GR L 13387; (March, 1960) (Digest)
G.R. No. L-13387; March 28, 1960
SY CHIUCO, petitioner, vs. COLLECTOR OF INTERNAL REVENUE, respondent.
FACTS
Petitioner Sy Chiuco was the owner and operator of the La Loma Cabaret in Quezon City from 1926 to January 1956. The cabaret charged customers P0.30 per dance: P0.10 paid as an admission fee at the gate and P0.20 paid to the “bailarinas” (dancers) after each dance. Notices of these fees were posted conspicuously in the cabaret. For the period from January 1947 to August 1950, petitioner declared in his tax returns only the following gross receipts: gate admissions (P59,160.40), restaurant sales (P5,339.90), and bar sales (P47,459.10), on which he paid a 10% amusement tax totaling P11,197.40. He did not declare the P0.20 dance fees collected for the “bailarinas.” Consequently, the respondent Collector of Internal Revenue assessed a deficiency amusement tax, including a 50% surcharge, amounting to P17,616.05, plus a P300.00 penalty for violating Section 260 of the Tax Code and Bookkeeping Regulations. Petitioner appealed to the Court of Tax Appeals, which affirmed the deficiency tax and surcharge but rejected the P300.00 penalty due to lack of authority. Petitioner then filed this petition for review.
ISSUE
Whether the P0.20 dance fees collected by the cabaret for its “bailarinas” form part of the “gross receipts” of the cabaret business subject to the 10% amusement tax under Section 260 of the Tax Code.
RULING
Yes. The Supreme Court affirmed the decision of the Court of Tax Appeals, holding that the dance fees are part of the gross receipts subject to amusement tax. Under Section 260 of the Tax Code, a 10% tax is levied on the gross receipts of cabarets “irrespective of whether or not any amount is charged or paid for admission,” and the term “gross receipts” embraces all receipts of the proprietor or operator. The Court reasoned that dancing is the main business of a cabaret, with “bailarinas” as the indispensable attraction. Therefore, fees paid for dancing are integral to the business operations and constitute gross receipts of the operator, even if later remitted to the dancers. The law treats dance fees as the primary gross receipts, with admission fees being incidental. The Court also upheld the 50% surcharge, finding that petitioner’s deliberate omission of a substantial portion of taxable income amounted to fraud. The defense of prescription was deemed waived, as it was not raised in the Court of Tax Appeals. The decision was affirmed, with costs against petitioner.