CTA Case No. 140 (Decision)

EPUBLIC OF THE PHILIPPIN~ � ~R'I' OFT.~ APPEALS MA ILA � 761r-OcFrrvE \~(tp t ~. tl..oner , ~1 - versus ~ t~1 �I . � E O. 140 ILV , as cting Ce l l ntem al Reven , Rec:p ond nt. x- - ~ - - - - - - � � � - � � c l This is an appeal f ro t o decisions of th . re pond nt Collector. of Internal R v nue ass ssing and de ending fro t e petitioner herein the sums of 1, 2 3. 50 and 332. 60, respectively r epresenting fix d taxe as r tail dealer in liquor , fermented liqu nd tobacco , allegedly du from petitioner f r th period fro t e 4t h quart r f 194 to 1953 and tl period f o 1954- 1955. pursuant to subsec - tion 1 ), (k} and (n) of section 93 of the Tax --- ode , in relation to 178 f th s od � Th pe itioner , .anila Lodge o. 761 i s ad- mitted!} a fratelnal, ivic , non-stock , non -profit organization duly incorporated und r Philippine Laws. t ~ns and o eats a club ous loc ted at Dee Boulevard , ~nila , erein i~ sells at retail , li- quor , fermented liquor , cigar and ci .J ar ttes onl to l.tS members and their guests. .I . R. agents dis- covered th t the l. anila El s Club h d not aid for t e pe ~~iod in question the privile e tax for r t il liquor de ler (B- 4 , retail dealer in f rrnented li - , 461

II1- � !4 C.T�� C - 2- uor ( -7 , nd re i1 tobacco deal r ( - 9- pr s- cribed i section 193 of th T x Cod � On Jo emb r 1 , 1953 , th C 11 ctor of Intern 1 ev nu s d a in t and de a d d fr th peti- tion r t h nt of th su of 1, 3. r ent- in . fixed s r t il e 1 , for the e iod from t 4th f 1946 to 1953, exclu of the s e t d c n lty of � h e- th y.. tit1oner, c iming th t it xe � ted fro ent of t p r . ilege t axes in qu stion , re ted that t s id s s t b revie 'f:d b tt e Confe enc taf of t ureau o Internal e en e . Tt Confer- c t ff, after du hearing, a. a d r iter- t ed the ass s me t ade by t he r p de t Collector of ln - t rnal venue. orth it � th p titioner appealed t o t is ourt on un 1 , 955. During th pendency of th original pet tion fo re 1ie in t e abov - e titled cas , r spondent issued anothe ss nt covering fixed taxes for t h y ars 1954 t o 195 n th uOUnt f 32. , ex- elusive of t � e penalty of o. � onse u nt ly , p etition r Jith of C urt filed a suppl e tal pet 'tion for review !hie included the latter ass ss ent. tit ' on r s s its cl im for e e. tion fron t he pa ent o th prl il g t ~es in uesticn o th grounds t at it is n t engag d in th busin s f selling at retail liquor, ermented l iquor. a d to~ bacco becauo t e sale of t Se afo e nti oned s - �~~ ...~.. , - - r ,...

�T� � E ' '� l .. 3 �- cific goods is mad on y to mber of the club and th ir gu ets on very limit d scale in p� rs ance o y of its Dener urpo e as a fr ternal so ial clu , to provid~ omfort, cr ation , a d convenienc to such e~bers, and erely to provid nou h .ar in to over op rational expens � (Pet! tioner' s 1 emo P� 3 � t> S ond nt�, on th oth hand , ma�nt in t at persons !ling articles subject to s ecific tax, sue as cigar , t o acco, li ,uor an the like, ar subject to t fixed t xes i$ osed by section 193 of h Tax , irrespecti of t~ether or n t the make profit , and et er or not they ar civic o fraternal club s lling only tot eir emb rs an tleir guests. This contention is based o a ruling pro ulgated by the ure u o Internal evenu ade �i 1921. T bon of contention betw n t e ttJO artie s erein t erefore , lies in tne proper interpretation n ap lication f t e pertinent provisi o s of the Tax ode~ na .ely subs ctions (i , (k) and (n of sec- tion 193 in relation t section 178 of thE; Tax C de ., w.ic e uot hereunder: sue �r e occu tion t x ust b �ct by ch individual engaged in a calling sub- ,, 4 6 3

