CIR V. BF GOODRICH PHILS. INC.

G.R. 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 a 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 or not petitioners right to assess has prescribed.

Held: Applying 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.