Lawrence, Inc. vs. C.T.A. Cas® No, et al.

REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPBALS

QUEZON CITY

LAWRENCE @. DER as

President of IF

CHRVALIFR, INC.

Petitioner, versus C.T.A. CAS® NO, 2208

COMMISSIONER OP

IMTRRAAL REVERT, a ee

DECIsIicon

This is an a@ppesl from a decision of respondent holding le Chevalier, Inc., represented by its president, Lawrence Q. Dee, liable for payment of $241,912.52 as fixed and percentare taxes anf surcharges for the period from “ovember, 1963 to June 30, 1965.

le Chevalier, Ince, per its Articles of Ineorpora~ tion, is e non-stock, non-profit club organized for the benefit of its members ami their quests, It established and mainteined » bar, restavrant and nichtelub where food and drinks were served, It wes registered with the Securities ani fxchange Commission on September 23, 1963 but ectually started operating its bar, restaurant ani nightclub or November 1, 1963.

On Setober 20, 1965, respondent, eeting on an affidavit executed by an informer, issued Anthority ‘lo. 1%735 authorizing BI... Sxaminers Cayetano “edide and antonio Tusaneza to verify ané fnovestigate the interma) DECISION .

CTA CASE NO, 2208 2 revenne tax liabilities of le Chevalier, Inc. These examiners discovered that le Chevalier, Inc. 614 not file nor pay income and business taxes for the years 1963 to June 1965, although it catered services not orly to its “eames and guests bot also indiseriminately, to the general public. On the basis of their report, a letter dated November 15, 1965 and another letter dated December 7, 1965 were sent to le Chevalier, Inc. informing it of the findings of "xaminers Medida and Tusaneza end reavest~ ing it to present its side of the case, As no action was taken by Le Chevalier, inc. on these letters, respomient, in his demand letter dated Jameary 13, 1967 assessed and demenied from it the payment of P241,912.53 as fixed am percentage taxes end surcharges computed as follows:

Gross Receipts:

es ¢ 6 lilt gussets

Total Gross Seceipts

10% tax due thereon . “* Add: 25% surcharge (late payment) oo @ @ @& 3 9393022 50% surcharge (wilfvll neglect) *& 69,106.4% Total 10% pereentage tax due .... FP TOTAL AMOUNT DUP & COLIACTIBIR ...

Petitioner's counsel, in a letter to the respondent dated December 1%, 1970, requested thet the assessment mode against his client be reinvestigated, reconsidered and withdrawn, ‘Said request was, however, denied by re- spoment in his letter dated December 23, 1970 and from this lettef of respondent, petitioner appealed to this Court, * 993

DrcisIon

CTA CAG NG, 220F Petitioner does not controvert the “igvres used by respondent in the assessment. tie questions orly the finding thet Le Chevalier Ine. catered not only to its members ord their cvests but slso te the general public. fle insists that the finding that le Chevalfer inc. catered to the general public ic base’ on information civen by an informer who was not an insider {fn the ¢clibe This position ignores the evidence afdueed in this case and the B,1.8. record.

Seles invoices of Le Chevalier, inc. vere presented | in evidence in this case. From these it enpear thet le Chevalier had two sets of invoices: one for non—sembers and another for members, ‘The fact that it he? invofces for non-members is in itself proof that they cater to the general public. Moreover, the sales invotces for members presented as evidence in this Court show that the customers who pei’ them were not members of the elub.

Lewrence — testified that members were ziven memberghip cards and an account number. w4hen served by Le Chevalier, Ine. the member signs anf writes his card number in the place Inticated at the foot of the ine volces. leither the signature of the members nor their ecard number appears in the place injicated in the nomerous Involces presentéd in this case, On the other hand petttioner has oot introduced in evidence any sales

PrcIeios -

SY

invoice signed by any cenber or st leret with iniicstior of his ecard number. The sales invotees presented by re- spormient art the teetironry of Dee are certeiniy not hrar- aye It fe significart too thot Ylorencie “evilla, ceshier of the ‘© Chevalier, inc. who wes presented as a witness for petitioner admitted that the recei-ts of the club 4o not identify the merbers or the ve nponenewhers. Thia tallies with the testimony of “llveric Goching, 6 weiter of the restaurant of “e Chevalier since 196% who testified thet he 414 not notice any customer who signed ehits and showed his 1.2. caré. According to im ecystomers psfid in cash, ‘The testironies of ‘ie- Villa and Coching sre not hearsay.

According to Fedida, le Chevalier had 19 members in 1963 and 30 In 1964, Ile based this finding on the Cash Jourral “ook of the corporation. There were two clesses of members, one refd 1,90). °° and the cther psid only r50. “ upon becoming a nember thereof. ine letter dated December 1%, 1970, counsel for petitioner admitted that in effect there were only 19 members in 1963 and 7° Ir 1964. These serhere could hardly absorb sales of #70,000 in Just two months of operation in 1953 nor could they abeord sales amounting to £00 .000,% for the year 196% or the sales amovnting to 510,268.35 from Janvary to June 39, 1965. These figures @o net inelude soles » 295 =

DECISION ~

CTa CaASF NO, 2208 3 amounting to P2%4,005,09 Afseovered by the examiners which were not reflected in the income of le Chevalier, Inc. The clear indication of the foregoing facts is thet Le Chevalier, Inc. wae in fact a business proposition disguised as a club.

We agree with respondent that Lawrenee (. Dee is personally liable for the tax lisbility of le Chevalier, Ine.

In a statement of May 23, 1969 of Reynaldo 0. *“l-~ mario, eccountant of Le Chewalier, he averred that Dee is the controlling capitalist of be Chevalier, Inc. and we find it signifieant that neither Dee nor 4+lmario ever mentioned any contribution from the members for the establishment an’ operation of the club, restaurant and nightelud. When pn august, 1956, Dee solf @ pert of the corporation for P400,900,00 to Joseph Chem Say anid Feline Pad4ille and another part to Neyraldo Almario for 65,900,909, the deciston to sell was spperently purely his as there is no evidence that tne other members had any participation in the sale. He could make the deci- sion alone because Le Chevallier was tut eae subterfuge for his own business aetivities.

WUFREYORT, the appealed decision is hereby affirmed, With sosts.

SO GADERED.

qaezon City, December 15, 1975.

RAWOW Ee AVAOE oN

” concuRy “Bs a — Ey a ye EE MISIAO BR.

Agsociate sary