G.R. Nos.

172045-46

June 16, 2009

delin@uen!* interest #er a!!u' from +e.ruar* 1", "%%" until full* paid pursuant to -e!tions "#0 and "#4 of the 1445 Tax Code. SO OR'ERE'.15 ((oldfa!in1 in the ori1inal) (oth parties filed their $otions for Re!onsideration whi!h were denied .* the CTA +irst ivision for la!9 of merit. Thereafter, .oth parties filed their respe!tive Petitions for Review under -e!tion 11 of Repu.li! A!t )o. 4"0" (RA 4"0") with the CTA 'n (an!.10 /n "# $ar!h "%%&, the CTA 'n (an! promul1ated a e!ision affirmin1 respondents lia.ilit* to pa* the 8AT and orderin1 it to pa* -T on its pawnshop ti!9ets. >owever, the CTA 'n (an! found that respondents deposit on su.s!ription was not su.;e!t to -T. 14 A11rieved .* the CTA 'n (an!s e!ision whi!h ruled that respondents deposit on su.s!ription was not su.;e!t to -T, petitioner elevated the !ase .efore this Court. T(e Ru,-n. o/ +(e Cou0+ o/ T)1 A22e),s /n the taxa.ilit* of deposit on su.s!ription, the CTA, !itin1 +irst Sout"er! P"ili##i!es E!ter#rises, &!c. v. Co''issio!er o, &!ter!al Reve!ue ,"% pointed out that deposit on su.s!ription is not su.;e!t to -T in the a.sen!e of proof that an e@uivalent amount of shares was su.s!ri.ed or issued in !onsideration for the deposit. 'xpressed otherwise, deposit on sto!9 su.s!ription is not su.;e!t to -T if2 (1) there is no a1reement to su.s!ri.e7 (") there are no shares issued or an* additional su.s!ription in the restru!turin1 plan7 and (,) there is no proof that the issued shares !an .e !onsidered as issued !ertifi!ates of sto!9."1 The CTA ruled that -e!tion 156"" of the Tax Code !ontemplates a su.s!ription a1reement. The CTA explained that there !an .e su.s!ription onl* with referen!e to shares of sto!9 whi!h have .een unissued, in the followin1 !ases2 (a) the ori1inal issuan!e from authoriAed !apital sto!9 at the time of in!orporation7 (.) the openin1, durin1 the life of the !orporation, of the portion of the ori1inal authoriAed !apital sto!9 previousl* unissued7 or (!) the in!rease of authoriAed !apital sto!9 a!hieved throu1h a formal amendment of the arti!les of in!orporation and re1istration of the arti!les of in!orporation with the -e!urities and 'x!han1e Commission. ", The CTA held that in this !ase, there was no su.s!ription or an* !ontra!t for the a!@uisition of unissued sto!9 forP0%%,%%% in the taxa.le *ear assessed. The Beneral Information -heet (BI-) of respondent showed onl* a !apital stru!ture of P6%%,%%% as -u.s!ri.ed Capital -to!9 and P"6%,%%% as Paid3up Capital -to!9 and did not in!lude the assessed amount. $ere relian!e on the presumption that the assessment was !orre!t and done in 1ood faith was unavailin1 vis3C3vis the eviden!e presented .* respondent. Thus, the CTA ruled that the assessment for defi!ien!* -T on deposit on su.s!ription has not .e!ome final."# T(e Issue Petitioner su.mits this sole issue for our !onsideration2 whether the CTA erred on a @uestion of law in disre1ardin1 the rule on finalit* of assessments pres!ri.ed under -e!tion ""0 of the Tax Code. Corollaril*, petitioner raises the issue on whether respondent is lia.le to pa* P1",,"0.#6 as -T on deposit on su.s!ription of !apital sto!9. T(e Ru,-n. o/ +(e Cou0+ Petitioner !ontends that the CTA erred in disre1ardin1 the rule on the finalit* of assessments pres!ri.ed under -e!tion ""0 of the Tax Code."6 Petitioner asserts that even if respondent filed a protest, it did not offer eviden!e to prove its !laim that the deposit on su.s!ription was an Dadvan!eD made .* respondents sto!9holders. "&Petitioner alle1es that respondents failure to su.mit supportin1 do!uments within &% da*s from the filin1 of its protest as re@uired under -e!tion ""0 of the Tax Code !aused the assessment of P1",,"0.#6 for deposit on su.s!ription to .e!ome final and unassaila.le."5 Petitioner alle1es that revenue offi!ers are afforded the presumption of re1ularit* in the performan!e of their offi!ial fun!tions, sin!e the* have the distin!t opportunit*, aside from !ompeten!e, to peruse re!ords of the assessments. Petitioner invo9es the prin!iple that .* reason of the expertise of administrative a1en!ies over matters fallin1 under their ;urisdi!tion, the* are in a .etter position to pass ;ud1ment thereon7 thus, their findin1s of fa!t are 1enerall* a!!orded 1reat respe!t, if not finalit*, .* the !ourts. >en!e, without the supportin1 do!uments to esta.lish the non3 in!lusion from -T of the deposit on su.s!ription, petitioners assessment pursuant to -e!tion ""0 of the Tax Code had .e!ome final and unassaila.le."0 Respondent, !itin1 Sta!-ar- C"artere- (a!./P"ili##i!e (ra!c"es v. Co''issio!er o, &!ter!al Reve!ue ,"4 asserts that the su.mission of all the relevant supportin1 do!uments within the &%3da* period from filin1 of the protest is dire!tor*.

