Case Digest (G.R. No. 104171) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
In Commissioner of Internal Revenue v. B.F. Goodrich Phils., Inc., G.R. No. 104171, decided on February 24, 1999, private respondent B.F. Goodrich Phils., Inc. (now Sime Darby International Tire Co., Inc.) was an American‐owned and controlled corporation prior to July 3, 1974, required by the Central Bank to develop a rubber plantation as a condition for tire manufacture. In 1961, under the Public Land Act and the 1935 Constitution’s Parity Amendment, it acquired parcels in Tumajubong, Basilan. Following a Justice Secretary opinion on August 2, 1973, that American rights over such lands would expire on July 3, 1974, the corporation sold the Basilan holdings to Siltown Realty Philippines, Inc. on January 21, 1974 for ₱500,000 payable in installments and simultaneously leased them back for 25 years, renewable for another 25. On April 14, 1975, the Bureau of Internal Revenue (BIR) issued Letter of Authority No. 10115, audited the 1974 books, and assessed a deficiency income tax o Case Digest (G.R. No. 104171) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Background and Land Transaction
- Private respondent B.F. Goodrich Phils., Inc. (now Sime Darby International Tire Co., Inc.) was an American-owned corporation required by the Central Bank (1961) to develop a rubber plantation as a condition for tire manufacturing.
- It purchased public agricultural lands in Tumajubong, Basilan under the Public Land Act and Parity Amendment to the 1935 Constitution.
- Sale and Leaseback; Tax Examinations
- Anticipating the July 3, 1974 expiration of the Parity Amendment, respondent sold its Basilan land to Siltown Realty Philippines, Inc. on January 21, 1974 for ₱500,000 (installment). Siltown then leased the parcels back to respondent for 25 years (renewable another 25 years).
- BIR Letter of Authority No. 10115 (April 14, 1975) led to an April 23, 1975 assessment of ₱6,005.35 deficiency income tax for 1974, which was paid.
- Subsequent BIR examinations of Siltown under LOAs Nos. 074420 RR and 074421 RR resulted in:
- October 10, 1980 donor’s tax assessment of ₱1,020,850 (alleging insufficient sale consideration).
- March 16, 1981 revised assessment of ₱1,092,949 (including surcharge, interest, compromise penalty).
- Respondent appealed to the Court of Tax Appeals (CTA), which on March 29, 1991 modified the assessment to ₱1,311,179.01 plus 10% surcharge and 20% annual interest (capped at three years).
- Court of Appeals and Supreme Court Proceedings
- Respondent elevated to the Court of Appeals, which reversed the CTA on prescription grounds, ruling that a subsequent assessment beyond the five-year period must be based on “fraud, irregularity, or mistake” (Sec. 337), not mere “falsity.”
- The Commissioner of Internal Revenue petitioned for review under Rule 45.
Issues:
- Has the five-year prescriptive period for assessing deficiency donor’s tax prescribed such that the October 1980 and March 1981 assessments are invalid?
- If not prescribed, are the assessments valid and in accordance with law?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)