De la Rana Stranseip Co., et al. vs. « C. Ta. Cask Ho, et al.

REPUBLIC OF THE *FILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

DE LA RANA STRANSEIP

CO., IMCs,

Petitioner,

- Versus « C. TA. CASK HO, 1499

ITWTEAWAL genase = UY

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Deciston

This is an appeel from the decision of re~

spondent Commissioner of Internal Sevenue, dated Jan-

wary 7, 1964, assessing and demanding from petitioner

the amounts of $21,010.20 as fixed and percentage

Saxes, inclusive of surcharge and compromise penalty,

for the years 1951 to 1956, and #3,67%.69 as 258 sur~-

eharge for late payment of commercial broker's tax

for 1955 up to the and quarter of 1956, or a total

of ¥24,68%.89,

Petitioner is a domestic corporation duly organ-

ized and existing under and by virtue of the laws of

_ the Philippines. On October 26, 1949, it entered

inte a contract with the National Development Co,

(SDC for short) for the sanagement and operation of

three NDC vessels, camely, Solis Mati, Dofla 4urora and

Dofia Alieia. (Buh, Ay pp. 45-52, BIR ree.)

The Dofie vessels are freight steamers and each

has a limited capacity of 12 passengers (pp. 3 & 9,

t.s.n.) and a complement of 35 officers and crew aem-

DECISION «

CTA CaBB Wo, 1499

:

bers. (p. 12, t.#.ne) very vessel has a dining hall

where meals are served and wines and liquers are dis-

played for sale to passengers and crew members. ‘Sales

ef wine and liquors are asde only during mealtime dbe-

Cause there are no waiters serving after meals. (pp. 3,

10-11, tosete)

Respondent, in a letter dated January 11, 1957,

Gemanded from petitioner the total sum of #35,783.65,

representing percentage tax on its gross receipts

from the year 1955 to the 2nd quarter of 1956 as a

commercial broker prescribed in Seetion 195 of the

Revenue Code, plus surcharge, anc fixed and percentage |

taxes, inclusive of surcharge and compromise penalty

for the years 1951 to 1956 as keeper of bar pursuant

to Section 191 of the same Code, (See xb. Ly pp. 18-

; 19, BIR ree.) On September 9, 1997, respondent re-

duced the assessment to #2%,68%.99, after crediting

petitioner the sum of F14,698.76 which it had already

paid on September 19, 1956 as commercial broker's tax.

(Bh. Hl, pe 20, BIR reas op. 65-66, BIR ree.) On

Jane 27, 1958, petitioner, through counsel, requested

the withdrawal of the assessment (pp. 79-82, BIR rec.)

which was denied in a letter dated May 16, 1960, OG

January 15 1964, respondent rendered his final deei-

ston denying petitioner's request for reconsideration.

(pp. 216-217, BIA rec.) 3

DECIBION «

CTA CAGE Bo. 1499

= 2

In his answer, respendent alleges as one of his

affirmative defenses that this Court has ne juris-

Giction te teke cogaisance of the instant appeal for

having been filed beyond the reglementary period ef

30 days fixed under Republie dst Bo. 1125. However,

respondest conceded this Ceart's jurisdiction when

petitioner, during the hearing on October 28, 1965,

established that the letter-decision dated January

7, 196% wos received by petitioner only on March 11,

1964. (pp. 89<$1, t.a.me)

The dominant issues raised for our consideration

aret

1. Whether or not petitioner is liable fer the

sum Of P21,610.20 as fixed and percentage taxes, ia-

@lusive of surcharge and eoapromise penalty, for the

years 1951 to 1956 as keeper of bar pursuant to ieo-

tion 191 of the Revenue Code, im relation te Seetions

182 and 183 of the same Code; and

2. Whether or not petitioner is liable fer the

asount of P3, 675.69 as 25% surcharge fer late paysent

of tts comuercial btreker’s tax for 1955 up te the 2nd

qaarter of 1956 as preseribed in Section 195 of the

Revenue Code,

The pertinent previsions of the Revenue Code as

regard the first iseue run es follows:

DECISION ~

CTA CASE Bo, 1499

3 ay & ve

gross Pessipte: x a erscoring sup-

plied) ;

Petitioner assails the assessment on the ground

that it is not a keeper of bar in any of its vessels.

Ana it contends that, assuming that it is a keeper of

bar, the assessment should have been made against tho

WDC, the owner of the vessels, ani ast against peti-

tioner which acted merely as an agent.

It has been consistently held that the liability

for fixed and percentage taxes does mot jnge facto

attach, by mere reason of the operation of a bar and

restaurant. For the ligbility to attach, the operater

mst be engaged in the business as barkeeper, which

means in activities where profit is the ouraose or

Jivelibood ia the motive. (Coll. v. The Club Filipi-

Club v. Meer, 1-1085%, Jan. 27, 1960; Coll. v¥. Sweeney,

et al., l-12178, Aug. 21, 1999.)

Respomient wishes te impress upon us that the

dining hall of a vessel is a bar for the reason that

wines or liquors are displayed and s0lé therein. “e

™~

CTA CASE HO, 1499

« § «=

are of the opinion, however, that there is no bar

in any ef the vessels as the word is used and ander-

stood in Section 191 of the Revenue Code.

A bar is erdinarily understood as a place where

_ wines er liquers are indiscriminately offered for

sale te the public. It is a place whieh is epened

anytime during business hours where customers are

generally served wines or liquors in "jiggers" or

glasses to be drunk inside the barroom. The case

ef herein petitioner is different. The dining hall

ef the vessel is opened only to its crew members and

limited passengers; petitioner serves wines or ligq-

vers only during mealtine or three times a day s0

that it is mot possible for a passenger or crew men-

ber to buy them before and after each meals and peti-

tioner sells wines or liquors in bottles which is-

- plies that passengers or crew members may drink then

fim end outside the dining hall. Liquors may have

been sold in the dining hall of petitioner's vessels

but wheat strikes us is that they were not sold in

the monner they are done in bers.

Assuming, arguende, that petitioner operates a

bar, still it is ~— engaged in business as bar- |

keeper. In operating ita vessels, it maintains or

keeps at the same time a bar where wines or liquers

are displayed and sold xs a necessary incident te

90

>

DECISION ~

CTA CASK He. 1499

«e 6 «

its main business of transporting freight and passen-

gers. Ani “where something is done as a mere in-

eident to, er as a necessary consequence of, the prin-

efipal business, it is not ordinarily texed as an in-

Gependent business in itself; and that whet is usually

taken os essential is the main activity in which the

taxpayer is engaged. All the various transactions

tending to better aecomplish the principal end in view

mast be treated as merely incidental to the prineipal

purpose of the business, in the absence of circun-

- gtanees evideneing a different intent.” Loaty ef Mani-

la v. Fortune Enterprises, Ine., L-14096, July 26,

1960; Standard-Vacuum 011 Co. v. Antigua, et al., 51

OsG, 2405; Smith, Bell 4 Co. v. Mun. of Zamboanga,

$5 Phil. 466.)

It is the usual practices ef operators of vessels

te provide for the needs, comfort and convenience of

the crew and passengers in order te promote and en-

hance their business, The sale of wines or liquors

during mealtime to its crew meabers an’ limited pas-

sengers is in keeping with this practice and is in-

deed a necessary incident in the operation of ocean

going vessels like the ships of petitioner.

Respondent eitesa the case of Maliese vs. Col-

lector of Internal Revenue, 99 Phil, 596, to support

his stand, The facts, however, of the Maliese case

are different and, therefore, not controlling in this