DECISIO .. � T � . � CA. E �'0. 140 ~ 4 �. ject thereto; the tax on a bu~iness by t e .p xson. fi:r:m , or company conducting the same. (!-Jnd rscoring supplied. ) * c . 19. � oun;t of tax ory,.};? si � ne~;; . Fixed taxes o business shall be co lected as foll ws , the amount stated b ing for the thol ear , when not ot er- wis specified: X X (i Retail liquor dealers , one hun- d:.r d pesos. ( ) etai eal r in f el.'ment d l i - quors, fifty , esos. X X X (n) .Jholes~le tobacco dealets , sixty sos; :r tail t obacco dealer s , s i teen pesos. n Th aforequot d provisions of the Tax Code are clear and p recise. The privilege taxes prescrib d in section 193 of the Tax Code in relation to secti on 178 of the same � are to be ir:1posed only on p rson s or ent i t ies ho en')age i n the ct ivities menti on d or classified there�n for 1b sinessw purposes. This evident intention of t e law becomes more palpable when we tak13 into� consi der ti on the fact thnt the drafter of our Tax Code had grouped the aforequoted previsions of law under on general division of t e Ta�x Code headed as ~~tri tle V, '~ rivilege Taxea on Jlusi - n~ss and 0�CUQati.,s>n . " It is not th&refore enti rely coxrect t o main - tain as respondent does, that all personr selling articles subject to specific taxes , like liq �or and tobacco, should likewise b subject to the fix d taxes imposed by section 193 of the Tax Code. fe ., ,. 464

E ISIO l � -- C. ,. h . SE JO. 140 believe, that in order that these persons should be ubjected to the privilege taxes itnpos d by the aforemention ed section of the Tax Code, it is ne- essary that l ey be engaged in the ~ sin s " of sell in liquor and tob ceo, ther �: se t e v lege texas as dealer of liquor and 'to acco can not 'att ch. nt this j~ncture a definition of the word business� is in order and we hav tle follo ing.. ~the w rd 'busines ' in its ordi" nary and c mo � use i employed to de- signate human ~fforts which have for thei~ nd living or r ward; it is no co onlx sed as descript:tv... of char!� \... tabf , �religious, educational or soci 1 a. encies. n { llant ne' s La'wi Dictionary, 1948 Ed. P~ 179} ttBusiness- �that which usie or enga~~s tir:le, attention or labor as principal serious concern or interest; ny particular occupation � r e ployment habitually engag d in , especially or livelihoo or gain. 10 {Vol . 1, 1949 p. f.t~err iam- � ter t s Ne lnterni!tiona Dictionary, 2nd Ed. 362}. Other definitions of he term *'business s given by judicial prone ncement arl! found in Volume V, 1ords and Phrases ~ pa e 999 as fol~owst *'Bu ines~ is a word of large signi- fication, and denotes the mployment or occupation in which a p.e son is eng, .. d to procure a living" . {Citing:. Goddard v. Chaffee , 84 Mass .. (Allen) 395; 79 Am. ec. 796) 1 y iness in co� on speech ans ha� bitual or re ular occupation that a party is eng g d in with a vie to winnin a iv ihoo or so.e gai . " (Citing� ln re Lamont, 41 P 2d. 497, 50~) '~ .~ 4 6 5

� 140 - 6- not co do of � 6; � on �� f go! 9 f initio t it i vi t I ro that � he 1 in, o i n y ning o busine � i restrict d to tiv t� s or f rs her profit .s � the u or 1 lihoo th Th t r b in s ing d t out -ny lifi a on i action f t T x Code n rel tion to c ion 17 0 t �� shoul hr f r constr d in ita plain viti for or n y � r strict d to i � ft0 d. J ith t es con �d t on n ind , no o. to th s io of h t h or not th � il 1 lu is eng ge n th n s llin li or n tobacco. that he petit n , n � ks Clu is 1, c vic, on- tock , no -profit or ani ti � th u ont a .c i n th en t blis th 11 lk c nc of ts purpo;> a fraternal oci c t on r tail t its club- hou on �� y ulevard , 11 or , ci r nd ci r- te on a very 1 ited c 1 , only to it e b r$ 466

