5/27/2017 G.R.No.

172394

RepublicofthePhilippines
SupremeCourt
Manila
THIRDDIVISION


H.TAMBUNTING G.R.No.172394
PAWNSHOP,INC.,
Petitioner, Present:


CORONA*,C.J.,
versus CARPIOMORALES,Chairperson,
BERSAMIN,
VILLARAMA,JR.,and

SERENO,JJ.

COMMISSIONEROF Promulgated:
INTERNALREVENUE,
Respondent. October13,2010
xx

DECISION


BERSAMIN,J.:

Theissuehereiniswhetherthepetitioner,apawnshopoperator,wasliableforVATand
thecompromisepenaltyfortaxableyear2000.

OnAugust29,2003,petitionerH.TambuntingPawnshop,Inc.(Tambunting),adomestic
corporation duly licensed to engage in the pawnshop business, received an assessment notice
datedAugust27,2003fromtheBureauofInternalRevenue(BIR),demandingthepaymentof
deficiency ValueAdded Tax (VAT) and compromise penalty for taxable year 2000 in the
amountsofP5,212,404.52andP25,000,respectively.

On September 15, 2003, Tambunting, disclaiming its liability, protested the assessment
withtherespondentCommissionerofInternalRevenue(CIR),arguingthatapawnshopbusiness
[1]
wasnotsubjecttoVATandthecompromisepenalty.

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Due to the inaction of the CIR on the protest, Tambunting filed on April 2, 2004 its
petitionforreviewwiththeCourtofTaxAppeals(CTA)pursuanttoSection228ofRepublic
[2]
ActNo.8424(NationalInternalRevenueCodeorTaxReformActof1997).

[3]
In a decision dated April 11, 2005, the CTA Second Division denied the petition for
review,towit:

WHEREFORE,premisesconsidered,theinstantPetitionforReviewisherebyPARTIALLY
GRANTED. Accordingly, petitioner is hereby ORDERED to pay respondent Commissioner of
InternalRevenuethedeficiencyVATfortaxableyear2000intheamountofPhP5,212,404.52,
plus25%surchargeand20%delinquencyinterestperannumfromSeptember29,2003untilfully
paid,pursuanttoSection248and249oftheNIRCof1997,asamended.



TheamountofPhP25,000imposedbywayofcompromisepenaltyisherebyDELETED.

SOORDERED.


[4]
OnApril29,2005,Tambuntingfiledamotionforpartialreconsideration. Lateron,on
May 26, 2005, Tambunting submitted a written manifestation, attaching a copy of Bureau of
InternalRevenue(BIR)taxpaymentdepositslip(BIRFormNo.0605)andthecorresponding
scheduleevidencingitspaymentofP828,809.67fortheyearsfrom2000to2002pursuanttoa
[5]
settlementagreementwithBIRallowingTambuntingtopay25%ofitsVATdue.

On July 14, 2005, however, the CTA Second Division denied Tambuntings motion for
[6]
partialreconsiderationinaresolutiondatedJuly14,2005.

[7]
OnAugust22,2005,TambuntingappealedbypetitionforreviewtotheCTAenbanc.

[8]
OnMarch21,2006,theCTAenbancrendereditsassaileddecision, disposingthus:

WHEREFORE, the Court enbancfinds no reversible error to warrant the reversal of the
assailed Decision promulgated on April 11, 2005 and the Resolution dated July 14, 2005,
respectively.

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Accordingly,theinstantPetitionforReviewisherebyDENIEDandtheassailedDecision
andResolutionareAFFIRMEDintoto.

SOORDERED.


[9]
TheCTAenbancdeniedTambuntingsmotionforreconsiderationonApril18,2006.

Hence,Tambuntinghasappealed,insistingthat:

THE CTA EN BANCS DECISION OF 21 MARCH 2006 AND RESOLUTION DATED 18
APRIL2006ARENOTINACCORDANCEWITHLAWANDSETTLEDJURISPRUDENCE
ONTHEMATTER.

Tambuntings main argument is that pawnshops are not within the concept of all services and
[10]
similar services as provided in Section 108 (A) of the National Internal Revenue Code.
Tambunting also argues that the enumeration under Section 108(A) of the National Internal
RevenueCodeofservicessubjecttoVATisexclusive.
Thepetitionhasmerit.

It is now settled that for purposes of determining their tax liability, pawnshops are treated as
[11]
nonbankfinancialintermediaries.

The VAT on nonbank financial intermediaries was first levied under R.A. No. 7716
(ExpandedValueAddedTaxLaw),whereSections3and17thereofprovide:

Section 3. Section 102 of the National Internal Revenue, as amended is hereby further
amendedtoreadasfollows:

Section102.Valueaddedtaxonsaleofservicesanduseorleaseofproperties.Thereshall
belevied,assessedandcollected,avalueaddedtaxequivalentto10%ofgrossreceiptsderived
fromthesaleorexchangeofservices,includingtheuseorleaseofproperties.

Thephrasesaleorexchangeofservicesmeanstheperformanceofallkindsofservicesin
thePhilippinesforothersforafee,remunerationorconsiderationxxx

xxxservicesofbanks,nonbankfinancialintermediariesandfinancecompaniesxxx

Section17.EffectivityoftheImpositionofVATonCertainGoods,PropertiesandServices.
Thevalueaddedtaxshallbeleviedassessedandcollectedonthefollowingtransactions,two(2)
yearsaftertheeffectivityofthisAct:

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xxx

(b)Services rendered by banks, nonbank financial intermediaries, finance companies and
other financial companies and other financial intermediaries not performing quasibanking
functionsxxx


However, Section 11 of R.A. No. 8241 amended Section 17 of R.A. No. 7716 to move the
effectivityoftheVATonnonbankfinancialintermediariestoJanuary1,1998,viz:

Section11.Section17ofRepublicActNo.7716isherebyamendedtoreadasfollows:

Section17.EffectivityoftheImpositionofVATonCertainGoods,PropertiesandServices.
Thevalueaddedtaxshallbeleviedassessedandcollectedonthefollowingtransactionsstarting
January1,1998:

xxx

(b) Services rendered by banks, nonbank financial intermediaries, finance companies and other
financialintermediariesnotperformingquasibankingfunctionsxxx


Later,R.A.No.8424(NationalInternalRevenueCodeorTaxReformActof1997)againmoved
theeffectivityoftheimpositionoftheVATtoDecember31,1999,towit:

Section5.TransitoryProvisionsDeferment of the Effectivity of the Imposition of VAT on
Certain Services. The effectivity of the imposition of the valueadded tax on services as
prescribedinSection17(a)and(b)ofRepublicActNo.7716,asamendedbyRepublicActNo.
8241, is hereby further deferred until December 31, 1999, unless Congress deems otherwise:
Provided, That the said services shall continue to pay the applicable tax prescribed under the
presentprovisionsoftheNationalInternalRevenueCode,asamended.


Still later, R.A. No. 8761 retarded the effectivity of the VAT on nonbank financial
intermediariestoJanuary1,2001,thus:

Section1.Section5ofRepublicActNo.8424isherebyamendedtoreadasfollows:

Section5.TransitoryProvisionsEffectivityoftheImpositionofVATonCertainServices.
TheimpositionofthevalueaddedtaxonthefollowingservicesshalltakeeffectonJanuary1,
2001:

xxx

(b)Servicesrenderedbybanks,nonbankfinancialintermediaries,financecompanies,and
otherfinancialintermediariesnotperformingquasibankingfunctionsxxx


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Lastly,R.A.No.9010revisedtheeffectivityoftheVATonnonbankfinancialintermediariesby
makingitstartonJanuary1,2003:

Section 1. Section 5 of Republic Act No. 8424 as amended by Republic Act No. 8761 is
herebyfurtheramendedtoreadasfollows:

Section5.TransitoryProvisionsEffectivityoftheImpositionofVATonCertainServices.
TheimpositionofthevalueaddedtaxonthefollowingservicesshalltakeeffectonJanuary1,
2003:

xxx

(b)Servicesrenderedbybanks,nonbankfinancialintermediaries,financecompanies,and
otherfinancialintermediariesnotperformingquasibankingfunctionsxxx

Accordingly, the consecutive deferments of the effectivity date of the application of VAT on
nonbankfinancialintermediarieslikepawnshopsresultedintheirnonliabilityforVATduring
theaffectedtaxableyears.Specifically,inFirstPlantersPawnshop,supra,the Court ruled on
theVATliabilityofpawnshopsfortaxableyearsfrom1996to2002,holding:
xxx Since petitioner is a nonbank financial intermediary, it is subject to 10% VAT for the tax
years1996to2002however,withthelevy,assessmentandcollectionofVATfromnonbankfinancial
intermediariesbeingspecificallydeferredbylaw,thenpetitionerisnotliableforVATduringthesetax
years.ButwiththefullimplementationoftheVATsystemonnonbankfinancialintermediariesstarting
January1,2003,petitionerisliablefor10%VATforsaidtaxyear.Andbeginning2004uptothepresent,
byvirtueofR.A.No.9238,PetitionerisnolongerliableforVATbutitissubjecttopercentagetaxon
grossreceiptsfrom0%to5%,asthecasemaybe.


The aforequoted pronouncement in First Planters Pawnshop has been reiterated in
[12]
TambuntingPawnshop,Inc.v.CommissionerofInternalRevenue andinTFS,Incorporated
[13]
v. Commissioner of Internal Revenue, thereby affirming the nonliability for VAT of
pawnshops in taxable years 19962002 by virtue of the deferment of its imposition.
Consequently, the VAT deficiency assessment and the surcharge served onTambunting by the
BIRlackedlegalbasisandmustbecanceled.

Asearliermentioned,however,TambuntingpaidtotheBIR25%ofitsVATliabilityfor
theyears2000to2002pursuanttoasettlementagreement.Thetaxliabilityinquestionherein
includestaxableyear2000only.Toalignwiththeresultherein,therefore,Tambuntingisentitled
toarefundofanyamountpaidpursuanttothesettlementagreementcorrespondingtotaxable
year2000only.

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WHEREFORE,wegrantthepetitionforreviewoncertiorari,andreverseandsetaside
thedecisiondatedMarch21,2006andtheresolutiondatedApril18,2006oftheCourtof Tax
Appeals en banc. We declare that the petitioner was not liable for the ValueAdded Tax in
taxableyear2000andordertheCommissionerofInternalRevenuetorefundtoH.Tambunting
Pawnshop,Inc.anyamountpaidpursuanttothesettlementagreementcorrespondingtotaxable
year2000only.

Nopronouncementoncostofsuit.

SOORDERED.




LUCASP.BERSAMIN
AssociateJustice


WECONCUR:




RENATOC.CORONA
ChiefJustice





CONCHITACARPIOMORALESMARTINS.VILLARAMA,JR.
AssociateJusticeAssociateJustice
Chairperson




MARIALOURDESP.A.SERENO
AssociateJustice

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ATTESTATION


IattestthattheconclusionsintheaboveDecisionhadbeenreachedinconsultationbeforethe
casewasassignedtothewriteroftheopinionoftheCourtsDivision.



CONCHITACARPIOMORALES
AssociateJustice
Chairperson




CERTIFICATION


Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons
Attestation,IcertifythattheconclusionsintheaboveDecisionhadbeenreachedinconsultation
beforethecasewasassignedtothewriteroftheopinionoftheCourtsDivision.




RENATOC.CORONA
ChiefJustice

*DesignatedasadditionalmemberperRaffledatedOctober11,2010inlieuofJusticeArturoD.Brion.
[1]
Rollo,p.29.
[2]
Section228.ProtestingofAssessment.WhentheCommissionerorhisdulyauthorizedrepresentativefindsthatpropertaxes
shouldbeassessed,heshallfirstnotifythetaxpayerofhisfindings:xxx
xxx
Thetaxpayersshallbeinformedinwritingofthelawandthefactsonwhichtheassessmentismadeotherwise,theassessment
shallbevoid.
Withinaperiodtobeprescribedbyimplementingrulesandregulations,thetaxpayershallberequiredtorespondtosaidnotice.
If the taxpayer fails to respond, the Commissioner or his duly authorized representative shall issue an assessment based on his
findings.
Suchassessmentmaybeprotestedadministrativelybyfilingarequestforreconsiderationorreinvestigationwithinthirty(30)
daysfromreceiptoftheassessmentinsuchformandmannerasmaybeprescribedbyimplementingrulesandregulations.
Withinsixty(60)daysfromfilingoftheprotest,allrelevantsupportingdocumentsshallhavebeensubmittedotherwise,the
assessmentshallbecomefinal.
Iftheprotestisdeniedinwholeorinpart,orisnotacteduponwithinonehundredeighty(180)daysfromsubmissionof
documents,thetaxpayeradverselyaffectedbythedecisionorinactionmayappealtotheCourtofTaxAppealswithinthirty(30)

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daysfromreceiptofthesaiddecision,orfromthelapseofonehundredeighty(180)dayperiodotherwise,thedecisionshall
becomefinal,executoryanddemandable.
[3]
Rollo,pp.4664.
[4]
Id.,pp.6580.
[5]
Id.,pp.2930.
[6]
Id.,pp.7980.
[7]
Id.,pp.81140.
[8]
Id.,pp.2843.
[9]
Id.,pp.4445.
[10]
Section108.ValueaddedTaxonSaleofServicesandUseorLeaseofProperties.
(A)RateandBaseofTax.Thereshallbelevied,assessedandcollected,avalueaddedtaxequivalenttotenpercent(10%)ofgross
receiptsderivedfromthesaleorexchangeofservices,includingtheuseorleaseofproperties.
Thephrase"saleorexchangeofservices"meanstheperformanceofallkindsorservicesinthePhilippinesforothersforafee,
remuneration or consideration, including those performed or rendered by construction and service contractors stock, real estate,
commercial, customs and immigration brokers lessors of property, whether personal or real warehousing services lessors or
distributors of cinematographic films persons engaged in milling processing, manufacturing or repacking goods for others
proprietors,operatorsorkeepersofhotels,motels,resthouses,pensionhouses,inns,resortsproprietorsoroperatorsofrestaurants,
refreshmentparlors,cafesandothereatingplaces,includingclubsandcaterersdealersinsecuritieslendinginvestorstransportation
contractors on their transport of goods or cargoes, including persons who transport goods or cargoes for hire another domestic
commoncarriersbyland,airandwaterrelativetotheirtransportofgoodsorcargoesservicesoffranchisegranteesoftelephoneand
telegraph,radioandtelevisionbroadcastingandallotherfranchisegranteesexceptthoseunderSection119ofthisCodeservicesof
banks,nonbankfinancialintermediariesandfinancecompaniesandnonlifeinsurancecompanies(excepttheircropinsurances),
including surety, fidelity, indemnity and bonding companies and similar services regardless of whether or not the performance
thereofcallsfortheexerciseoruseofthephysicalormentalfaculties.Thephrase'saleorexchangeofservices'shalllikewiseinclude:
(1)Theleaseortheuseofortherightorprivilegetouseanycopyright,patent,designormodel,plansecretformulaorprocess,
goodwill,trademark,tradebrandorotherlikepropertyorright
(2)Theleaseoftheuseof,ortherighttouseofanyindustrial,commercialorscientificequipment
(3)Thesupplyofscientific,technical,industrialorcommercialknowledgeorinformation
(4)Thesupplyofanyassistancethatisancillaryandsubsidiarytoandisfurnishedasameansofenablingtheapplicationor
enjoymentofanysuchproperty,orrightasismentionedinsubparagraph(2)oranysuchknowledgeorinformationasismentioned
insubparagraph(3)
(5)Thesupplyofservicesbyanonresidentpersonorhisemployeeinconnectionwiththeuseofpropertyorrightsbelongingto,
ortheinstallationoroperationofanybrand,machineryorotherapparatuspurchasedfromsuchnonresidentperson
(6)Thesupplyoftechnicaladvice,assistanceorservicesrenderedinconnectionwithtechnicalmanagementoradministrationof
anyscientific,industrialorcommercialundertaking,venture,projectorscheme
(7)Theleaseofmotionpicturefilms,films,tapesanddiscsand
(8)Theleaseortheuseofortherighttouseradio,television,satellitetransmissionandcabletelevisiontime.
Leaseofpropertiesshallbesubjecttothetaxhereinimposedirrespectiveoftheplacewherethecontractofleaseorlicensing
agreementwasexecutedifthepropertyisleasedorusedinthePhilippines.
Thetermgrossreceiptsmeansthetotalamountofmoneyoritsequivalentrepresentingthecontractprice,compensation,service
fee,rentalorroyalty,includingtheamountchargedformaterialssuppliedwiththeservicesanddepositsandadvancedpayments
actually or constructively received during the taxable quarter for the services performed or to be performed for another person,
excludingvalueaddedtax.
xxx
[11]
FirstPlantersPawnshopv.CommissionerofInternalRevenue,G.R.No.174134,July30,2008,560SCRA621.
[12]
G.R.No.179085,January21,2010,610SCRA514.
[13]
G.R.No.166829,April19,2010.

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