Collector of Internal Revenue vs. Club Filipino Inc.

de Cebu
Parties: Club Filipino Inc. de Cebu (petitioner)
Collector of Internal Revenue (defendant)

Justice Paredes
Facts: • Club Filipino Inc. de Cebu is a civic corporation in which neither in its articles or by-
laws is there a provision relative to its dividends and their distribution.
•The club is operated mainly with funds derived from membership fees and dues,
whatever profits it had were used to defray its overhead expenses and to improve it's golf
course.
• The club owns and operates a club house, bowling alley, golf course and bar-
restaurant which sells food and beverages to its members and guests.
• A BIR agent discovered that the club had never paid percentage tax on the gross
receipt of its bar-restaurant and demanded them the sum of Php. 12,068.64 as fixed and
percentage tax and compromise penalty.

Issues:
1. Whether the respondent Club is liable for the payment of the fixed and percentage tax and
surcharge prescribe in sec. 182, 183 and 192 of the Tax Code under which the assessment was
made in connection with the operation of it's bar and restaurant and;
2. Whether it is liable for the payment as the sum of Php. 500.00 as the compromise penalty.

Held : The Club Filipino Inc. de Cebu is not liable to pay for the fixed and percentage taxes as
well as the compromise penalty.

Ratio: Having found that the club was organized to develop and cultivate sports for the healthful
recreation and entertainment of its stockholders and members; that it is operated mainly with
funds derived from membership fees and dues; the Club's bar and restaurant catered only its
members and guests and whatever was derived from it was used to defray its overhead
expenses and to improve its golf course, it stands to reason that the Club is not engaged in the
business of an operation of its bar and restaurant. The liability of fixed and percentage taxes as
provided by section 182, 183 and 191 does not ipso facto attach by mere reason of operation of
a bar and restaurant. For the liability to attach, the operator thereof must be engaged in a
business as business keeper and restauranteur. The plain and ordinary meaning of a business
is restricted to activities or affairs where profit is the purpose or livelihood is the motive