EN BANC

[G.R. No. L-11176. June 29, 1959.]

THE COLLECTOR OF INTERNAL REVENUE, petitioner, vs.

MANILA LODGE NO. 761 OF THE BENEVOLENT &
PROTECTIVE ORDER OF ELKS and THE COURT OF TAX
APPEALS, respondents.

Solicitor General Ambrosio Padilla and Solicitor Frine C. Zaballero for

petitioner.

Manuel O. Chan for respondent Lodge.

SYLLABUS

1. TAXATION; PRIVILEGE TAX; DEALER OF LIQUOR AND TOBACCO,

WHEN MAY BE SUBJECTED TO PRIVELEGE TAX. — The "retail liquor dealers",
"retail dealers in fermented liquors" land "retail tobacco dealers" required in
section 193 of the Tax Code, in relation to section 178 of the same, to pay
taxes, are those engaged in teh "business" of selling liquor and tobacco.
2. ID.; ID.; NON-PROFIT ORGANIZATIONS; LIABILITY FOR THE
PAYMENT OF PRIVILEGE TAX. — The plain and ordinary meaning of
"business" is restricted to activities or affairs where profit is the purpose, or
livelihood is the motive. As the term "business" is used without any
qualification in the aforementioned sections of the Tax Code, it should be
construed in its plain and ordinary meaning. Thus, in the case at bar the
respondent club cannot be considered as engaged in the "business" of
selling liquor and tobacco because, in pursuance of its purpose as a fraternal
social club, it sells on retail at its clubhouse, liquor, cigars and cigarettes, on
a very limited scale only to its members and their guests, providing just
enough margin to cover operational expenses without intention to obtain
profit. Hence, it cannot be held liable for of the privilege taxes required by
section 193 of the Tax Code.