COMMISSIONER OF INTERNAL RE EN!E, Petitioner, vs. FIRST E"#RESS #A$NS%O# COM#AN&, INC., Respondent. 'ECISION CAR#IO, J.: T(e C)se The Commissioner of Internal Revenue (petitioner) filed this Petition for Review1 to reverse the Court of Tax Appeals e!ision " dated "# $ar!h "%%& in the !onsolidated !ases of C.T.A. '( )os. &% and &". In the assailed de!ision, the Court of Tax Appeals (CTA) 'n (an! partiall* re!onsidered the CTA +irst ivisions e!ision , dated "# -eptem.er "%%#. T(e F)*+s /n "0 e!em.er "%%1, petitioner, throu1h A!tin1 Re1ional ire!tor Ruperto P. -omera of Revenue Re1ion & $anila, issued the followin1 assessment noti!es a1ainst +irst 'xpress Pawnshop Compan*, In!. (respondent)2 a. Assessment )o. ,131340# for defi!ien!* in!ome of P"%,51".60 with !ompromise penalt* of P,,%%%7 tax

.. Assessment )o. ,131#3%%%%6,3406 for defi!ien!* value3added tax (8AT) of P&%1,""%.10 with !ompromise penalt* of P1&,%%%7 !. Assessment )o. ,131#3%%%%6,340 & for defi!ien!* do!umentar* stamp tax ( -T) of P1",,"0.#6 on deposit on su.s!ription with !ompromise penalt* of P",%%%7 and d. Assessment )o. ,1313%%%%6,3405 for defi!ien!* -T of P&",1"0.05 on pawn ti!9ets with !ompromise penalt* of P0,6%%. Respondent re!eived the assessment noti!es on , :anuar* "%%". /n 1 +e.ruar* "%%", respondent filed its written protest on the a.ove assessments. -in!e petitioner did not a!t on the protest durin1 the 10%3da* period,0respondent filed a petition .efore the CTA on "0 Au1ust "%%". 4 Respondent !ontended that petitioner did not !onsider the supportin1 do!uments on the interest expenses and donations whi!h resulted in the defi!ien!* in!ome tax.1% Respondent maintained that pawnshops are not lendin1 investors whose servi!es are su.;e!t to 8AT, hen!e it was not lia.le for defi!ien!* 8AT.11 Respondent also alle1ed that no defi!ien!* -T was due .e!ause -e!tion 10% 1" of the )ational Internal Revenue Code (Tax Code) does not !over an* do!ument or transa!tion whi!h relates to respondent. Respondent also ar1ued that the issuan!e of a pawn ti!9et did not !onstitute a pled1e under -e!tion 1461, of the Tax Code.1# In its Answer filed .efore the CTA, petitioner alle1ed that the assessment was valid and !orre!t and the taxpa*er had the .urden of proof to impu1n its validit* or !orre!tness. Petitioner maintained that respondent is su.;e!t to 1%< 8AT .ased on its 1ross re!eipts pursuant to Repu.li! A!t )o. 551&, or the 'xpanded 8alue3Added Tax =aw ('8AT). Petitioner also !ited (IR Rulin1 )o. ""1341 whi!h provides that pawnshop ti!9ets are su.;e!t to -T. 16 /n 1 :ul* "%%,, respondent paid P"5,5##.00 as defi!ien!* in!ome tax in!lusive of interest.1& After trial on the merits, the CTA +irst ivision ruled, thus2

