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    CIR vs. Club Filipino

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    TaJheng Barde

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    © All Rights Reserved
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    CIR vs. Club Filipino

    Uploaded by

    TaJheng Barde
    3 views1 page

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    © © All Rights Reserved

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    Copyright:

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    3 views1 page

    CIR vs. Club Filipino

    Uploaded by

    TaJheng Barde

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 1

    CIR vs.

    Club Filipino, 5 SCRA 321

    FACTS:

    Club Filipino, Inc. De Cebu is a civic corporation. Among other purposes, the corporation aims to
    “provide, operate, and maintain various games not prohibited under general laws and general
    ordinances; and develop and cultivate sports of every kind and any denomination for recreation
    and healthy training of its members and shareholders."

    The Club also owns and manages a clubhouse, a bowling alley, a golf course, and a bar-
    restaurant for its members and their guests, which are necessary for the club's operation. The
    club primarily operates using funds from membership fees and dues. Due to a capital surplus
    resulting from the revaluation of its real properties, the Club declared stock dividends; however,
    no actual cash dividends were distributed to the stockholders.

    A BIR agent discovered that the Club failed to pay percentage tax on the gross receipts of its bar
    and restaurant. The Collector of Internal Revenue assessed and demanded the unpaid
    percentage tax, along with surcharges, from the Club. After the Club's request for cancellation
    of the assessment was denied, it filed the current petition for review.

    ISSUE: Whether Club Filipino, Inc. De Cebu is a stock corporation.

    RULING:

    NO.
    For a stock corporation to exist, two requisites must be compiled with, to wit: (1) a capital stock
    divided into shares, and (2) an authority to distribute to the holders of such shares, dividends or
    allotments of the surplus profits on the basis of the shares held.

    In the case at bar, the fact that Club Filipino, Inc. of Cebu's capital stock is divided into shares
    does not affect the conclusion made by the trial court that the Club is not operating as a bar and
    restaurant business. The determining factor is the Club's purpose or objective, as stated in its
    articles and by-laws. In corporation law, the actual purpose is not controlled by the corporate
    form or the commercial aspect of the business, but can be demonstrated through extrinsic
    evidence, including by-laws and operational methods. The Tax Court, based on the extrinsic
    evidence provided, determined that the Club is not engaged in the business as a barkeeper and
    restaurateur. Additionally, there is no authority in the Club's articles of incorporation or by-laws
    for the distribution of dividends or surplus profits. Consequently, it cannot be considered a
    stock corporation under the corporation law.

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