CCMMISSICNLk CI IN1LkNAL kLVLNUL pet|t|oner vs 8I GCCDkICn nILS INC (now SIML DAk8

IN1LkNA1ICNAL 1IkL CC INC) and 1nL CCUk1 CI ALALS respondents

Iacts
O rlvaLe 8espondenL 8l Coodrlch hlls lnc (now Slme uarby lnLernaLlonal 1lre Co lnc) was an Amerlcan
owned and conLrolled corporaLlon
4 As a condlLlon for approvlng Lhe manufacLure by prlvaLe respondenL of Llres and oLher rubber
producLs Lhe CenLral 8ank of Lhe hlllpplnes requlred LhaL lL should develop a rubber planLaLlon
4 prlvaLe respondenL purchased from Lhe hlllpplne governmenL ln 1961 under Lhe ubllc Land
AcL and Lhe arlLy AmendmenL Lo Lhe 1933 ConsLlLuLlon cerLaln parcels of land locaLed ln
1uma[ubong 8asllan and Lhere developed Lhe planLaLlon
O ,ore Lhan a decade laLer on AugusL 2 1973 Lhe [usLlce secreLary rendered an oplnlon sLaLlng LhaL upon
Lhe explraLlon of Lhe arlLy AmendmenL on !uly 3 1974 Lhe ownershlp rlghLs of Amerlcans over publlc
agrlculLural lands lncludlng Lhe rlghL Lo dlspose or sell Lhelr real esLaLe would be losL
4 prlvaLe respondenL sold Lo SllLown 8ealLy hlllpplnes lnc on anuary 21 1974 lLs 8asllan
landholdlng for 300000 payable ln lnsLalmenLs
4 ln accord wlLh Lhe Lerms of Lhe sale SllLown 8ealLy hlllpplnes lnc leased Lhe sald parcels of
land Lo prlvaLe respondenL for a perlod of 23 years wlLh an exLenslon of anoLher 23 years aL Lhe
laLLer's opLlon
O Lhe books and accounLs of prlvaLe respondenL were examlned for Lhe purpose of deLermlnlng lLs Lax
llablllLy for Laxable year 1974 LhaL resulLed ln Lhe Apr|| 23 197S assessmenL of prlvaLe respondenL for
deflclency lncome Lax ln Lhe amounL of 600333 whlch lL duly pald
O n Lhe basls of Lhls examlnaLlon Lhe 8l8 commlssloner lssued agalnsL prlvaLe respondenL on Cctober 10
1980 an assessmenL for deflclency ln donor's Lax ln Lhe amounL of 1020830 ln relaLlon Lo Lhe
prevlously menLloned sale of lLs 8asllan landholdlngs Lo SllLown
4 8l8 deemed Lhe conslderaLlon for Lhe sale lnsufflclenL and Lhe dlfference beLween Lhe falr
markeL value and Lhe acLual purchase prlce a Laxable donaLlon
4 lL recelved anoLher assessmenL daLed March 16 1981 whlch lncreased Lhe amounL Lo
1092949
O rlvaLe respondenL appealed Lhe correcLness and Lhe legallLy of Lhese lasL Lwo assessmenLs Lo Lhe C1A
whereln Lhe laLLer modlfled lL and ordered prlvaLe respondenL Lo pay Lhe amounL of 131117901 plus
10 surcharge and 20 annual lnLeresL
O DndaunLed prlvaLe respondenL elevaLed Lhe maLLer Lo Lhe CourL of Appeals whlch reversed Lhe C1A
4 JhaL ls lnvolved here ls noL a flrsL assessmenL nor ls lL one wlLhln Lhe 3year perlod sLaLed ln
SecLlon 331 above
Issue J$- peLlLloner's rlghL Lo assess hereln deflclency donor's Lax has lndeed prescrlbed as ruled by publlc
respondenL CourL of Appeals
J$- Lhe hereln deflclency donor's Lax assessmenL for 1974 ls valld and ln accordance wlLh law
ne|d ?es and -o
kat|o
SLC 331 erlod of llmlLaLlon upon assessmenL and collecLlon xcept os ptovlJeJ lo tbe socceeJloq sectloo
lotetoolteveooe toxes sboll be ossesseJ wltblo flve yeots oftet tbe tetoto wos flleJ ooJ oo ptoceeJloq lo coott
wltboot ossessmeot fot tbe collectloo of socb toxes sboll be beqoo oftet expltotloo of socb petloJ lot tbe potposes
of tbls sectloo o tetoto flleJ befote tbe lost Joy ptesctlbeJ by low fot tbe fllloq tbeteof sboll be cooslJeteJ os flleJ
oo socb lost Joy ltovlJeJ 1bot tbls llmltotloo sboll oot opply to coses olteoJy lovestlqoteJ ptlot to tbe opptovol of
tbls coJe
App|y|ng th|s prov|s|on of |aw to the facts at hand |t |s c|ear that the Cctober 16 1980 and the March 1981
assessments were |ssued by the 8Ik beyond the f|veyear statute of ||m|tat|ons 1he CourL has Lhoroughly
sLudled Lhe records of Lhls case and found no basls Lo dlsregard Lhe flveyear perlod of prescrlpLlon
-or ls peLlLloner's clalm of falslLy sufflclenL Lo Lake Lhe quesLloned assessmenLs ouL of Lhe amblL of Lhe sLaLuLe of
llmlLaLlons 1he relevanL parL of Lhen SecLlon 332 of Lhe -l8C whlch enumeraLes Lhe excepLlons Lo Lhe perlod of
prescrlpLlon provldes
SLC 332 LxcepLlons as Lo perlod of llmlLaLlon of assessmenL and collecLlon of Laxes (a) o tbe cose of o folse ot
ftooJoleot tetoto wltb loteot to evoJe o tox ot of o follote to flle o tetoto tbe tox moy be ossesseJ ot o ptoceeJloq
lo coott fot tbe collectloo of socb tox moy be beqoo wltboot ossessmeot ot ooy tlme wltblo teo yeots oftet tbe
Jlscovety of tbe folslty ftooJ ot omlssloo xxx"
eLlLloner lnslsLs LhaL prlvaLe respondenL commlLLed falslLy" when lL sold Lhe properLy for a prlce lesser Lhan lLs
declared falr markeL value 1hls facL alone dld noL consLlLuLe a false reLurn whlch conLalns wrong lnformaLlon due
Lo mlsLake carelessness or lgnorance13 lL ls posslble LhaL real properLy may be sold for less Lhan adequaLe
conslderaLlon for a bona flde buslness purpose ln such evenL Lhe sale remalns an arm's lengLh" LransacLlon ln
Lhe presenL case Lhe prlvaLe respondenL was compelled Lo sell Lhe properLy even aL a prlce less Lhan lLs markeL
value because lL would have losL all ownershlp rlghLs over lL upon Lhe explraLlon of Lhe parlLy amendmenL ln
oLher words prlvaLe respondenL was aLLempLlng Lo mlnlmlze lLs losses AL Lhe same Llme lL was able Lo lease Lhe
properLy for 23 years renewable for anoLher 23 1hls can be regarded as anoLher conslderaLlon on Lhe prlce
lneludlbly Lhe 8l8 falled Lo show LhaL prlvaLe respondenLs 1974 reLurn was flled fraudulenLly wlLh lnLenL Lo evade
Lhe paymenL of Lhe correcL amounL of Lax13 ,oreover eveo tbooqb o Jooots tox wblcb ls JefloeJ os o tox oo
tbe ptlvlleqe of ttoosmlttloq ooes ptopetty ot ptopetty tlqbts to oootbet ot otbets wltboot oJepoote ooJ foll
volooble cooslJetotloo16 ls Jlffeteot ftom copltol qolos tox o tox oo tbe qolo ftom tbe sole of tbe toxpoyets
ptopetty fotmloq pott of copltol ossets17 tbe tox tetoto flleJ by ptlvote tespooJeot to tepott lts locome fot tbe
yeot 1974 wos sofflcleot compllooce wltb tbe leqol tepoltemeot to flle o tetoto ln oLher words the fact that the
sa|e transact|on may have part|y resu|ted |n a donat|on does not change the fact that pr|vate respondent
a|ready reported |ts |ncome for 1974 by f|||ng an |ncome tax return