DECISION

CONCEPCION, J : p

This is an appeal taken by the Collector of Internal Revenue from a

decision of the Court of Tax Appeals holding that the Manila Lodge No. 761
of the Benevolent & Protective Order of Elks "is not liable for privilege taxes
onits sale by retail of liquor and tobacco exclusively to its members and their
guests," and reversing and setting aside a decision of said appellant to the
contrary, dated November 19, 1953, without special pronouncement as to
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 costs.
The uncontested facts are set forth in the decision of said Court, from
which we quote:
"This is an appeal from two decisions of teh respondent
Collector of Internal Revenue assessing and demanding from the
petitioner herein the sums of P1,203.50 and P332.00, respectively
representing fixed taxes as retail dealer in liquor, fermented liqour,
and tobacco, allegedly due from petitioner for the period from the 4th
quarter of 1946 to 1953 and the period from 1954-1955 pursuant to
subsections (i), (K) and (n) of section 193 of the Tax Code, in relation
to 178 of the same Code.
"The petitioner, Manila Lodge No. 761 is admitted a fraternal,
civic, non-stock, non-profit organization duly incorporated under
Philippine laws. It owns and operates a clubhouse located at Dewey
Boulevard, Manila, wherein it sells at retail, liquor, fermented liquor,
cigar and cigarettes only to its members and their guests. B.I.R.
agents discovered that the Manila Elks Club had not paie for the
period in question the privilege tax for retail liquor dealer (B-4), retail
dealer in fermented liquor (B-7), and retail tobacco dealer (B-9-a)
prescribed in section 193 of the Tax Code.
"On November 19, 1953, the Collector of Internal Revenue
assessed against and demanded the petitioner the payment of the
sum of P1,203.50 representing fixed taxes, as retail dealer, for the
period from its 4th quarter of 1946 to1953, exclusive of the
suggested compromise penalty of P80.00. The petitioner, claiming
that it was exempted from the payment of the privilege taxes in
question, requested that the said assessment be reviewed by the
Conference Staff of the Bureau of Internal Revenue. The Conference
Staff, after due hearing, upheld and reiterated the assessment made
by the respondent Collector of Internal Revenue. Forthwith, the
petitioner appealed to this Court on June 1, 1955.
"During the pendency of the original petition for review in the
above-entitled cas, respondent issued another assessment covering
fixed taxes for the years 1954 to 1955 in the amount of P332.00,
exclusive of the suggested compromise penalty of P50.00.
Consequently, petitioner woth leave of Court filed a supplemental
petition for review which included the latter assessment.
"Petitioner bases its claim for exemption from the payment of
the privilege taxes in question on the grounds that it is not engaged
in the business of selling at retail liquor, fermented liquor, and
tobacco because the sale of these aforementioned specific goods is
made only to members of the club and their guests' on a very limited
scale in pursuance only of its general purpose as a fraternal social
club, to provide comfort, receation,and vonvenience to such
members, and merely to provide enough margin to cover operational
expenses.' (Petition's Memo p. 3).
"Respondent, on the other hand, maintains that persons selling
articles subject to specific tax, such as cigars, tobacco, oquor and the
like are subject to the taxes imposd by section 193 of the Tax Code,
irrespective of whether or not they made profit, and whether or not
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 they are civic or fraternal clubs selling only to their members and
their guests. This contention si based on a ruling promulgated by the
Bureau of Internal Revenue made in 1921."
Petitioner herein maitains that:
"1. The respondent Court of Tax Appeals erred in reversing
the decision of the petitioner-appellant which held the respondent
club liable for fixed taxes.
"2. The respondent Court of Tax Appeals erred in holding
that before respondent club's liability for the privilege taxes imposed
by section 193 of the Tax Code attaches it is necessary that it be
engaged in the 'business' of selling liquor and tobacco.
"3. The respondent Court of Tax Appeals erred in holding
that a fraternal, civic, non-stock, non-profit organization like the
respondent club selling at retail liquor and tobacco only to its
members and their guests woth just enough margin to cover
operational expenses should not be held liable for the fixed taxes
incident to the business of selling at retail, liquor and tobacco.
"4. The respondent Court of Tax Appeals erred in holding
that the administrative construction of the Bureau of Internal
Revenue on the matter in question is outside the ambit of, and is
incosistent with, the Revised administrative Code and Tax Code."
This appeal is untenable. In the language of the Court of Tax Appeals:
"The bone of contention between the two parties herein . . ., lies
on the proper interpretation and application of the pertinent