IN IE$ OF ALL T%E FOREGOING , the instant petition is here.* #ARTIALL& GRANTE'. Assessment )o. ,1313%%%%6,340 for defi!ien!* do!umentar* stamp tax in the amount of -ixt*3Two Thousand /ne >undred Twent*3'i1ht Pesos and 05?1%% (P&",1"0.05) and Assessment )o. ,131#3%%%%6,340 for defi!ien!* do!umentar* stamp tax on deposits on su.s!ription in the amount of Twelve Thousand Three >undred Twent*3'i1ht Pesos and #6?1%% (P1",,"0.#6) are CANCELLE' and SET ASI'E. >owever, Assessment )o. ,131#3%%%%6,340 is here.*AFFIRME' ex!ept the imposition of !ompromise penalt* in the a.sen!e of showin1 that petitioner !onsented thereto (UST vs. Collector, 104 SCRA 1062; Exquisite Pa !s"o# $e elr%, &!c. vs. $ai'e (. Sa!tia)o, et al., su#ra*. A!!ordin1l* petitioner is OR'ERE' +o #A& the defi!ien!* value added tax in the amount of -ix >undred /ne Thousand Two >undred Twent* Pesos and 10?1%% (P&%1,""%.10) in!lusive of defi!ien!* interest for the *ear 1440. In addition, petitioner is OR'ERE' +o #A& "6< sur!har1e and "%<

Respondent !laims that petitioner re@uested for additional do!uments in petitioners letter dated 1" $ar!h "%%", to wit2 (1) loan a1reement from lender .an9s7 (") offi!ial re!eipts of interest pa*ments issued to respondent7 (,) do!umentar* eviden!e to su.stantiate donations !laimed7 and (#) proof of pa*ment of -T on su.s!ription. ,% It must .e noted that the onl* do!ument re@uested in !onne!tion with respondents -T assessment on deposit on su.s!ription is proof of -T pa*ment. >owever, respondent !ould not produ!e an* proof of -T pa*ment .e!ause it was not re@uired to pa* the same under the law !onsiderin1 that the deposit on su.s!ription was an advan!e made .* its sto!9holders for future su.s!ription, and no sto!9 !ertifi!ates were issued.,1 Respondent insists that petitioner !ould have issued a su.poena re@uirin1 respondent to su.mit other do!uments to determine if the latter is lia.le for -T on deposit on su.s!ription pursuant to -e!tion 6(!) of the Tax Code.," Respondent ar1ues that deposit on future su.s!ription is not su.;e!t to under -e!tion 156 of the Tax Code. Respondent explains2 -T