D CISIO - . T.A.. SE 0 . 140 �- 1 - and their uests, providing just enough argin to cover operational expenses without inte tion to obtain profit. uch being the case then, the Aanil I lk$ Club can n t e consider d s engaged in the "bu�siness" of selling liquor and to acco. nay Jhere the corporation ha dled o ey~ xcept such as was n cessary o cover. op e;a tifoonr alltseexlef ses, con du c t ed no usin s , and engaged in no trans ction that contemplated a profit for itself - sue a ~orporat i n �is considered not organized for profit � und r the eneral Drporation La . " {Read v. Tidewater Coal Exch. , 116 A898 9 , cited in Vol . 4 , ords &Phrases, p. 220, defining "profits�; und rscor- ing provided) �� _ . The petition r her in, 1 anila lk Club, ot being engaged in th busine of sellin a re ail liquor and tab ce o, cannot ther for b held li � le for the privilege taxes required by section 19 , ub- section {i), (k) and (n). The~ i ht of ric an authori ies enhances the strength of our f indin s that a fraternal,. civi~, non-stoc , non-profit orga- nization, li e th lk Club, selling at r tail li- quor and tobacco nly to its me ers and their guest in pursuance with its general purp'ose as a fraternal social club with just enough argin to co er op ra- tional expenses , should not held lia le for th fixed tax s incident o th busine s o elling at retail, liquor and tobacc o. 11 bonafide social club, h:f.c h dis- poses of liquors at its clubhouse to me - bers and their uest a a fi xed char e as incident to the general purpos s �Of the organization is not required to take out

DE... IS!ON - .T A. C ~SE NO. 140 license b Rev. La �Js Ho . "' 777- 378r- , ap ... pro ed .arc h 15, 190 � mi~h provide for a license upon the business of disposing intoxicating liquors: th ter busines in such stot ute . e n5.n business in the trad or commercial sens � (Sta v. Uni� ver si y Club , 130 P. 468 , 47 ; 5 1ev. .75; 44 L�� A. , N. S. 1026 ). A social c � ub ,. not ~ organized for t he p rpo~e of evn "ing the li~~or la s , ut hich furnis.hes it mbers with li� quors and refreshments without profit to itself, is not a retail liquor dealer , within the statute i~ o~in a lie ns ax on all p rson deali g in ~ s lling or di � pocin cf intoxicatin li uors by r tail. n ( Barden v. r~ontan Club, 25 P. 1042, 10 Moot .. 330, 11 L. H. 1'. � 59 3) � � c ts 1881 , c. 14) ' uth riz. ns taxa- tion of liquor dealers, does not include a social club .aintaini1g a library, giving mus i cal entertaintnents, and furnishing i eals for its r..e.nb :cs , �.htc h 1 ps a sr. - 1 stock of liquor; ' the m mbers paying for it drink as it is taken, ut no pr fit bei ade on such sal s.� (Tenness e Cl b of .!emp his v. D\ er , 79. Tebn . {11 Le ) 452 , 461 , 7 Am . R p. ~98.) 11 .1\ social club c omposed of rs who have no proprietary �n erest in the assets which �.. ovides a reading roo , res� taurant, bar rooGl, li.orar y, billiard rooms n si t ng ooms fo its members, the ex- penses o~ wh:ch are defra ed by a nual dues fro~ ach ne r , and �by payments �made by the members for food and drinks , is not et ag d �n he usiness of a retail liquor dealer, within - e~t.'on 11 of the !..ouisiana Lie ax La ." (La nn .. 585, 20 L� � � 185). Respondent, however, ins i sts that t he petitLm r should pa y th pr "vilege tax on the sale at ret�il o liquor and t bacc because this ha ... been allegedly the prac- tice consi tently followed b; the urea of -nt r al R ver ue sine 1921 , and be a e ction 1464 of e Re is d Ad. i i trativ ode under which said ruling ~as then based had been reena ted by he le:islatur~ 'f> .: 468

