CIR v. Club Filipino (G.R. No. L-12719, May 31, 1962)

CIR v. Club Filipino (G.R. No. L-12719, May 31, 1962)

F:  Club Filipino is a civic corporation organized under the laws of the Philippines with an authorized capital stock of P200,000.00. The Club owns and operates a club house, a bowling alley, a golf course and a bar-restaurant where it sells wines and liquors, soft drinks, meals and short orders to its members and their guests. The bar-restaurant was a necessary incident to the operation of the club and its golf-course. Neither in the articles or by-laws is there a provision relative to dividends and their distribution, although it is covenanted that upon its dissolution, the Club's remaining assets, after paying debts, shall be donated to a charitable Philippine Institution in Cebu. 

In 1952, a BIR agent discovered that the Club has never paid percentage tax on the gross receipts of its bar and restaurant and thus demanded that it pay sum of 12,068.84, as fixed and percentage taxes.

Section 182, of the Tax Code states, "Unless otherwise provided, every person engaging in a business on which the percentage tax is imposed shall pay in full a fixed annual tax of ten pesos for each calendar year or fraction thereof in which such person shall engage in said business.

"Percentage tax . . . Keepers of restaurants, refreshment parlors and other eating places shall pay a tax three per centum, and keepers of bar and cafes where wines or liquors are served five per centum of their gross receipts . . .”.

Issue: 

WON the Club should pay for percentage taxes for the operation of its bar and restaurant exclusive for its members. 

H: 

No, the Club is not liable for the payment of said taxes. It was held that he liability for fixed and percentage taxes, as provided by these sections, does not ipso facto attach by mere reason of the operation of a bar and restaurant. For the liability to attach, the operator thereof must be engaged in the business as a barkeeper and restaurateur. This means that the purpose must be profit and livelihood is the motive. This is not the case for Club Filipino.

The Club was organized to develop and cultivate sports of all class and denomination, for the healthful recreation and entertainment of its stockholders and members; that upon its dissolution, its remaining assets, after paying debts, shall be donated to a charitable Philippine Institution in Cebu. The Club’s bar only caters to its members and their guests and that although it derives profit, it is not the main purpose of the operation of the bar and restaurant. The Club is a stock corporation that does not provide for the distribution of its dividends or surplus profits. 

A tax is a burden, and, as such, it should not be deemed imposed upon fraternal, civic, non-profit, nonstock organizations, unless the intent to the contrary is manifest and patent" (Collector v. BPOE Elks Club, et al., supra), which is not the case in the present appeal.