Co!soli-ate- Coco!ut &!-., &!c. v. Collector o, &!ter!al Reve!ue ,#1 the Court held2 The do!umentar* stamp tax under this provision of the law ma* .e levied onl* on!e, that is upon the ori1inal issue of the !ertifi!ate. The !ru!ial point therefore, in the !ase .efore Es is the proper interpretation of the word Fissue. In other words, when is the !ertifi!ate of sto!9 deemed Fissued for the purpose of imposin1 the do!umentar* stamp taxG Is it at the time the !ertifi!ates of sto!9 are printed, at the time the* are filled up (in whose name the sto!9s represented in the !ertifi!ate appear as !ertified .* the proper offi!ials of the !orporation), at the time the* are released .* the !orporation, or at the time the* are in the possession (a!tual or !onstru!tive) of the sto!9holders ownin1 themG xxx /rdinaril*, when a !orporation issues a !ertifi!ate of sto!9 (representin1 the ownership of sto!9s in the !orporation to full* paid su.s!ription) the !ertifi!ate of sto!9 !an .e utiliAed for the exer!ise of the attri.utes of ownership over the sto!9s mentioned on its fa!e. The sto!9s !an .e alienated7 the dividends or fruits derived therefrom !an .e en;o*ed, and the* !an .e !onve*ed, pled1ed or en!um.ered. The !ertifi!ate as issued .* the !orporation, irrespe!tive of whether or not it is in the a!tual or !onstru!tive possession of the sto!9holder, is !onsidered issued .e!ause it is with value and hen!e the do!umentar* stamp tax must .e paid as imposed .* -e!tion "1" of the )ational Internal Revenue Code, as amended. In -e!tion 15& of the Tax Code, -T is imposed on the sales, a1reements to sell, memoranda of sales, deliveries or transfer of shares or !ertifi!ates of sto!9 in an* asso!iation, !ompan*, or !orporation, or transfer of su!h se!urities .* assi1nment in .lan9, or .* deliver*, or .* an* paper or a1reement, or memorandum or other eviden!es of transfer or sale whether entitlin1 the holder in an* manner to the .enefit of su!h !ertifi!ates of sto!9, or to se!ure the future pa*ment of mone*, or for the future transfer of !ertifi!ates of sto!9. In Co'#a)!ie +i!a!ciere Sucres et 2e!rees v. Co''issio!er o, &!ter!al Reve!ue , this Court held that under -e!tion 15& of the Tax Code, sales to se!ure the future transfer of due3.ills, !ertifi!ates of o.li1ation or !ertifi!ates of sto!9 are su.;e!t to do!umentar* stamp tax. #" Revenue $emorandum /rder )o. %0340 (R$/ %0340) provides the 1uidelines on the !orporate sto!9 do!umentar* stamp tax pro1ram. R$/ %0340 states that2 1. All existin1 !orporations shall file the Corporation -to!9 -T e!laration, and the -T Return, if appli!a.le 3(en 'ST -s s+-,, 4ue on +(e su5s*0-5e4 s()0e -ssue4 56 +(e *o02o0)+-on , on or .efore the tenth da* of the month followin1 pu.li!ation of this /rder. xxx ,. All existin1 !orporations with authoriAation for in!reased !apital sto!9 shall file their Corporate -to!9 -T e!laration, to1ether with the -T Return, if appli!a.le 3(en 'ST -s 4ue on su5s*0-2+-ons 7)4e )/+e0 +(e )u+(o0-8)+-on, on or .efore the tenth da* of the month followin1 the date of authoriAation. ((oldfa!in1 supplied) R$/ %0340, reiteratin1 Revenue $emorandum Cir!ular )o. #5345 (R$C #5345), also states that what is .ein1 taxed is the privile1e of issuin1 shares of sto!9, and, therefore, the taxes a!!rue at the time the shares are issued. R$C #5345 also defines issuan!e as the point in whi!h the sto!9holder a!@uires and ma* exer!ise attri.utes of ownership over the sto!9s. As pointed out .* the CTA, -e!tions 156 and 15& of the Tax Code !ontemplate a su.s!ription a1reement in order for a taxpa*er to .e lia.le to pa* the -T. A su.s!ription !ontra!t is defined as an* !ontra!t for the a!@uisition of unissued sto!9s in an existin1 !orporation or a !orporation still to .e formed.#, A sto!9 su.s!ription is a !ontra!t .* whi!h the su.s!ri.er a1rees to ta9e a !ertain num.er of shares of the !apital sto!9 of a !orporation, pa*in1 for the same or expressl* or impliedl* promisin1 to pa* for the same.## In this !ase, respondents -to!9holders '@uit* se!tion of its (alan!e -heet as of ,1 e!em.er 1440#6 shows2 -to!9holders '@uit* AuthoriAed Capital -to!9 1440 P ",%%%,%%%.%% "6%,%%%.%% 0%%,%%%.%% &",0"%.,# (060,#40.,0)