E....ISION - C. T� � ~JSE O. 140 - 9- as sect~on 193 of the ~ational Intern �! Revenue Code. Thu s, res (mdent contends , th� t the policy of the ureau of ternel Revenue has therefore ~ain ed nap- proval by 1 i tive reenactments.r The alleged ad . inistra ti e prz ctic e i s founded up on t e following ru in~ rendered in 1921. "Clubs sell "n9 V'l e do not agree with t11e contention of the r s- pondent. ~ ile there is admittedly a ruling on this point in 192 , there is no s owing t ha t such h s been a long-c ont � n ed practice. Be t hat as it ~y , any � s ch adr inistr t ve c n truction must oe t hin the ambit of, and must b consistent with ,j evised . di inistr tive Code and he Ta x Code. It is li. ewise t .� e rule that wh r the tatute is unambiguous, an d inistrativ construction i unwarrante (u. s . vs . i souri P . � o. 278 u.s. 269, 73 L. d. 322 and no construction ,ay be mude to restric or enlarge th ea ing of an Act. (Blat v. u.s. , 305 u. ' � 26 , 83 � � 167 � An examination of section 1464 of the Revis d Administrative ode taken in connection ~t�ith s etion 1453 of the same~ discloses the fa c that asi e from the chan9e in r �tes of t xes . o be paid and th r- r n ement o the classific tio of .businesses enume- -...-.....�. �, .- L!6 9

c. -'!.'..IS..I /.J;:. o. .:4 - 10 - x-ata !er n , �c io 1,., of e pr se� t Tax o e i a er0z i . c py of t aforem~nt�oned provision~ ... of t. R � ,.~ '"J � 1 u.. in:: �trat ...ve Code. The policy or rinci fol O\ d by tho s~id co r gar i g pri- l vile e taxes, i . � that the privi eg s taxes are payabl on y tl se pezso s or entit: s engaged in th~ busine s enur ated in section 1464 of t e said odp , h s not suffer~ az y chang~ , an he sa~~ e & ill obtains under our prose ax Code. In he absenc e of a shoving t tat the legis a i e ~ody 1ad be� ap rised o tie a or ai rulin , v~a aine legislative approv l __thru reenactt � t is , e1. iev , . th pol� c y be ind t e a v �il ,. th tio d Pl'OV sio1 I .. vis dn . in stra ivo \# e .of xi ~ per OCl engaged i bus in s �~nd n- t the v.l ~ d prac ice ~ ol 0 :;.n the ~dmin'strative ruli 0 1921. ..�,e believe t at no amount of trenchant adherence to an estabLished p:r:ae- tice may �us ify its continued applic tion where i t is cle r nd manifest th�t he sa~e is not i conso- na ce wi h the policy of the legislat re as defined oy aw .. �rn all cases ~here hose persons whose duty it is to execut a law have uniforrr.ly , iven :tt a partlcul cons- tru tion, and that cons ructio has been .cquiesced in and acted upon for � a long time , t i a. conte pora:ry ex- psi io f � e sta�ute , ~ic always co n n s th~ attenti n of t he o r s , and will e followed u leGs it cla rlr ~asr lX~,.;~enptpreaalrssn.t and ~�1.an.-_;., f o b wron � ' . (P endy; v. Col� lector of "'ustor. s , 51 Phil . 144 , citin Kelly v. tv:ult. nomah , ounty , 18 Ore 356 , 359 . ) 470 ,

/ CI 10 T - � T. �"'-. CA..' . NO. l - 11 - ght to t e c n- plae d upon a se II-... VIE"J OF IE FO E OUX3 , we ar e of the o inion . and ~c .�old t!1at th_ ~'-an a Elks 1� b is not 1 able for pri vilege taxes on its sale by ret ai l of liq~or and tobac co exclusively to its member s and t heir gues s. h ec � sion of t ;1 e respondent dated ovember 19 , 195 ~ ~ holdin petitioner liable for fixed taxes, iS hereby reversed and set aside, with no pronounc ment a to costs. ~ OHDEHB.D. Manila , Philipryines,. July 31 , 19o6. ~~~ MA IJ.\1~ NABLE re ~ding udge 1'1~ ONCU.!h � 1\1~ Jl. U �iAL ,. sociate Judge �v-� .. .