provisions of Tax Code, namely subsections (i), (k) and (n) of section
193 in relation to section 178 of the Tax Code, which wer quote
hereunder:
'Sec. 178. Payment of provilege taxes . — A privilege tax
must be paid before any business or occupation hereinafter specified
can be lawfully begun or pusued. 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.'(Emphasis supplied.)
SEC. 193. Amount of tax on business.-Fixed taxes on
business shall be collected os follows, the amount stated being for
the whole year when not otherwise specified:
(j) Retail liquor dealers, on hundred pesos.
(k) Retail dealers in fermented liquors, fifty pesos.
(n) wholesale tobacco dealers, sixty pesos; retail tobacco
dealers, sixteen pesos."
"The aforequoted provisions of the Tax Code are clear and
precise. The privilege taxes prescribed in section 193 of the Tax Code
in relation to section 178 of the same, are to be imposed only on
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 persons or entities who engage in the activities memtioned or
classified therein for 'business' purposes. This evident intention of the
law becomes more palpable when we take into consideration the fact
that the drafters of our Tax Code had grouped the aforequoted
provisions of law under one general division of the Tax Code headed
as 'Title V, Privilege Taxes on Business and occupation.'
"It is not therefore intirely correct to maintain as respondent
does, that all persons selling articles subject to specific taxes, like
liquor and tobacco, should likwise be subject to the fixed taxes
imposed by section 193 of the Tax Code. We believe, that in order
that these persons should be subjected to the privilege taxes imposed
by the aforementioned section of the Tax Code, it is necessary that
they be engaged in the 'business' of selling liquor and tobacco,
otherwise the privilege taxes as a dealer of liquor and tobacco can
not attach.
"At this juncture a definition of the word 'business is in order
and we have the following:
'The word 'business' in its ordinary and common use is
employed to designate human efforts which have for their and living
or reward; it is not commonly used as descriptive of charitable,
religious, educational or social agencies.' (Ballaantine's Law
Dictionary, 1948 Ed. P. 179)
'Business — 'that which busies or engages time, attention or
labor as a principal serious concern or interest; any particular
occupation or employment habitually engaged in specially for
livelihood or gain.' (Vol. 1, 1049 Merriam-Webster's New International
Dictionary, 2nd Ed. p. 362.).
"Other definitions of the term business' as given by judicial
pronouncement are found in Volume V. Words and Phrases, page 999
as follows:
'Business is a word of large signification, and denotes the
employment or occupation in which a person is engaged to procure a
living'. (citing: goddard v. chaffee, 84 Mass (Allen) 395; 79 Am Dec.
796). 'Business in common speech means habitual or regular
occupation that a party is engaged in with a view to winning a
livelihood or some gain.' (Citiong: In re Lemont, 41 p. 2D, 497, 502)
'An enterprise not conducted as a means of livilihood or for
profit does not come within the ordinary meaning of the terms,
'business, trade or industry.' (Citing City of Rochester vs. Rochester
Girl's Home, 194 N.Y.S. 236, 237).
'The term 'business as used in law imposing a license tax on
business, trades, etc. ordinarily means business in the trade or
commercial sense only, carried on with a view to profit or livelihood.'
Citing: Cuzner vs. california Club 100 p. 868, 867, 155, Cal. 303, 20
L.R.A. N.S. 1095).
'From the foregoing definitions, it is evident that the plain,
ordinary meaning of 'business' is restricted to activities or a affairs
where profit is the purpose, or livlihood is the motive. The term
'business' being used without any qualification insection 193 of the
Tax Code in relation to section 178 of the same, should therefore be
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 construed in its plain and ordinary meaning, restricted to activities for
profit or livlihood.
'With these considerations in mind, we now come to the
question of whether or not the Manila Elks Club is engaged in the
'business' of selling liquor and tobacco.
"Respondent, in paragraph 1 of his answer, admits that the
petitioner herein, Manila Elks Club is a fraternal, civic, non-stock, non-
profit organization. It has been established without contradiction that
the Manila Elks Club, in pursuancen of its purpose as a fraternal social
club, sells on retail at its clubhouse on dewey Boulevard, liquor, cigars
and cigarettes, on a very limited scale, only to its memberes and their
guests, providing just enough margin to cover operational expenses
without intention to obtain profit. such being the case then, the
Manila Elks Club cannot be considered as engaged in the 'business' of
selling liquor and tobacco.
'Where the corporation handled no money except such as was
necessary to cover operational expenses, conducted no business for
itself, and engaged in no transactions that contemplated a profit for