It must .e noted that deposits on su.s!ription represent advan!es made .* the sto!9holders and are in the nature of lia.ilities for whi!h sto!9s ma* .e issued in the future. A.sent an* express a1reement .etween the sto!9holders and petitioner to !onvert said advan!es?deposits to !apital sto!9, either throu1h a su.s!ription a1reement or an* other do!ument, these deposits remain as lia.ilities owed .* respondent to its sto!9holders. +or these deposits to .e su.;e!t to -T, it is ne!essar* that a !onversion?su.s!ription a1reement .e made .* +irst 'xpress and its sto!9holders. A.sent su!h !onversion, no -T !an .e imposed on said deposits under -e!tion 156 of the Tax Code.,, (Enders!orin1 in the ori1inal) Respondent !ontends that .* presentin1 its BI- and finan!ial statements, it had alread* suffi!ientl* proved that the amount sou1ht to .e taxed is deposit on future su.s!ription, whi!h is not su.;e!t to -T. ,# Respondent !laims that it !annot .e re@uired to su.mit proof of -T pa*ment on su.s!ription .e!ause su!h pa*ment is non3existent. Thus, the .urden of provin1 that there was an a1reement to su.s!ri.e and that !ertifi!ates of sto!9 were issued for the deposit on su.s!ription rests on petitioner and his examiners. Respondent states that a.sent an* proof, the defi!ien!* assessment has no .asis and should .e !an!elled. ,6 On the Taxability of Deposit on Stock Subscription -T is a tax on do!uments, instruments, loan a1reements, and papers eviden!in1 the a!!eptan!e, assi1nment, sale or transfer of an o.li1ation, ri1ht or propert* in!ident thereto. -T is a!tuall* an ex!ise tax .e!ause it is imposed on the transa!tion rather than on the do!ument. ,& -T is also levied on the exer!ise .* persons of !ertain privile1es !onferred .* law for the !reation, revision, or termination of spe!ifi! le1al relationships throu1h the exe!ution of spe!ifi! instruments. ,5 The Tax Code provisions on -T relatin1 to shares or !ertifi!ates of sto!9 state2 -e!tion 156. Sta'# Tax o! 0ri)i!al &ssue o, S"ares o, Stoc. . 3 /n ever* ori1inal issue, whether on or1aniAation, reor1aniAation or for an* lawful purpose, of shares of sto!9 .* an* asso!iation, !ompan* or !orporation, there shall .e !olle!ted a do!umentar* stamp tax of Two pesos (P".%%) on ea!h Two hundred pesos (P"%%), or fra!tional part thereof, of the par value, of su!h shares of sto!92 Provi-e-, That in the !ase of the ori1inal issue of shares of sto!9 without par value the amount of the do!umentar* stamp tax herein pres!ri.ed shall .e .ased upon the a!tual !onsideration for the issuan!e of su!h shares of sto!92 Provi-e-, ,urt"er, That in the !ase of sto!9 dividends, on the a!tual value represented .* ea!h share. ,0 -e!tion 15&. Sta'# Tax o! Sales, A)ree'e!ts to Sell, 1e'ora!-a o, Sales, 2eliveries or Tra!s,er o, 2ue/3ills, Certi,icates o, 03li)atio!, or S"ares or Certi,icates o, Stoc.. 3 /n all sales, or a1reements to sell, or memoranda of sales, or deliveries, or transfer of due3.ills, !ertifi!ates of o.li1ation, or shares or !ertifi!ates of sto!9 in an* asso!iation, !ompan* or !orporation, or transfer of su!h se!urities .* assi1nment in .lan9, or .* deliver*, or .* an* paper or a1reement, or memorandum or other eviden!es of transfer or sale whether entitlin1 the holder in an* manner to the .enefit of su!h due3.ills, !ertifi!ates of o.li1ation or sto!9, or to se!ure the future pa*ment of mone*, or for the future transfer of an* due3.ill, !ertifi!ate of o.li1ation or sto!9, there shall .e !olle!ted a do!umentar* stamp tax of /ne peso and fift* !entavos (P1.6%) on ea!h Two hundred pesos (P"%%), or fra!tional part thereof, of the par value of su!h due3.ill, !ertifi!ate of o.li1ation or sto!92 Provi-e-, That onl* one tax shall .e !olle!ted on ea!h sale or transfer of sto!9 or se!urities from one person to another, re1ardless of whether or not a !ertifi!ate of sto!9 or o.li1ation is issued, indorsed, or delivered in pursuan!e of su!h sale or transfer2 And #rovi-e-, ,urt"er, That in the !ase of sto!9 without par value the amount of the do!umentar* stamp tax herein pres!ri.ed shall .e e@uivalent to twent*3five per!ent ("6<) of the do!umentar* stamp tax paid upon the ori1inal issue of said sto!9.,4 In -e!tion 156 of the Tax Code, -T is imposed on the ori1inal issue of shares of sto!9. The -T, as an ex!ise tax, is levied upon the privile1e, the opportunit* and the fa!ilit* of issuin1 shares of sto!9. In Co''issio!er o, &!ter!al Reve!ue v. Co!structio! Resources o, Asia, &!c. ,#% this Court explained that the -T atta!hes upon a!!eptan!e of the sto!9holders su.s!ription in the !orporations !apital sto!9 re1ardless of a!tual or !onstru!tive deliver* of the !ertifi!ates of sto!9. Citin1 P"ili##i!e

