Michel J. Lhuillier Pawnshop v. Commissioner of Internal Revenue

[C.T.A. CASE NO. 6141. October 24, 2001.] MICHEL J. LHUILLIER PAWNSHOP, INC. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N Before Us for consideration is a Petition for Review filed on July 14, 2000, seeking to annul Assessment Notices No. 81-VAT-13-97-99-12-118 and 81-DST-13-97-99-12-119, issued by the Respondent against the Petitioner for alleged Value Added Tax and Documentary Stamp Tax deficiencies during taxable year 1997. The assessments arose from the following antecedents: Petitioner is a corporation duly organized and existing under and by virtue of the laws of the Philippines. In its Amended Petition for Review, Petitioner averred that it received the questioned Assessment Notices for alleged non-payment of Value Added Tax and Documentary Stamp Tax from the Chief of the Assessment Division of Revenue Region No. 13, Cebu City on December 9, 2000. On January 6, 2000, Petitioner filed with the Respondent a Motion for Reconsideration in accordance with Section 228 of the National Internal Revenue Code questioning the legality and validity of the assessments. In a letter received by the Petitioner on May 29, 2000, Respondent denied Petitioner's Motion for Reconsideration. Hence this Appeal. In its Petition for Review, Petitioner reiterates its stance a quo and argued that a pawnshop business is not liable to pay value added tax on its sale of rematados citing as basis therefor Section 105 of Title IV, Chapter I and Section 106 (A) of the Tax Code which provides, thus: Section 105 "Any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to the value-added tax (VAT) imposed in Sections 106 to 108 of this Code. Section 106 (A) There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, a value-added tax equivalent to ten percent (10%) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor." On September 12, 2000, Respondent filed his Answer to the Petition for Review and advanced the following Special and Affirmative Defenses, to wit: "7. The petition alleges that petitioner received the assessments last November 19, 1999 and that on January 6, 2000, it filed a motion for reconsideration thereof (paragraphs 2 and 3, Petition). In other words, petitioner protested the assessments after the lapse of thirty (30) days from its receipt thereof. Hence, the assessments have become final and executory (Section 228, Tax Code) and, therefore, this Honorable Court has no jurisdiction to act on the petition ( Republic vs. Lim Tian Teng Sons & Co., Inc., 16 SCRA 584). 8. Under Section 102 (a) of the TaxCode, as amended by R.A.No.7716, the sale of services rendered by lending investors and services similar thereto is subject to 10% VAT on gross receipts derived from said sale. Section 4.102-1 of Revenue RegulationsNo.7-95 defines a "lending investor" as including "all persons, other than banks, non-bank financial intermediaries, finance companies and other financial intermediaries not performing quasi-banking functions, who make a practice of lending money for themselves or others at interest." Since the services of pawnshops are similar to those of lending investors, the sale of said services is subject to 10% VAT. 9. Pawnshops lend money on the security of personal property, that is, a pledge. The pledge is evidenced by a pawn ticket. Hence, the pawn ticket is the logical document subject to documentary stamp tax on pledges under Section 195 of the TaxCode (Revenue Memorandum Circular No. 43-91, May 27, 1991). 10. The assessment was issued in accordance with law and regulations. 11. All presumptions are in favor of the correctness of tax assessments (CIR vs. Construction Resources of Asia, Inc., 145 SCRA 671). It should be noted that the allegation of Respondent with respect to the lack of jurisdiction explained in Paragraph number 7 of the Answer is no longer considered an issue to be resolved in this case as the Petitioner has corrected the data in its Amended Petition for Review (see page 39, CTA Records). Moreover, the Parties, in their Joint Stipulation of Facts and Issues, have limited the issues to the following: 1. Whether or not Pawnshop business is subject to Value Added Tax under Section 102 (a) of the Tax Code. 2. Whether interest income is income from service or from forbearance of money. 3. Whether liquidated damages are income from services or a simple item of indemnification. 4. Whether pawnshop business is similar or akin to Lending Investor business. 5. Whether respondent is legally empowered to impose and charge Value Added Tax on the petitioner for the proceeds of the auction sale of pawned item. 6. Whether pawn ticket is subject to documentary stamp tax. In its Memorandum, Petitioner argues that pawnshops are of a different class from that of a lending investor and, therefore, should be exempt from the payment of the Value Added Tax. This conclusion allegedly finds support in the provision of Section 102(a) of the Tax Code which does not express, whether directly or indirectly, that pawnshop business is subject to Value Added Tax. To justify the assessment, Respondent, makes capital of the same provision of the Tax Code invoked by the Petitioner. However, Respondent opines that the enumeration of persons performing services for a fee in the said provision is merely intended to give examples of businesses subject to VAT on sale or exchange of services, hence, not exclusive. Moreover, Respondent submits that the legislative intent is not to limit the application of Section 112 (a) to those enumerated therein because the law speaks of all "kinds of services." Hence, since a pawnshop is engaged in the sale of services, it is subject to VAT under the aforesaid provision. We find Respondent's assertions not plausible. Accordingly, We rule in favor of the Petitioner. Time and again, this Court has consistently ruled that pawnshops are not in the same class as lending investors. Apropos to this pronouncement are the following provisions of the Tax Code, thus: "Sec. 157. Words and Phrases defined. . . . (u) "Lending investor" includes all persons who make a practice of lending money for themselves or others at interest. Sec. 161. Fixed Taxes . . . . (3) Other fixed taxe s. . . . (dd) Lending investors 1. In chartered cities and first class municipalities, one thousand pesos, 2. In second and third class municipalities, five hundred pesos; 3. In fourth and fifth class municipalities and municipal districts, two hundred fifty pesos: Provided , That lending investors who do business as such in more than one province shall pay a tax of one thousand pesos. xxx xxx xxx Sec. 175. Percentage tax on dealers in securities, lending investors . Dealers in securities shall pay a tax equivalent to six (6%) per cent of their gross income. Lending investors shall pay a tax equivalent to five (5%) per cent of their gross income. (Formerly Section 116.) Presidential Decree114 (PawnshopRegulatoryAct) Sec. 3. Definitions . As used in this decree, unless the context otherwise requires, the following terms shall have the following meanings: " Pawnshop " shall refer to a person or entity engaged in the business of lending money on personal property delivered as security for loans and shall be synonymous and may be used interchangeably, with pawnbroker or pawnbrokerage. xxx xxx xxx Sec. 10. Rates of interest . No pawnshop shall directly or indirectly stipulate, charge, demand, take or receive any higher rate or greater sum or value for any loan or forbearance than the rate allowed by the Usury Law for such transactions. . . . Seemingly, the theory of the Respondent jibes well with the aforequoted provision that pawnshops may be in the same class as lending investors since its principal activity is lending money at interest. Moreover, under Section 4.102-1 of Revenue Regulations No. 7-95 cited by the Respondent in his Memorandum, a lending investor is defined as including "all persons, other than banks, non-bank financial intermediaries, finance companies and other financial intermediaries not performing quasi-banking functions, who made a practice of lending money for themselves or others at interest. This definition coupled with Respondent's declaration in RMO 15-91 and RMC 43-91, which We quote hereunder, may bolster Respondent's theory, thus: RMO No. 15-91, March 11, 1991 "A restudy of P.D.114 shows that the principal activity of pawnshops is lending money at interest and incidentally accepting a pawn of personal properties delivered by the pawner to the pawnee as security for the loan. Clearly, this makes pawnshop business akin to lending investor's business activity which is broad enough to encompass the business of lending money at interest by any person whether natural or juridical. Such being the case, pawnshops shall be subject to the 5% lending investor's tax based on their gross income pursuant to Section 116 of the TaxCode, as amended." RMC No. 43-91, May 27, 1991 "This Circular subjects to the 5% lending investor's tax the gross income of pawnshops pursuant to Section 116 of the TaxCode, and it thus revokes BIR RulingNos.6-90, and VAT RulingNos.22-90 and67-90. In order to have a uniform cut-off date, avoid unfairness on the part of taxpayers if they are required to pay the tax on past transactions, and so as to give meaning to the express provisions of Section 246 of the TaxCode, pawnshop owners or operators shall become liable to the lending investors tax on their gross income beginning January 1, 1991. Since the deadline for the filing of percentage tax return (BIR Form No. 2529A-O) and the payment of the tax on lending investors covering the first calendar quarter of 1991 has already lapsed taxpayers are given up to June 30, 1991 within which to pay the said tax without penalty. If the tax is paid after June 30, 1991, the corresponding penalties shall be assessed and computed from April 21, 1991. Since pawnshops are considered as lending investors effective January 1, 1991, they also become subject to documentary stamp taxes prescribed in title VII of the TaxCode. BIR Ruling No.325-88 dated July 13, 1988 is hereby revoked." However, at this point, this Court is not yet inclined to abandon its previous findings that pawnshops are not in the same class as lending investors and therefore, should not be held liable for the payment of the 5% lending investor's tax. In the case of Trustworthy Pawnshop, Inc. vs. Collector of Internal Revenue, CTA Case No. 5691, March 7, 2000 , and in other similar cases, this Court emphatically ruled, thus: "If we go by the contention that pawnshops are lending investors, then Congress would not have been mistaken in treating the two separately under paragraphs (dd) and (ff) of Section 161 of the TaxCode, as amended, supra . Logic simply dictates that if by prior definition under Section 157 (u) of said Code pawnshops and lending investors are of the same class, then there is no rational basis for differentiating them under one heading later, except for the fact that they are dissimilar as tax subjects. Further analyzing said Section 161, supra, it appears that lending investors were imposed a graduated type of fixed taxes depending on the class of the city or municipality involved while pawnshops were differently levied a flat amount of tax. This particular observation bolster Our position that pawnshops are not similarly situated as lending investors. Congress would not have intended otherwise, because the act of segregating and imposing upon them unequal amount of taxes would transgress the fundamental rule on taxation on uniformity or equality enshrined under par. 1, Section 28 of Article VI of our Co nstit ution. The rule requires that all subject or objects of taxation, similarly situated, are to be treated alike or put on equal footing both in privileges and liabilities ( Juan Luna Subdivision vs. Sarmiento, 91 Phil. 371) . It has also been interpreted to mean that all taxable articles or kinds of property of the same class shall be taxed at the same rate ( City of Baguio vs. de Leon, 25 SCRA 938) . Verily, Congress is presumed to have acted in full knowledge of this particular constitutional limitation when it classified pawnshops apart from lending investors." Anent Respondent's reliance on RMO No. 15-91 and Section 4.102-1 of Revenue Regulations No. 7-95, suffice it to state that the Court of Appeals had the occasion to rule on the validity of RMO No. 15-91 declaring it as unconstitutional, the power to tax being vested solely with Congress. Similarly, We cannot admit Respondent's inference that pawnshops are similar to those of lending investors pursuant to Revenue Regulations No. 7-95, thus: ". . . Revenue CircularNos.15-91 and43-91 are not implementing rules but are new and additional measures which only congress is empowered to impose. Section 245 of the TaxCode has limited or confined petitioner's power to issuing rules and regulations to implement or carry into effect the provision of the Code in the enforcement of taxes therein, and petitioner cannot impose additional taxes not provided therein. Under the Constitution, the power to tax is solely vested in Congress. In issuing subject Revenue Circulars imposing new taxes against pawnshops, petitioner arrogated unto himself legislative powers, with grave abuse of discretion and in excess of jurisdiction." (CIR vs. Hon. Andres Reyes, Jr., et al. CA-GR No. 28824, December 23, 1993). Proceeding now to the validity of the imposition of the documentary stamp tax the provision of Section 195 of the Tax Code is at point, thus: 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 , another by express stipulation or otherwise, there shall be collected a documentary stamp tax at the following rates: . . ." (Emphasis Ours). Analyzing carefully the aforecited provisions, 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. Corollarily, Section 3 of P.D. No. 114 (Pawnshop Regulation Act) defines a pawn ticket as the pawnbrokers "receipt" for a pawn. It is neither a security nor a printed evidence of indebtedness. Prescinding from this, inasmuch as the document taxable under Section 195 must be the document evidencing the indebtedness and considering that under the Pawnshop Regulation Act, a pawn ticket is not a printed evidence of indebtedness, accordingly, such pawn ticket cannot be considered as a document subject to documentary tax ( Commissioner of Internal Revenue vs. Hon. Andres B. Reyes, Jr. CA-G.R. SP No. 28824 promulgated on December 23, 1993). Having found that the onus had been discharged satisfactorily by the Petitioner, We therefore declare that the assessments are void for lack of legal basis. WHEREFORE, in view of all the foregoing, the instant Petition for Review is hereby GRANTED. Accordingly, Assessment Notices Nos. 81-VAT-13-97-99-12-118 and 81-DST-13-97-99-11-119 are hereby CANCELLED and SET ASIDE. SO ORDERED. (SGD.) AMANCIO Q. SAGA Associate Judge WE CONCUR: (SGD.) ERNESTO D. ACOSTA Presiding Judge Separate Opinions With due respect to the majority opinion, for reasons stated in the case of Commissionerof Internal Revenue vs.AgenciaExquisite of Bohol, Inc., CA -G.R. SP. No. 59282, March 23, 2001, I wish to cast a dissenting vote. In dissenting, I wish to emphasize the following: 1. Then Section 102(a) [now renumbered as Section 108(A)] of the TaxCode subjects to VAT the sale of all kinds of services in the Philippines for a fee, remuneration or consideration, including lending investors, services of banks, non-bank financial intermediaries and finance companies, and similar services. [Note: In the case of banks, non-bank financial intermediaries and finance companies, VAT imposition has been deferred to January 1, 2003 under Section 5 of RA8424, as amended by RA8761 and RA9010.] Section 102(a) provides in pertinent part: "SEC. 102. Value-added Tax on Sale of Services and Use or Lease of Properties . "(A) Rate and Base of Tax . There shall be levied, assessed and collected, a value-added tax equivalent to ten percent (10%) of gross receipts derived from the sale or exchange of services , including the use or lease of properties. "The phrase ' sale or exchange of services ' means the performance of all kinds of services in the Philippines for others for a fee, remuneration or consideration, including those performed or rendered by construction and service contractors: stock, real estate, commercial, customs and immigration brokers; lessors or 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, operators or keepers of hotels, motels, resthouses, pension house, inns, resorts; proprietors or operators of restaurants, refreshment parlors, cafes, and other eating places, including clubs and caterers; dealers in securities; lending investors; transportation contractors on their transport of goods or cargoes, including persons who transport goods or cargoes for hire and other domestic common carriers by land, air and water relative to their transport of goods or cargoes; services of franchise grantees except those under Section 119 of this Code: services of banks, non-life insurance companies (except their crop insurances), including surety, fidelity, indemnity and bonding companies; and similar services regardless of whether or not the performance thereof calls for the exercise or use of the physical or mental faculties . . . xxx xxx xxx The term 'g ross receipts ' means the total amount of money or its equivalent representing the contract price, compensation, service fee, rental or royalty, including the amount charged for materials supplied with the services and deposits and advanced payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person , excluding the value-added tax." [Emphasis ours] From the foregoing, the sale or exchange of services is subject to VAT. The phrase "sale or exchange of services" encompasses the performance of all kinds or services for a fee, remuneration or consideration. The enumeration of persons performing services for a fee, such as, construction and service contractors, stock, real estate, commercial, customs and immigration brokers, etc., is merely intended to give examples of businesses performing services for a fee that are subject to VAT. The enumeration is not exclusive, which means that other persons performing services for a fee, who are not expressly mentioned in the enumeration, are also subject to VAT. As held in Gomezvs.Ventura, (54 Phil. 726) : ". . . The maxim expressio unius est exclusio alterius should be applied only as a means of discovering legislative intent and should not be permitted to defeat the plain indicated purpose of the legislature. It does not apply when words are mentioned by way of example, or to remove doubts . (See Cyc., 1122) . . .." [Emphasis ours] Section 102(a) [now 108(A)] does not limit its application to those enumerated therein because the law speaks of "all kinds of services". To limit its application to the enumeration would contradict the very clear meaning of the phrase "all kinds of services". The phrase "including" should be construed merely as an enlargement and not of limitation. "The intention of an act will prevail over the literal sense of its terms. Thus, limited words in one part of an act may be expanded by general words in another part, if the general words more nearly express the legislative intent. A term whose statutory definition declares what it "includes" is more susceptible to extension of meaning by construction than where the definition declares what a term "means". Thus, it has been said that " the word 'includes' is usually a term of enlargement, and not of limitation . . . It, therefore, conveys the conclusion that there are other items includable, though not specifically enumerated . . ." Sutherland, Statutory Construction, 4th ed. Vol. 24, p. 82, Sec. 47.08, citing United States. Argosy Ltd. v. Hannigan, 404 F2d 14 (CA 5th, 1968); See United States v. Gertz, 249 F2d 662 (CA 9th, 1957); Federal Land Bank of St. Paul v. Bismarck Lumber Co., 314 US 95, 86 L Ed 65, 62 S Ct 1 (1941). [Emphasis ours] Hence, in the cases of Genato CommercialCorporation vs.The Court of Tax Appeals, 104 Phil. 615, and Philippine AmericanDrug Co. vs.Collector of Internal Revenue, 106 Phil. 163 , general words were harmonized with specific words found in the statute in question so as not to limit coverage of the taxing statute. In determining that the bank charge in question formed part of the charges enumerated in Art. 183-(B) of the then TaxCode, the Supreme Court in the Genato case (cited in the PhilippineAmericanDrug Co. case) held: As may be seen, an importer is required to pay in advance the necessary percentage tax on the articles imported "based on the import invoice value thereof, certified to as correct by the Philippine Consul at the port of origin if there is any, including freight, postage, insurance, commission, customs, duty, and all similar charges. " In other words, the law requires that it be included in the assessment not only the import invoice value of the merchandise, which includes freight, postage, insurance, commission and customs duty, but all other similar charges which would necessarily increase the landed cost of the merchandise imported, which, in our opinion, should include the difference of Php 0.015 paid by petitioner to a local bank in the purchase of foreign exchange to carry out the importation. Indeed, the intention of Congress in enacting the above-quoted provision is to include in the assessment all charges, whether specified or otherwise, which an importer has to pay to complete his importation. Invoking the rule of ejusdem generis which provides that "where, in a statute, general words follow a designation of a particular subjects or classes of persons, the meaning of the general words will ordinarily be presumed to be restricted by the particular designation, class or nature as those specifically enumerated," petitioner contends that the difference of Php 0.015 which it paid to a local bank in the purchase of foreign exchange to cover the importations in question cannot be included in the assessment for the purpose of determining the advance sales tax because they are not similar to the charges specifically enumerated in the law. With this we disagree, for it cannot be denied that the intention of the law is to include all charges, that may be paid by the importer to bring the importation into the country . In other words, all items of expense that may be incurred by the importer in bringing the importation into the country and which would necessarily increase the landed cost must be deemed included in the phrase "all similar charges" mentioned in the law. The doctrine of ejusdem generis is but a rule of construction adopted as an aid to ascertain and give effect to legislative intent when that intent is uncertain or ambiguous, but the same should not be given such wide application that would operate to defeat the purpose of the law. In other words, the doctrine is not of universal application. Its application must yield to the manifest intent of Congress (State vs. Prather, 21 L.R.A. 23,25). [Emphasis ours] In this particular case, the law is not only clear in its intent but also in its wording that "all kinds of services" should be subject to VAT. Hence, pawnshop services should a fortiori be subject to VAT. 2. Since pawnshops are engaged in the sale of services, they are subject to VAT under Section 102(a) [now 108(A)] of the TaxCode. Section 3 of the Presidential DecreeNo.114, otherwise known as the "PawnshopRegulationAct" defines a pawnshop thus: "Pawnshop shall refer to a person or entity engaged in the business of lending money on personal property delivered as security for loans and shall be synonymous, and may be used interchangeably with, pawnbroker or pawnbrokerage." Judicial notice may be taken of the fact that the principal activity of pawnshops is lending money at interest on the security of personal property. The act of lending money at interest constitutes the performance of a service for a fee, remuneration or consideration for such service. Hence, pawnshops are engaged in the sale of services that is subject to VAT under Section 102(a) [now 108(A)] of the TaxCode. 3. Moreover, the term "lending investor" as well as "similar services" in Section 102 (now 108) of the TaxCode sufficiently encompasses pawnshop activities. Section 116 of the then TaxCode (before amendment by Executive OrderNo.273) defined "lending investor" in this manner: "(u) Lending investors include all persons who make a practice of lending money for themselves or others at interest." The definition of the term "pawnshop" under Section 3 of P.D.No.114 is broad enough to fall within the coverage of "lending investors" and "similar services" even if one were to restrict the meaning of "all kinds of services" under Section 102(a) [now 108(A)] of the TaxCode. After all, the principal business activity of pawnshops is actually lending money at interest. 4. As previously cited, then Section 102(a) [now Section 108(A)] of the TaxCode provides: "The term ' gross receipts' means the total amount of money or its equivalent representing the contract price, compensation, service fee , rental or royalty, including the amount charged for materials supplied with the services and deposits and advanced payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person, excluding the value-added tax." All interest income, liquidated damages and gain from auction sale of pawned items actually or constructively received by petitioner, having been derived as an intrinsic part of the pawnshop business, form part of the gross receipts of pawnshops subject to VAT. 5. Section 103 (now 109) of the TaxCode, as amended by RA7716, enumerates the transactions that are exempt from VAT. Pawnshop transactions are not among the exempt transactions. Neither are there any express provisions of law exempting pawnshops from VAT. Since the transactions of pawnshops are not among those enumerated in Section 103 [now 109] of the TaxCode or any other express provision of law as VAT exempt, the same are subject to VAT under Section 102(a) [now 108(A)]. In this regard, tax exemptions are strictly construed against the taxpayer. In the absence of any clear provision of law exempting pawnshops from VAT, our conclusion is that pawnshops are subject to VAT on their gross receipts since they are clearly engaged in the performance of services. 6. Section 195 of the TaxCode provides in pertinent part: SEC. 195. Stamp Tax on Mortgages, Pledges and Deeds or 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), and additional tax of Ten pesos (P10.00). "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 is specified in such mortgage, pledge or deed or trust, the documentary stamp tax prescribed in this Section shall be paid and computed on the full amount of the loan or credit granted." [Emphasis ours] Pawnshops lend money on the security of personal property, that is, a pledge. The pledge is evidenced by a pawn ticket. Hence, the pawn ticket is the logical document subject to documentary stamp tax on pledges under Section 195 of the TaxCode (Revenue Memorandum CircularNo.43-91, May 27, 1991). In this regard, it should be noted that the pawner presents the pawn ticket to redeem the pawned or pledged item. The pawn ticket is thus document evidencing the pledge. Section 173 of the TaxCode provides: 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 transactions so had or accomplished , the corresponding documentary stamp taxes prescribed in the following Sections of this Title, by the person making, signing, issuing, accepting or transferring the same wherever the document is made, signed, issued, accepted or transferred when the obligation or right arises from Philippine sources or the property is situated in the Philippines, and at the same time such act is done or transaction had: Provided, That whenever one party to the taxable document enjoys exemption from the tax herein imposed, the other party thereto who is not exempt shall be the one directly liable for the tax. [Emphasis ours] In Cruzvs.Chua, G.R. No. 31018, November 6, 1929, 54 Phil 10, our Supreme Court refers to the pawn ticket as a contract of pledge as follows: In applying this provision to the situation before us it must be borne in mind that the ordinary pawn ticket is a document by virtue of which the property in the thing pledged passes from hand to hand by mere delivery of the ticket; and the contract of pledge is, therefore, absolvable to bearer. It results that one who takes a pawn ticket in pledge acquires domination over the pledge ; and it is the holder who must renew the pledge if it is to be kept alive. [Emphasis ours] As the person accepting the pawn ticket, which is the evidence of the pledge, the pawnshop is liable for documentary stamp tax thereon. In view of the foregoing, I respectfully register my dissent. (SGD.) JUANITO C. CASTAEDA, JR. Associate Judge