CIR V B.F. GOODRICH PHIL., INC., ET AL GR No.

104171,
February 24, 1999
Facts: Private

respondent BF Goodrich Philippines Inc. was an American

corporation prior to July 3, 1974. As a condition for approving the manufacture

of tires and other rubber products, private respondent was required by the
Central Bank to develop a rubber plantation. In compliance therewith, private
respondent bought from the government certain parcels of land in Tumajubong
Basilan, in 1961 under the Public Land Act and the Parity Amendment to the
1935

constitution,

and

there

developed

rubber

plantation.

On August 2, 1973, the Justice Secretary rendered an opinion that ownership

rights of Americans over Public agricultural lands, including the right to dispose
or sell their real estate, would be lost upon expiration on July 3, 1974 of the
Parity Amendment. Thus, private respondent sold its Basilan land holding to
Siltown Realty Phil. Inc., (Siltown) for P500,000 on January 21, 1974. Under the
terms of the sale, Siltown would lease the property to private respondent for 25
years with an extension of 25 years at the option of private respondent.
Private respondent books of accounts were examined by BIR for purposes of
determining its tax liability for 1974. This examination resulted in the April 23,
1975 assessment of private respondent for deficiency income tax which it duly
paid. Siltowns books of accounts were also examined, and on the basis thereof,
on October 10, 1980, the Collector of Internal Revenue assessed deficiency
donors tax of P1,020,850 in relation to said sale of the Basilan landholdings.
Private respondent contested this assessment on November 24, 1980. Another
assessment dated March 16, 1981, increasing the amount demanded for the
alleged deficiency donors tax, surcharge, interest and compromise penalty and
was received by private respondent on April 9, 1981. On appeal, CTA upheld the
assessment. On review, CA reversed the decision of the court finding that the
assessment was made beyond the 5-year prescriptive period in Section 331 of
the

Tax

Code.

Issue: Whether
Held: Applying

or not petitioners right to assess has prescribed.

then Sec. 331, NIRC (now Sec. 203, 1997 NIRC which

provides a 3-year prescriptive period for making assessments), it is clean that

the October 16, 1980 and March 16, 1981 assessments were issued by the BIR
beyond the 5-year statute of limitations. The court thoroughly studied the
records of this case and found no basis to disregard the 5-year period of
prescription, expressly set under Sec. 331 of the Tax Code, the law then in
force.
For the purpose of safeguarding taxpayers from any unreasonable examination,
investigation or assessment, our tax law provides a statute of limitations in the
collection of taxes. Thus, the law or prescription, being a remedial measure,
should be liberally construed in order to afford such protection. As a corollary,
the exceptions to the law on prescription should perforce be strictly construed.