BIR Ruling [UN-057-95]

February 8, 1995 BIR RULING [UN-057-95] 1st Indorsement Returned to the Assistant Commissioner, Administrative and Financial Service, Attn.: Chief, Disbursement Accounting Division, the entire papers relative to the claim for refund of Mr. Mauro C. Wandag, former employee of this Bureau of the amount of P17,764.07 and P2,646.63, or the total amount of P20,410.70, representing unliquidated cash advance and disallowances. Records show that Mr. Mauro C. Wandag has an unliquidated cash advance and disallowances in the amounts of P17,764.07 and P2,646.63, respectively, or the total amount of P20,410.70. These amounts were deducted from Mr. Wandag's terminal leave pay over his objections and without a categorical directive from the Commission on Audit to withhold payment of the above-mentioned amount of P20,410.70, pursuant to the provisions of Section 21, Chapter IV, Subtitle B, Title I, Book V of Executive Order No. 292, otherwise known as the Administrative Code of 1987, which took effect on November 23, 1989. cdi It is contended that in the case of Romulo vs. Francisco Tantuico, et. al ., G.R. No. 53585 promulgated on February 15, 1990, the Supreme Court ruled that the determination whether a person is indebted to the Government is a judicial rather than an administrative function, and that no executive officer or an administrative body possesses such power. The decision states that no one can settle alleged unsettled disallowances or accountabilities of an employee during his employment under the pretext that he is indebted to the Government by way of set-off or legal compensation. For legal compensation can only take place by operation of law in accordance with Article 1278 of the New Civil Code of the Philippines, as amended, when both parties are declared debtor and creditor of each other by a proper court. Thus, the benefits due Mr. Mauro C. Wandag cannot be withheld under the present retirement laws. Retirement laws are to be liberally construed and interpreted in favor of the retiree because the intention is to provide for the retiree's sustenance and comfort, when he is no longer capable of earning his livelihood [Profeta vs. Drilon, 216 SCRA 777 (1992); Tantuico, Jr. vs. COA, G.R. 96422, February 28, 1994]. The Supreme Court decision in Tantuico vs. COA is not applicable to the instant case as the facts in Wandag's case are different from Tantuico's case. Mr. Tantuico was appointed COA Chairman in 1980. In 1985, he applied and was granted clearances for his money, property and other accountabilities which covered the period from 1976 to December 30, 1985. He resigned in 1986 and applied for second clearance to cover the period from January 1, 1986 to March 9, 1986. His second clearance was likewise approved but then COA Chairman Eufemio Domingo ordered a re-audit of Mr. Tantuico's accountabilities. An inventory committee recommended the issuance of clearance to Mr. Tantuico. Not satisfied with the recommendation, Mr. Domingo ordered another audit and this time by special audit team which found some deficiencies in the first audit report. The COA Chairman rendered a ruling on December 21, 1989 allowing payment of only 1/2 of Mr. Tantuico's retirement benefits. Mr. Tantuico contested the report of the special audit team and demanded full payment of his retirement benefits. On the other hand, Mr. Wandag retired compulsorily at the age of 65, and was given clearance of all money and property responsibilities (folded sheet) but in the certificate of clearance, there is a noted of unliquidated cash advance of P17,764.07 and unsettled COA disallowances amounting to P2,646.63 or a total of P20,410.70. If the said amount is not deducted from his terminal leave pay, it will encourage all would-be-retirees to incur shortages as the same are not deductible from their terminal leave pay. cdta In view of the foregoing, it is believed that the deduction of P20,410.70 is legal. LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue