Internal Revenue Case of the Balara Filters

July 22, 1959 BIR RULING NO. 385-59 The Regional Director Regional District No. 4 Quezon City S i r : There is returned herewith the papers bearing on the internal revenue case of the Balara Filters, involving the sum of P15,468.10 as amusement tax, with the following information. cdll Pursuant to the opinion of the Secretary of Justice dated July 14, 1955 (Opinion No. 245, Series of 1955), this Office has consistently ruled that admission fees or charges to swimming pools and dancing pavilions are not subject to amusement taxes imposed under section 260 of the Tax Code, unless the said swimming pools and dancing pavilions are used for swimming or dancing contests or exhibitions, in which case the admission fees or charges to such places become taxable under section 260. However, in the case of the Collector of Internal Revenue vs. Junior Women's Club of the Philippines, G. R. No. L-6992, promulgated on February 28, 1956, the Supreme Court decided that if any place is on any occasion used by the owner or leased to others for dancing purposes or any other amusement undertaking by reason of which admission fees or charges are collected, such a place may be considered a place of amusement within the meaning of the 1st paragraph of section 260 of the Tax Code, and, therefore, admission fees or charges to the said place shall be subject to the graduated rates of amusement taxes thereunder provided. It would seem from the aforecited decision of the Supreme Court that the opinion of the Secretary of Justice is already superseded especially with respect to the definition of a place of amusement. Apparently, the swimming pools, dancing pavilions and other amusement places at Balara Filters may be included within the purview of the said definition. In this case, we should also take into consideration the applicability of Republic Act No. 104, which provides among other things for the liability to taxation, of government-owned and controlled corporation engaged in business or any other undertaking for profit. cdt Revenue Examiner Benjamin C. Perez in his 2nd Indorsement dated October 3, 1958, reported that the Balara Filters is operated by the NAWASA, a government-owned and controlled corporation, which in this respect is definitely not engaged in any transaction for profit. Obviously, the taxability of the Junior Women's Club of the Philippines (re: CIR vs. JWCP) was predicated on the presence of the element of profit in its sponsored undertaking. Likewise, the same element should be present before a government-owned and controlled corporation engaged in business can be subject to taxation. Hence, since profit is the primordial consideration in the determination of the taxability or non-taxability of an undertaking, this Office is of the opinion that the admission fees and charges to the swimming pools and dancing pavilions at the Balara Filters are exempt from the payment of amusement taxes, it appearing that any amount realized, if ever, by the Balara Filters is intended only for the upkeep and maintenance of the place. No part of the proceeds from the said fees and charges inures to the benefit of any private person. In view of the foregoing consideration, the assessment of the Bureau in the sum of P15,468.10 against the Balara Filters should be canceled and this case closed and terminated. Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue