CIR V. GOODRICH 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 3year 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.