Taxation Case Digest: Commissioner vs Leal

COMMISSIONER OF INTERNAL REVENUE

vs.

JOSEFINA LEAL

GR. No. 113459

November 18, 2002

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REMEDIES OF A TAXPAYER UNDER THE NIRC; POWER OF THE CTA TO REVIEW RULINGS OR OPINIONS OF COMMISSIONER

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Facts:

Pursuant to Sec. 116 of the Tax Code which imposes percentage tax on dealers in securities and lending investors, the Commissioner of Internal Revenue issued Memorandum Order (RMO) No. 15-91 dated March 11, 1991, imposing five percent (5%) lending investor’s tax on pawnshops based on their gross income and requiring all investigating units of the Bureau to investigate and assess the lending investor’s tax due from them. The issuance of RMO No. 15-91 was an offshoot of petitioner’s evaluation that the nature of pawnshop business is akin to that of lending investors.
Subsequently, petitioner issued Revenue Memorandum Circular No. 43-91 dated May 27, 1992, subjecting the pawn ticket to the documentary stamp tax as prescribed in Title VII of the Tax Code.
Adversely affected by those revenue orders, herein respondent Josefina Leal, owner and operator of Josefina Pawnshop in San Mateo, Rizal, asked for a reconsideration of both RMO No. 15-91 and RMC No. 43-91 but the same was denied with finality by petitioner in October 30, 1991.
Consequently, on March 18, 1992, respondent filed with the RTC a petition for prohibition seeking to prohibit petitioner from implementing the revenue orders.
Petitioner, through the Office of the Solicitor-General, filed a motion to dismiss the petition on the ground that the RTC has no jurisdiction to review the questioned revenue orders and to enjoin their implementation. Petitioner contends that the subject revenue orders were issued pursuant to his power “to make rulings or opinions in connection with the Implementation of the provisions of internal revenue laws.” Thus, the case falls within the exclusive appellate jurisdiction of the Court of Tax Appeals, citing Sec. 7(1) of RA 1125.
The RTC issued an order denying the motion to dismiss holding that the revenue orders are not assessments to implement a Tax Code provision, but are “in effect new taxes (against pawnshops) which are not provided for under the Code,” and which only Congress is empowered to impose. The Court of Appeals affirmed the order issued by the RTC.

Issue:

Whether or not the Court of Tax Appeals has jurisdiction to review rulings of the Commissioner implementing the Tax Code.

Held:

The jurisdiction to review rulings of the Commissioner pertains to the Court of Tax Appeals and NOT to the RTC. The questioned RMO and RMC are actually rulings or opinions of the Commissioner implementing the Tax Code on the taxability of the Pawnshops.
Under RA 1125, An Act Creating the Court of Tax Appeals, such rulings of the Commissioner of Internal Revenue are appealable to that court:
Sec. 7 Jurisdiction – The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as herein provided—
1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Revenue Code or other laws or part of law administered by the Bureau of Internal Revenue.