144

P"

Paid3up Capital -to!9 eposit on -u.s!ription Retained 'arnin1s )et In!ome

"6%

"%4

(1#

Total

P "6#,,"1.4&

Att*. )apiAa I. Are (si!) all those fi1ures appear in the .alan!e sheetG $r. Rosario :r. A. The Paid Ep Capital appeared here .ut the -u.s!ri.ed Portion was not stated. ((oldfa!in1 supplied) (ased on Rosarios testimon* and respondents finan!ial statements as of 1440, there was no a1reement to su.s!ri.e to the unissued shares. >ere, the deposit on sto!9 su.s!ription refers to an amount of mone* re!eived .* the !orporation as a deposit with the possi.ilit* of appl*in1 the same as pa*ment for the future issuan!e of !apital sto!9. #5 In Co''issio!er o, &!ter!al Reve!ue v. Co!structio! Resources o, Asia, &!c. ,#0 we held2 Je are firml* !onvin!ed that the Bovernment stands to lose nothin1 in imposin1 the do!umentar* stamp tax onl* on those sto!9 !ertifi!ates dul* issued, or wherein the sto!9holders !an freel* exer!ise the attri.utes of ownership and with value at the time the* are ori1inall* issued. As 0e.)04s +(ose *e0+-/-*)+es o/ s+o*;s +e72o0)0-,6 su5?e*+ +o sus2ens-:e *on4-+-ons +(e6 s(),, 5e ,-)5,e /o0 s)-4 +)1 on,6 3(en 0e,e)se4 /0o7 s)-4 *on4-+-ons, /o0 +(en )n4 on,6 +(en s(),, +(e6 +0u,6 )*@u-0e )n6 20)*+-*), :),ue /o0 +(e-0 o3ne0s.lavvphil((oldfa!in1 supplied) Clearl*, the deposit on sto!9 su.s!ription as refle!ted in respondents (alan!e -heet as of 1440 is not a su.s!ription a1reement su.;e!t to the pa*ment of -T. There is no P0%%,%%% worth of su.s!ri.ed !apital sto!9 that is refle!ted in respondents BI-. The deposit on sto!9 su.s!ription is merel* an amount of mone* re!eived .* a !orporation with a view of appl*in1 the same as pa*ment for additional issuan!e of shares in the future, an event whi!h ma* or ma* not happen. The person ma9in1 a deposit on sto!9 su.s!ription does not have the standin1 of a sto!9holder and he is not entitled to dividends, votin1 ri1hts or other prero1atives and attri.utes of a sto!9holder. >en!e, respondent is not lia.le for the pa*ment of -T on its deposit on su.s!ription for the reason that there is *et no su.s!ription that !reates ri1hts and o.li1ations .etween the su.s!ri.er and the !orporation. On the Finality of Assessment un er Section !!" of the Tax #o e -e!tion ""0 of the Tax Code provides2 -'C. ""0. #0o+es+-n. o/ Assess7en+. 3 Jhen the Commissioner or his dul* authoriAed representative finds that proper taxes should .e assessed, he shall first notif* the taxpa*er of his findin1s2 Provi-e-, "o ever, That a preassessment noti!e shall not .e re@uired in the followin1 !ases2 (a) Jhen the findin1 for an* defi!ien!* tax is the result of mathemati!al error in the !omputation of the tax as appearin1 on the fa!e of the return7 or (.) Jhen a dis!repan!* has .een determined .etween the tax withheld and the amount a!tuall* remitted .* the withholdin1 a1ent7 or (!) Jhen a taxpa*er who opted to !laim a refund or tax !redit of ex!ess !redita.le withholdin1 tax for a taxa.le period was determined to have !arried over and automati!all* applied the same amount !laimed a1ainst the estimated tax lia.ilities for the taxa.le @uarter or @uarters of the su!!eedin1 taxa.le *ear7 or (d) Jhen the ex!ise tax due on ex!isa.le arti!les has not .een paid7 or (e) Jhen an arti!le lo!all* pur!hased or imported .* an exempt person, su!h as, .ut not limited to, vehi!les, !apital e@uipment, ma!hineries and spare parts, has .een sold, traded or transferred to non3exempt persons. The taxpa*er shall .e informed in writin1 of the law and the fa!ts on whi!h the assessment is made7 otherwise, the assessment shall .e void. Jithin a period to .e pres!ri.ed .* implementin1 rules and re1ulations, the taxpa*er shall .e re@uired to respond to said noti!e. If the taxpa*er fails to respond, the Commissioner or his dul* authoriAed representative shall issue an assessment .ased on his findin1s. -u!h assessment ma* .e protested administrativel* .* filin1 a re@uest for re!onsideration or reinvesti1ation within thirt* (,%) da*s from re!eipt of the assessment in su!h form and manner as ma* .e pres!ri.ed .* implementin1 rules and re1ulations. $-+(-n s-1+6 <60= 4)6s /0o7 /-,-n. o/ +(e 20o+es+, ),, 0e,e:)n+ su22o0+-n. 4o*u7en+s s(),, ():e 5een su57-++e4A o+(e03-se, +(e )ssess7en+ s(),, 5e*o7e /-n),. as Prescribe

