CTA Case No. 15 (Decision)

. .,- . ~/ -. l'lt:PUBLIC OP THE PHILIPPINES COURT OF TAX APPEALS WANlU LU f I ru � �- - . . - . - - - . - - - . DC [ This � a P 1 lo. vi w t, - c lo 0 the za�p den in a1na 111 ln u fixed rc r an c i penal as . p r of �� an aura � ttl ac i~ or 1 o� ~ia c atoe of � ort �� quently � foll in .1eotst 329

- 2- otr m nera de c ns arioa ... eitl a..: o y- wa ... vi1ion relat v vic.iend althou~n i t lear th upon 1 � -� tltioner'a re a1nln de a, d ntat d to c ine inr.ti- tutton n C u ( r � ilipino Inc . o bu, x it -2 ). etlt on r te l a CJ.U ho I t owl t . f ~ Yt blr r eat a\U'ant :r:e it ella nt) , n oft drln �� aand lchta, ot Go � � h r.d e $� c � 1 an pic � � to ts rn d &� taurMt n cosaary � ci n o the operatio of the tl and � olf ~ourse. . clu 1 o~rated a ly with funds dtrivtd fr fees and o defray ou��� ita overhea e pensea and to provt it� olf c urse. In 19~1, � a :r:eault of � capital s rplua ari in fr the re�valuat1on of lta real properties, the 330

, � 1~ - 3 .. price or val of -hie incr a � p ition r d - clared toe 1vid nd � ut no .,... 1 c v- denda re d tri ut ~o toc� hol r$. In th p t tior1 r h 19~2 , a . ent di cov r n ver p ny p rc nt x on th ro s c !pta of 1 a bar nd r st r t alt ough t s C\Jr d -� � In 1 tt r - ( a) nd - '7 �r 2.2, 195", r spon nt n ... nde f ro et1t.ioner the P r- centa e tax it ro 1 r tX year ro to ... 51 , 2 , ~ . 77 rc r thareo , fX X rt rs fr l 6 ~0 195 � n 1 p n 1 y. or total o 12, ote r pon en , n t 0 rul 0 he ur u 0 Int rn v 2� 19t;3 (F "1 o. 1 .o for th c n- eella io 0 r t rin en d n1 � t t on r f th tnt nt tltion n h1 f 1- for r� 1 � h u nv lv 1 ~' 2. her or t t t�on r liable for the payt~tnt of tM su of aa c~proetf.�� penalty. 331 ~

- � EC IO � c . r . .� E � l~ - 4- h 1 w upcn ~ 1ch respon ent ass� aed the fix an p rc ntag taxe 1n au st1on 1s found �n cticn 1 2, l 110 t � x Cod � -C. 1 l . X ... h afor pter I - T x leg� ax s on u ~n ns J: n ccu on 1 Jnt rnal venu � y us. th intention o 0 to po t � lixed an p r en a � taxe in ~�~tion& .l 2. a �� l o tne od ~ .' 3 3 2

.. E � 16 5- persona ~ ent1t1et engegtd in t ac ivit!ea mentioned or cla$tified therein for � aln sa� purpo��� bee �� evi ent (��� nila od;e No: 761 of the Benevolent Protective rd�r f lka v. la~�~a , C. T. A. ate o. 1 , uly 31, 1 5 J J. ur �� v. Col� lect~ of Internal ev nue , c. r�� Ca e o. 179, f�br uary 8, 1957). Consequently, the ltab 1 t for flxed an percentage taxes d � not !2!Q t cto attach by mere reason of the op�ratl n oi � ,. and restaurant. or the liebility to attach, thegpe� rator thereof ua � engage t th u� n" s �� a ~r-keeper and restauranttur. Th lain nd ordinary ..antno of �b �- e a 1� rest~ ettd tct1vities or affairs where profit s t pur ose, or 11.,.l.thocd lt t � m tlve, nc t e t r � usin a' hen use without quellfieat on should con&tru d... !n ita p ain an ox�d!n~r e nin � rEstrict d to activities f~ ~refit ('lr llvel il.ood~ (...ee an '& we ey et 1., !Y�ra.) he for gcln oct nal cone!.� derationa. we ahtll now prcce d to clet r 1n .hcthcr .. or not pettticne~ !a en rator of a bar end restaurant. pon the f�cts: that tit:toner ~~ .r ni"' to develop an culttv te porta of all cl~~ nomination for the healthful recreation and enter� ta~t of lts stockhol �r� and lts c:ttsaolution, ita reaain1ng ����ta, aftc payi . � shal ,,,.. _ 333

