Case # 3 Khatriinah B.

Abella

H. Tambunting Pawnshop, Inc vs. CIR

GR No. 172394 October 13, 2010

Facts:

Petitioner, H.Tambunting Pawnshop, Inc. (petitioner), a domestic corporation duly

licensed to engage in the pawnshop business received an assessment notice from BIR
demanding payment of deficiency VAT and compromise penalty for taxable year 2000 in
the amounts of PHP 5, 212, 404.52 and PHP 25, 000.00, respectively. Petitioner disclaiming
its liability protested the assessment with the respondent CIR, arguing that a pawnshop
business was not subject to VAT and compromise penalty.

Due to the inaction of CIR to the protest, petitioner elevated the case with the
CTA – the petition was partially granted by the deletion of the compromise penalty but
petitioner was ordered to pay the taxes due plus surcharge and delinquency interest.

Aggrieved by the decision of the CTA, petitioner filed a motion for partial
reconsideration with the CTA Second Division, submitted a written manifestation
attaching a copy of BIR tax payment deposit slip and the corresponding schedule
evidencing its payment for the years from 2000 to 2002 pursuant to a settlement
agreement with BIR allowing petitioner to pay 25% of its VAT due – but the same was
denied.

An appeal to the CTA en Banc was filed thereafter but still, the same was denied.
Hence, this petition.

Issue:

Whether or not a pawnshop operator is liable for VAT and the compromise penalty.

Ruling:

The court ruled petitioner’s main argument that pawnshops are not within the
concept of all services and similar services as provided in Section 108(A) of the NIRC and
that the enumeration under Section 108(A) of the NIRC of services subject to VAT is
exclusive has merit.

Moreover, it is settled that for purposes of determining their tax liability,

pawnshops are treated as non-bank financial intermediaries.

Accordingly, the consecutive deferments of the effectivity date of the application

of VAT on non-bank financial intermediaries like pawnshops resulted in their non-liability
for VAT during the affected taxable years. Thus, the VAT deficiency assessment and the
surcharge served on the petitioner by BIR lacked legal basis and must be canceled and
petitioner is entitled to refund of any amount paid pursuant to the settlement agreement
corresponding to taxable year 2000 only.