G.R. No. L-10854; January 27, 1960
MANILA POLO CLUB, plaintiff-appellee, vs. BIBIANO L. MEER, ETC, defendant and appellant.

FACTS

The Manila Polo Club, a non-stock corporation organized to promote social intercourse and sports among its members, operates a restaurant and bar within its premises for its members, their families, and friends. Relying on a ruling by the appellant (the Collector of Internal Revenue) that exempted the Baguio Country Club from fixed and percentage taxes under Sections 182 and 191 of the National Internal Revenue Code, the Club filed a claim for a refund of percentage taxes it had paid from the fourth quarter of 1947 to the third quarter of 1949. After the claim was denied, the Club filed an action in the Court of First Instance of Manila, which ordered the refund of the taxes.

ISSUE

Whether the Manila Polo Club is subject to the fixed and percentage taxes imposed by Sections 182 and 191 of the National Internal Revenue Code for the operation of its restaurant and bar.

RULING

The Supreme Court affirmed the lower court’s decision, ordering the refund of the taxes. The Court held that the Club is not subject to the taxes because:
1. The appellant admitted the Club is a social club and would be exempt if it proved sales in its restaurant and bar were made strictly on a “cost-plus-expenses-basis” (charging only procurement costs plus an amount to cover operational expenses). The record showed the Club used this method.
2. Therefore, the Club cannot be considered engaged in business as a keeper of a restaurant and bar.
3. The Club’s objectives are to promote polo, sports, and social intercourse among members. The operation of the bar and restaurant is merely incidental to these objectives, and the Club is not a commercial concern run for profit.
The decision was affirmed without costs.