itself — such a corporation is considered not organized for profit
under the General Corporation Law.' (Read v. Tidewater Coal Exch.,
116 a 898, 904, cited in Vol. 34, Words & Phrases, p. 220, defining
profits; emphasis provided.)
"The petitioner herein, Manila Elks club, jot being engaged in
the business of selling at retail liquor and tobacco, cannot therefore
be held liable for the privilege taxes required by section 193,
subsections (1), (k) and (n). The wight of American authorities
enhances the strength of our findings that a fraternal, civiv, non-
stock, non-profit organization, like the Elks Club, selling at retail
lequor and tobacco only to its members and their guests in pursuance
woth its general purpose as a fraternal social club with just enough
margin to cover operational expenses, should not be held liable for
the fixed taxes incident to the business of selling at retail, liquor and
tobacco.
'A bonafide social club, which disposes of liquors at its
clubhouse to members and their guests at a fixed charge as incident
to the general purposes of the organiztional is not required to take
out a license by Rev. Laws No. 3777-3785, approved March 15, 1905,
which provides for a license upon the business of disposing
intoxicating liquors; the term business in such statute meaning
business in the trade or commercial sense. (State v. University Club,
130 p. 468, 470; 35 Nev. 475; 44 L.R.A., N.S. 1026).
A social club, not organized for the purpose of evading the
liquor laws, bu which furnishes its members with liquors and
refreshments without profit to itself, is not a retail liquor dealer,
within the statute imposing a license tax on all persons dealing in,
selling or disposing of intoxicating liquors by retail.' (Barden v.
Montan Club, 25 P. 1042, 10 Mont. 330, II L.R.A. 539).
'Acts 1881, C. 149, authorizing taxation of liquors dealers, does
not include a social club maintaining a library, giving musical
entertainments, and furnishing meals for its members, which keeps a
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 small stock of liquor; the members paying for its drink as it is taken,
but no profit being made on such sales.' (Tennessee Club of Memphis
v. Dwyer, 79 Tenn. (11 Lea) 452, 461, 47 Am. Rep. 298.)
'A social club composed of members who have no proprietary
interest in the assets which provides a reading room, restaurant, bar
room, library, billiard rooms and sitting rooms for its members, the
expenses of which are defrayed of which are defrayed by annual
dues from each member, and by payments made by the members for
food and drinks, is not engaged in the business of a retail liquor
dealer, within section 11 of the Louisians License Tax Laws." (La Ann.
585, 20 L.R.A. 185). Respondent, however, insists that the petitioner
should pay the privilege tax on the sale at retail of liquor and tobacco
because this has been allegedly the practice consistently followed by
the Bureau of Internal Revenue since 1921 and because section 1464
of the Revised Administrative Code under which said ruling was then
based had been reenacted by the legislature as section 193 of the
National Internal Revenue Code. Thus, respondent contends, that the
policy of the Bureau of Internal Revenue has therefore gained
'approval by legislative reenactments.'
"The alleged administrative practice is founded upon the
following ruling rendered in 1921.
'Clubs selling exclusively to members thereof liquors and other
products on which the specific tax is imposed should pay the privilege
tax corresponding to the business engaged in . The fact that such
products are sold at cost to the members of the club does not affect
the club's liability to tax.' (Ruling, Oct. 13, 1921, B.I.R. 105.02; Exh. 3
pp. 66-69. BIR records.)
"We do not agree with the contention of the respondent. While
there is admittedly a ruling on this point in 1921, there is no showing
that such has been along-continued practoce. Be that as it may, any
such adminitrative construction must be within the ambit of, and
must be consistent with the Revised Adminitrative Code and the Tax
Code. It is likewise the rule that where the statute is unabiguous, an
administrative construction is unwarranted (U.S. vs. Missouri P. R. Co.
269, 73 L. Ed. 322) and no construction may be made to restrict or
enlarge the meaning of an Act. (Blatt vs. U.S., 305 U.S. 83 L. ED. 167).
"An examination of section 1464 of the Revised Administrative
Code taken connection with section 1453 of the same, discloses the
fact that aside from the change in rates to be paid and the
arrangement of the classification of business enumerated therein,
section 193 of the present Tax code is a verbatim copy of the
aforementioned provisions of the Revised Administrative Code. The
policy or principle followed by the said code regarding privileges
taxes, i.e. that the privilege taxes are payable only by those persons
or entities engaged in the business enurerated in section 1464 of the
said Code, has not suffered any change, and the same still obtains
under our present Tax Code. In the absence of a showing that the
legislative body had been apprised of the aforesaid ruling, what has
gained legislative approval thru reenactment is, we believe, the
policy behind the above-mentioned provision of the Revised
Administrative Code of taxing persons engaged in business and not
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 the alleged practice following the adminitrative ruling of 1921. We
believe that no amount of trenchant adherence to an established
practice may justify its continued application where it is clear and
manifest that the same is not consonance woth the policy of the
legislature as defined by law."
It is urged by appellant that emphasis should be placed not on the
term "business", but on the phrases "retail liquor dealers", in fermented
liquors" and "retail tobacco dealers", appearing in section 193 of the
National Internal Revenue Code, which are defined in section 194 thereof as
follows:
"SEC. 194. Words and phrases defined.-In applying the
provisions of the preceding section, words anf phrases shall be taken
in the sense and extension indicated below:
xxx xxx xxx
"(i) 'Retail liquor dealer' includes every person, except a
retail vino dealer, who for himself or on commission sells or offers for
sale wine or distilled speirits (other than denatured alcohol) in
quantities of five liters or less at any one time and not for resale.
"(k) 'Retail dealer in fermented liquors' includes every
person, except retail dealers in tuba, basi, and tapuy, who for himself
or on commission sells or offers for sale fermented liquors and
quantities of five liters or less at any one time and not for resale.
"(o) 'Tobacco dealer' comprehends every person who for
himself or on commission sellsa or offers for sale cigars, cigarettes, or
manufactured tobacco."
Undoubtedly, these definitions must be given all the weight due
thereto, in the interpretation of section 193 of the Tax Code. As used
therein, the phrases above referred to are, however, part and parcel of the
provisions contained, not only in said section 193, but, also, in section 178
and other parts of the Tax Code, all of which must be given effect in their
entirely as a harmonious, coordinated and integrated unit, not as a mass of
hetegeneous and unrelated if not incongruous terms, clauses and sectences.
In other words, the phrases in question should be construed in the light of
the context of the whole Tax Code, of which they are integral parts. And
when this is done — when we consider that section 193 requires "retail
liquor dealers", "retail dealers in fermented liquor" and "retail tobacco
dealers" to pay the taxes on business" therein specified; that said section
193 is entitled "Amount of tax on business"; that said section 193 merely
implements the general provision in section 178, to the effect that "a
privilege tax must be paid before any business or occupation hereinafter
specified can be lawfully beguan and pursued"; that the term "business" is
used in said section 178 six (6) times; and that the aforementioned sections
178, 193 and 194 are part of Title V of the Tax Code, entitled "Privilege taxes
on business and occupation" — it becomes crystal clear that the "retail liquor
dealer", "retail dealers in fermented liquors" and "retail tobacco dealers"
alluded to in said section 193 are those engaged in "business", not fraternal,
civic, non-stock, non-profit organizations, like herein respondent, which sells
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 wines, distilled spirits, fermented liquors and tobacco, exclusively to its
members and their guests, at such prices as are merely sufficient to cover
operational expenses.
Petitioner assails the applicability of the decisions relied upon by the
Court of Tax Appeals, upon the ground that said decisions refer to the
authority to license, and, hence, to the exercise of the police power, not that
of taxation which is involved in the case at bar. However, the distinction
made enhances — instead of detracting from — the weight of said decisions
as precedents, insofar as the issue herein is concerned. Indeed, the police
power is, in general broader and subject to less restrictions than the power
to tax. It is not difficult to conceive the advisability, if not, necessity, of
requiring a license for some activities undertaken by so-called "clubs", owing
to the possibility, if not probability, of use of said name, appellation or
denomination, in order to avoid or evade some laws or to camouflage certain
ventures, pursuits or enterprises which otherwise would clearly be illegal,
immoral or contrary to public policy. Upon the other hand, a tax is a burden
and, as such, it will not be deemed imposed upon fraternal, civic, non-profit,
non-stock organizations, unless the intent to the contrary is manifest and
patent.
Wherefore, the appealed decision of the Court of Tax Appeals is hereby
affirmed, without special pronouncement as to costs. It is so order.
Paras, C.J., Bengzon, Padilla, Montemayor, Bautista Angelo, Endencia
and Barrera, JJ., concur.

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