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CIR vs. B.F. Goodrich 104171

The CIR assessed additional taxes against BFG more than 5 years after BFG paid its initial tax assessment for 1974. BFG contested the additional assessment, arguing it was beyond the 5-year statute of limitations for tax assessments under the NIRC. The CA agreed with BFG and reversed the increased CTA assessment. The Supreme Court affirmed the CA's decision, finding that the initial assessment was not based on a "false" return, so the 5-year limit applied, and the later assessment was too late.

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308 views1 page

CIR vs. B.F. Goodrich 104171

The CIR assessed additional taxes against BFG more than 5 years after BFG paid its initial tax assessment for 1974. BFG contested the additional assessment, arguing it was beyond the 5-year statute of limitations for tax assessments under the NIRC. The CA agreed with BFG and reversed the increased CTA assessment. The Supreme Court affirmed the CA's decision, finding that the initial assessment was not based on a "false" return, so the 5-year limit applied, and the later assessment was too late.

Uploaded by

magen
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Commissioner of Internal Revenue, versus B.F. Goodrich Philippines, Inc.

(Now Sime Darby International Tire Co., Inc.)


G.R. No. 104171, February 24, 1999
Third Division, Panganiban, J.

Facts: BF Goodrich PH Inc. (BFG) was an american-owned and controlled


corporation, and to approve the manufacture by BFG of tires and other rubber
products the Central Bank of the Philippines required that it should develop a
rubber plantation. In compliance with this requirement, BFG purchased from
the PH Government under the Public Land Act, and the parity amendment to
the 1935 Constitution certain parcels of land in Basilan there developed a
rubber plantation. Over a decade later, the Justice Secretary opined that the
expiration of the Parity Amendment would strip off the ownership rights of
Americans over public agricultural lands, including their right to dispose their
real estate. In accord with the terms of sale, Siltown Realty Philippines (SRP)
leased subject lands to BFG for 25 yrs with extension of another 25 yrs at the
latter’s election. BFG paid an assessment in amount of 6,005.35Php based on
the letter of authority issued by the BIR for its tax liability in year 1974. The Bureau
of Internal Revenue (BIR) then issued letters of authority and memorandum
authority to examine SRP’s business, income and tax liabilities. The BIR found
that there were deficiencies in donor’s tax around 1MPhp, in relation to its sale
for the subject lands. The BIR deemed the consideration for the sale insufficient,
and the difference between the fair market value and the actual purchase
price a taxable donation. BFG contested this, yet later received another
assessment now with surcharge, interest, and compromise penalty. BFG
appealed to the Court of Tax Appeals (CTA) which increased the assessment.
The case was elevated to the Court of Appeals (CA), which reversed the CTA
decision: the subject assessment was made beyond the 5 year period and
may only be justified by fraud, irregularity and mistake on the part of the
taxpayer.

Issue(s): Notwithstanding the expiration of the five-year prescriptive period,


may the Bureau of Internal Revenue (BIR) still assess a taxpayer even after the
latter has already paid the tax due, on the ground that the previous
assessment was insufficient or based on a "false" return?

Decision: No. Petition for Review Denied, CA decision affirmed. The prescriptive
period for internal-revenue taxes to be assessed is 5 years pursuant to Section
331 of the National Internal Revenue Code (NIRC.) Here, the assessments were
issued beyond the 5-year statute of limitations, thus had prescribed. CIR insists
that the 5 year prescriptive period does not apply since there was a falsity:
when BFG sold the property for a price lesser than its declared fair market
value. It cannot be given favor: This fact alone did not constitute a false return
which contains wrong information due to mistake, carelessness, or ignorance.
In fact, BFG was just trying to cut losses. The fact that the sale transaction may
have partly resulted in a donation does not change the fact that private
respondent already reported its income for 1974 by filing an income tax return.

Page 17 of 30

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