COMMISSIONER OF INTERNAL REVENUE vs. JOSEFINA LEAL (Tax 2)

G.R. No. 113459             November 18, 2002

COMMISSIONER OF INTERNAL REVENUE petitioner,vs. JOSEFINA LEAL, respondent.

FACTS:

Josefina Leal, owner and operator of Josefina’s Pawnshop asked for a reconsideration of both RMO No. 15-91 imposing 5% lending investor’s tax on pawnshops based on their gross income and requiring all investigating units of the Bureau of Internal Revenue (BIR) to investigate and assess the lending investor’s tax due from them; and RMC No. 43-91 that subjecting the pawn ticket to the documentary stamp tax as prescribed in Title VII of the Tax Code. However the same was denied with finality by petitioner in its BIR Ruling.

Consequently, respondent filed with the Regional Trial Court (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 Section 7 (1) of Republic Act No. 1125.

Howver 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.

Petitioner then filed with the Court of Appeals a petition for certiorari and prohibition under Rule 65. Petitioner alleged that in denying the motion to dismiss, the RTC Judge acted without or in excess of his jurisdiction, or with grave abuse of discretion.

The Court of Appeals dismissed the petition "for lack of legal basis" and ruled that "the (RTC) order denying the motion to dismiss is subject to immediate challenge before the Supreme Court (not the Court of Appeals), which is the sole authority to determine and resolve an issue purely of law. Nonetheless, the Court of Appeals resolved the case on the merits, sustaining the RTC ruling that the questioned revenue orders are "new additional measures which only Congress is empowered to impose."

Hence, the instant petition for review on certiorari under Rule 45.

ISSUE:

WHETHER IT IS THE RTC OR THE COURT OF TAX APPEALS WHICH HAS JURISDICTION OVER THE INSTANT CASE.

RULING:

The jurisdiction to review the rulings of the Commissioner of Internal Revenue pertains to the Court of Tax Appeals, not to the RTC.

The questioned RMO No. 15-91 and RMC No. 43-91 are actually rulings or opinions of the Commissioner implementing the Tax Code on the taxability of pawnshops. 

Subject matter thereof clearly falls within the exclusive jurisdiction of the Court of Tax Appeals. Section 7 of Republic Act No. 1125 granted to the Court of Tax Appeals exclusive appellate jurisdiction to review by appeal, among others, 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 Internal Revenue Code or other law or part of law administered by the Bureau of Internal Revenue.

Here, respondent Josefina Leal, being a pawnshop owner, is assailing the revenue orders imposing 5% lending investor’s tax on pawnshops issued by petitioner. Clearly then, she should have filed her petition with the Court of Tax Appeals, not the RTC.