The BI- su.mitted to the -e!urities and 'x!han1e Commission on ,1 $ar!h 1444 shows the followin1 Capital -tru!ture2 #& (. +inan!ial Profile 1. Capital -tru!ture 2 AET>/RIH' -E(-CRI(' PAI 3EP 3 3 3 P",%%%,%%%.%% 6%%,%%%.%% "6%,%%%.%%

These entries were explained .* $i1uel Rosario, :r. (Rosario), respondents external auditor, durin1 the hearin1 .efore the CTA on 11 :une "%%,. Rosario testified in this wise2 Att*. )apiAa I. $r. Rosario, I refer *ou to the .alan!e sheet of +irst 'xpress for the *ear 1440 parti!ularl* the entr* of deposit on su.s!ription in the amount of P0%% thousand, will *ou please tell us what is (si!) this entr* representsG $r. Rosario :r. A. T(-s )7oun+ o/ #900 +(ous)n4 0e20esen+s +(e *)se .-:en 56 +(e s+o*;(o,4e0s +o +(e *o72)n6 5u+ 4oes no+ ne*ess)0-,6 7)4e <s-*= 2)67en+ +o su5s*0-5e4 2o0+-on. Att*. )apiAa I. $()+ -s <s-*= +()+ 2)67en+ s+)n4s /o0> $r. Rosario :r. A. T(-s 2)67en+ s+)n4s )s <s-*= /o0 +(e 4e2os-+ /o0 /u+u0e su5s*0-2+-on. Att*. )apiAa I. Jould *ou 9now if +irst 'xpress issued !orrespondin1 shares pertinent to the amount .ein1 depositedG $r. Rosario :r. A. )o. Att*. )apiAa I. Jhat do *ou mean .* noG $r. Rosario :r. A. T(e6 4-4 no+ -ssue )n6 s()0es 5e*)use +()+ -s no+ +(e 2)67en+ o/ su5s*0-2+-on. T()+ -s ?us+ ) 7e0e 4e2os-+. Att*. )apiAa I. Jould *ou 9now, $r. Rosario, how mu!h is the -u.s!ri.ed Capital of +irst 'xpress PawnshopG $r. Rosario :r. A. The -u.s!ri.ed Capital of +irst 'xpress Pawnshop Compan*, In!. for the *ear 1440 is P6%% thousand. Att*. )apiAa I. >ow a.out the Paid Ep CapitalG $r. Rosario :r. A. The Paid Ep Capital is P"6% thousand. id the* or the* did notG

