others for interest. A pawnshop, on the other hand, is defined under
PD 114 as a person or entity engaged in the business of lending money or personal
property delivered as security for loans and shall be synonymous, and may be used
interchangeably, with pawn broker or pawn brokerage. While pawnshops are
engaged in the business of lending money, they are not considered lending investors
for the purpose of imposing the 5% percentage tax because, first, lending investors
and pawnshops are subjected to different tax treatments. Second, Congress never
intended pawnshops to be treated in the same way as lending
investors. Section 116 of the NIRC of 1977, was basically lifted from
Section 1758 of the NIRC of 1986, which treated both tax subjects
differently. Third, Sec. 116 of the NIRC subjects to percentage tax
dealers ion securities and lending investors only and no mention of
pawnshops. In statutory construction, the mention of one thing
implies the exclusion of another thing not mentioned. Fourth, the BIR
ruled several times that pawnshops were not subject to the 5%
percentage tax and even admitted the same in the subject issuance.
Lastlty, pawnshops were sought to be included as among those
subject to the percentage tax by House Bill No. 11197 of 1994. If
pawnshops were covered within the term lending investor, there would
have been no need to introduce such amendment to include owners of
pawnshops.