THE COLLECTOR OF INTERNAL REVENUE v. MANILA LODGE a.
a. Section 193 of the Tax Code provides that persons selling articles
NO. 761
Month Day, Year | Ponente, J. | Topic
PETITIONER: The Collector of Internal Revenue
RESPONDENTS: Manila Lodge No. 761 of the Benevolent & Protective
Order of Elks and the Court of Tax Appeals
SUMMARY: The case is an appeal filed by CIR contesting the Court of Tax
Appeals’ decision that Manila Lodge is not liable for privilege taxes on its retail
sale of liquor and tobacco exclusively to its members and guests. The SC
affirmed the decision and interpreted that
DOCTRINE: Words construed in their ordinary sense
General rule: In the absence of legislative intent, words and phrases should be
given their plain, ordinary, and common usage meaning. They should be read
and considered in their natural, ordinary, commonly accepted, and most obvious
signification, according to good and approved usage and without resulting to
forced or subtle construction.
FACTS:
1. The Manila Lodge No. 761 is a fraternal, civic, non-stock, non-profit
organization which operates a clubhouse in Manila. The organization sells
at retail, liquor, fermented liquor, cigar and cigarettes but only to its
members and their guests.
2. Agents of the Bureau of Internal Revenue discovered that the Manila Elks
Club had not paid for their privilege taxes as required by Section 193 of the
Tax Code.
3. The Collector of Internal Revenue demanded the payment of P1,203.50 for
fixed taxes as a retail dealer for the 4th quarter of 1946 to 1953 together with
a penalty of P80.00. Manila Lodge claimed exemption and requested
another assessment by the BIR. As a result, another assessment was issued
by the BIR requiring the payment of fixed taxes between 1954 to 1955 in
the amount of P322.00 and a penalty of P50.00.
4. Manila Lodge filed a petition for review with the CTA and claimed that its
exemption is based on the fact that it is not engaged in the business of
selling at retail liquor, fermented liquor and tobacco because their sale are
exclusive to the members and their guests and only for the purpose of
providing comfort, recreation and convenience to the members and
providing enough margin to cover operational expenses.
5. CIR’s contentions:
such as cigars, tobacco, liquor are subject to specific tax
irrespective of whether or not they made profit and whether or not
they are civic or fraternal clubs selling only to their members and
guests
6. Relevant provisions:
a. Section 178 of Tax Code
i. “Payment of privilege taxes – A privilege tax must be
paid before any business or occupation hereinafter
specified can be lawfully begun or pursued. The tax on
business is payable for every separate or distinct
establishment or place where the business subject to the
tax is conducted; and one occupation or line of business
does not become exempt by being conducted with some
other occupation or business for which such tax has been
paid.
The occupation tax must be paid by each individual
engaged in a calling subject thereto; the tax on a business
by the person, firm, or company conducting the same”
b. Sec. 193 of Tax Code
i. Amount of tax on business – Fixed taxes on business shall
be collected as follows, the amount stated being for the
whole year when not otherwise specified:
(j) Retail liquor dealers, one hundred pesos
(k) Retail dealers in fermented liquors, fifty pesos
(n) Wholesale tobacco dealers, sixty pesos; retail tobacco
delaers, sixteen pesos
ISSUE/s:
1. WoN Manila Lodge No. 761 can be considered a “business” as defined by
the Tax Code and therefore subject to privilege taxes? – NO
RULING: SC affirmed the CTA’s decision.
RATIO:
1. The provisions of the Tax Code are clear and precise – that the privilege
taxes are only to be imposed on persons or entities who engage in retail of
liquor, fermented liquors and tobacco for BUSINESS PURPOSES
2. These provisions were grouped under one general division of the Tax Code:
Title V, Privilege Taxes on Business and Occupation”
3. It is necessary that they’re engaged in the business of selling liquor and
tobacco for the privilege taxes to be imposed
4. “Business”à plain and ordinary meaning: restricted to activities or affairs
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 where profit is the purpose or livelihood is the motive. Manila Elks Club
cannot be considered as engaged in the business of selling liquor and
tobacco as the only money handled by them is merely to cover operational
expenses. They did not conduct any business for themselves and engaged in
no transactions contemplated for profit.
5. The amenities operated by the club are financed by the annual dues from
each members and the payments each member provides for food and drinks
à NOT EQUAL TO BUSINESS OF A RETAIL LIQUOR AND
TOBACCO DEALER

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