� ainly - 6. tld d SJ tn�tltut1 in C� UJ ~t it. !1 r only 1 h funds derive r th�t ~tit to �� az fact no ca h i � 1 �J an t 1$ an rt1t r nt . u 11 ov r - s n to olf d in l that �tion r of an ~r t r o ar +... 1 1 01 op �..:c act c er!ly O� v .r ir.ta a rpr! � %d tC cl o v hr l nectsaar 1y ne 1 Oi f lop!n d cul v th ~rettion n n r n � 0 n ur $ exlete ce, eeource � ci 1 0 ld 1 ty 6 ' &urplus X � It "'rt v. o l e t I In 1 �� � 7, y 24 � 9 't oll tor 1 ev n � �� � � o� - 27 , c o- J:' 2 � 19 � ~ 334

.. 0: ISIO.~ � 1 J� ��� fh cln.: th t p t �t � onqr .s a stock co1;pora- tion 1s erit . or s ock corpo:-- to c pli ,. to � t:. ! to h , and ( 2) n shores d!vi nd$ o.: nts f th surplus profit on . �� .,i of th sh lc! c . 3,. ct . o. 1 9) . it n r � c pit 1 oc In the cas a h1 ls iv into orth r n t t�cl of lncorpor n or 0 ind n Olthority for the d!Gtr uti of tv.1dends r urpl >roftt � �onaequGntly, p t. loner cannot toe corporation �it .in t cont. pl tio. of th corpo.r � tion law. ! 1 ct h t .. c p t 1 ... c of p tit on r i 1vid n o h r o s not d tr c find .. 1 not n gcd in th of 0 tsu nt. h t i n ..ive of hctl r or not p t tion r ng d h ines r� P r t ur 0- j ct or purpo by-l a, 1 � hicb, t t d in its art cl n or � , nt n c ltl n of p .rts it toe old 1 cr ion nd nt rt nf nd r � T ctu 1 1� not c nt oll d y th COl"POr t for or y t. rc al aap ct o pro ut a , u ay � s o' n uy xtr lSiC � . eluding y� laws nd he e'thoc;t o (u . .... . v. 1okwic;.k El ctr c �� .t� ip p., 158 F(2d) 272, 335

, . T. A. - - � 15 276, e n Da 5 e cr ~l dio uJ. ''� C is� toner, 148 l: (~d 94 , 5 � ) ro h xtr �n,ic ev� enc uced , r led to the con:lus1 n that pet1t1o r is not n. 9 n t a� a r � ee r ur t ur nd th r for not lt le for rc~nt � c ata c s un"" r h tic r con- d cte s of h~ in �i pt 0 l lo limit d 1' nea here s ort �r boxln � ll n no t nerally p ca x no �on ent rpr sea . Th for th ev 0 the 1 t1 n, p c of devo d o 1 ct nd cr o n� y or at hav of 0 no Intern l 0 � r � no p rt h of c: in any X' c of h m:tlc la1: �s tt r o c � t r p ndin ov rn on y or t o r.thl lc rn lo 1 c u..rpo���� avln ruled th t p t t on r ts n t d in th usin a n r t r o a t u- ., 336

I! � l.!> ... 9 � rant , and eref re not l!a 1 f f!xe ~nd per- that t � not l able for any penalty, ch let& of c r 1� nalty hich �� not ccep e � f � reapo nt ' � ei� on at ece � � ~ 22, 19~2 � htr by r v r � out pr n unce- �n �� to co t � � !l � h 1 ppino , uly 11 , 1 7. ., . 33 7 