If the protest is denied in whole or in part, or is not a!ted upon within one hundred ei1ht* (10%) da*s from su.mission of do!uments, the taxpa*er adversel* affe!ted .* the de!ision or ina!tion ma* appeal to the Court of Tax Appeals within thirt* (,%) da*s from re!eipt of the said de!ision, or from the lapse of the one hundred ei1ht* (10%)3da* period7 otherwise, the de!ision shall .e!ome final, exe!utor* and demanda.le. ((oldfa!in1 supplied) -e!tion ""0 of the Tax Code #4 provides the remed* to dispute a tax assessment within a !ertain period of time. It states that an assessment ma* .e protested .* filin1 a re@uest for re!onsideration or reinvesti1ation within ,% da*s from re!eipt of the assessment .* the taxpa*er. Jithin &% da*s from filin1 of the protest, all relevant supportin1 do!uments shall have .een su.mitted7 otherwise, the assessment shall .e!ome final. In this !ase, respondent re!eived the tax assessment on , :anuar* "%%" and it had until " +e.ruar* "%%" to su.mit its protest. /n 1 +e.ruar* "%%", respondent su.mitted its protest and atta!hed the BI- and (alan!e -heet as of ,1 e!em.er 1440. Respondent explained that it re!eived P0%%,%%% as a deposit with the possi.ilit* of appl*in1 the same as pa*ment for the future issuan!e of !apital sto!9. Jithin &% da*s from the filin1 of protest or until " April "%%", respondent should su.mit relevant supportin1 do!uments. Respondent, ():-n. su57-++e4 +(e su22o0+-n. 4o*u7en+s +o.e+(e0 3-+( -+s 20o+es+ , did not present additional do!uments an*more. In a letter dated 1" $ar!h "%%", petitioner re@uested respondent to present proof of pa*ment of -T on su.s!ription. In a letter3repl*, respondent stated that it !ould not produ!e an* proof of -T pa*ment .e!ause it was not re@uired to pa* -T under the law !onsiderin1 that the deposit on su.s!ription was an advan!e made .* its sto!9holders for future su.s!ription, and no sto!9 !ertifi!ates were issued. -in!e respondent has not alle1edl* su.mitted an* relevant supportin1 do!uments, petitioner now !laims that the assessment has .e!ome final, exe!utor* and demanda.le, hen!e, unappeala.le. Je re;e!t petitioners view that the assessment has .e!ome final and unappeala.le. It !annot .e said that respondent failed to su.mit relevant supportin1 do!uments that would render the assessment final .e!ause when respondent su.mitted its protest, respondent atta!hed the BI- and (alan!e -heet. +urther, petitioner !annot insist on the su.mission of proof of -T pa*ment .e!ause su!h do!ument does not exist as respondent !laims that it is not lia.le to pa*, and has not paid, the -T on the deposit on su.s!ription. The term Drelevant supportin1 do!umentsD should .e understood as those do!uments ne!essar* to support the le1al .asis in disputin1 a tax assessment as determined .* the taxpa*er. The (IR !an onl* inform the taxpa*er to su.mit additional do!uments. The (IR !annot demand what t*pe of supportin1 do!uments should .e su.mitted. /therwise, a taxpa*er will .e at the mer!* of the (IR, whi!h ma* re@uire the produ!tion of do!uments that a taxpa*er !annot su.mit.1a #"i1 After respondent su.mitted its letter3repl* statin1 that it !ould not !ompl* with the presentation of the proof of -T pa*ment, no repl* was re!eived from petitioner. -e!tion ""0 states that if the protest is not a!ted upon within 10% da*s from su.mission of do!uments, the taxpa*er adversel* affe!ted .* the ina!tion ma* appeal to the CTA within ,% da*s from the lapse of the 10%3da* period. Respondent, havin1 su.mitted its supportin1 do!uments on the same da* the protest was filed, had until ,1 :ul* "%%" to wait for petitioners repl* to its protest. /n "0 Au1ust "%%" or within ,% da*s after the lapse of the 10%3 da* period !ounted from the filin1 of the protest as the supportin1 do!uments were simultaneousl* filed, respondent filed a petition .efore the CTA. Respondent has !omplied with the re@uisites in disputin1 an assessment pursuant to -e!tion ""0 of the Tax Code. >en!e, the tax assessment !annot .e !onsidered as final, exe!utor* and demanda.le. +urther, respondents deposit on su.s!ription is not su.;e!t to the pa*ment of -T. Conse@uentl*, respondent is not lia.le to pa* the defi!ien!* -T of P1",,"0.#6. $(e0e/o0e, we 'EN& the petition. Je AFFIRM the Court of Tax Appeals e!ision dated "# $ar!h "%%& in the !onsolidated !ases of C.T.A. '( )os. &% and &". SO OR'ERE'.