Commissioner of Internal Revenue vs. Commission on Audit

An informer's reward under Section 281 of the National Internal Revenue Code is payable where the information leads to the recovery of revenues from delinquent taxpayers, regardless of whether the taxpayers are government-owned corporations, because such corporations have legal personalities separate from the government and their tax payments accrue to the General Fund as actual government revenue. COA's constitutional audit jurisdiction does not foreclose its review of reward determinations, but its disallowance must rest on legal grounds, not on an erroneous view that inter-governmental tax collection produces no net revenue gain.

Petitioner Tirso B. Savellano was a private individual who furnished the Bureau of Internal Revenue with information regarding tax delinquencies of two government-owned and controlled corporations — the National Coal Authority (NCA) and the Philippine National Oil Company (PNOC). Petitioner Commissioner of Internal Revenue acted in representation of the BIR's interest in upholding the validity of reward payments that COA had disallowed. The dispute arose at the intersection of two statutory and constitutional regimes: Section 281 (formerly Section 316) of the National Internal Revenue Code, which grants informer's rewards for information leading to the recovery of revenues, and the Commission on Audit's constitutional mandate under Article IX(D) of the 1987 Constitution to examine, audit, and settle all accounts pertaining to government expenditures. Section 90 of the Government Auditing Code (P.D. 1445) provides that the final determination by the proper administrative authority as to reward entitlement is conclusive upon executive agencies, but COA is not an executive agency — it is an independent constitutional commission.

On June 25, 1986, petitioner Tirso B. Savellano submitted a confidential affidavit of information to the Bureau of Internal Revenue, reporting that the National Coal Authority (NCA) and the Philippine National Oil Company (PNOC) had failed to pay taxes totaling P234 million on interest earnings from their respective money placements with the Philippine National Bank, covering the period from October 15, 1984 to that date. Both NCA and PNOC were government-owned and controlled corporations performing proprietary functions. The BIR investigated the report and confirmed the reported tax liabilities. Upon demands thereafter made, NCA paid the BIR a total of P15,986,165.05 in two installments on September 10 and October 15, 1986, while PNOC paid a total of P93,955,479.12 in four installments spanning September 10, 1986 to October 1, 1987.

By a letter dated November 28, 1986, then BIR Commissioner Bienvenido Tan, Jr. recommended to the Minister of Finance payment to Savellano of an informer's reward equivalent to 15% of the amount paid by NCA, or P2,397,924.75. The Department of Finance Committee on Rewards favorably passed upon the recommendation, and then Deputy Minister of Finance Alfredo Pio de Roda, Jr. approved it. Savellano was duly paid that amount. In the PNOC case, the informer's reward was approved by then Finance Undersecretary Marcelo Fernando, and Savellano received a total of P14,093,321.89 in four installments, the last on December 1, 1987.

On February 8, 1989, the Commission on Audit rendered Decision No. 740 disallowing in audit the payment of the informer's reward in the NCA case. COA reasoned that under Section 281 of the National Internal Revenue Code, payment of an informer's reward is conditioned upon actual recovery or collection of revenues, and no such revenue was actually realized because two government agencies were involved — the income realized by the BIR from NCA's withholding taxes merely reduced NCA's income, resulting in a zero net effect. COA further argued that allowing such claims would reward inter-governmental violations and could induce collusion among government offices to obtain informer's rewards. After the COA Resident Auditor issued Revised Certificate of Settlement and Balances No. 89-0001-104(c) on July 20, 1989, directing the withholding of salaries from thirteen BIR officials and employees personally liable for the disallowed amount of P11,397,924.75, the Commissioner of Internal Revenue, Savellano, and former BIR Accounting Division Chief Potenciana Evangelista sought reconsideration. COA denied these pleas in Decision No. 1930, prompting the separate petitions that were later consolidated before the Supreme Court.

• Conclusiveness of DOF Determination: Petitioner Commissioner of Internal Revenue argued that the Department of Finance's approval of Savellano's reward claim is conclusive upon executive agencies concerned, including COA, pursuant to Section 90 of the Government Auditing Code, as it constitutes the final determination of the proper administrative authority.
• Actual Revenue Collection: Petitioner maintained that there were actual cash collections of P109,941,644.17 from NCA and PNOC for non-payment of withholding taxes, and that these amounts had accrued to the General Fund.
• Statutory Clarity: Petitioner contended that Section 316 (now 281) of the NIRC entitling an informer to a reward for information leading to the collection of internal revenue taxes is clear and needs no interpretation; assuming it does, it should be interpreted in favor of the informer.
• Separate Corporate Personality: Petitioner asserted that NCA and PNOC have legal personalities separate from the BIR, the Government, and the State.
• Immunity of Public Officers: Petitioner argued that superior and subordinate officers of the government are not civilly liable for acts done in the performance of their official duties.
• BIR's Exclusive Authority over Rewards: Petitioner Savellano contended that the express statutory grant to the BIR of the power to allow or disallow informer's reward claims constitutes an implied statutory denial of the same power to COA, which would otherwise transform COA into "a super tax authority" and undermine the BIR's revenue-colting function.
• Proprietary Income as Private Funds: Petitioner Savellano maintained that there was "actual" collection of tax because government-owned corporations derive income from proprietary functions, which does not constitute public funds; only when such income is taxed does the corresponding amount become part of the national treasury, redounding to the government's benefit.

• Standing of the Commissioner: Respondent COA questioned the personality of petitioner Commissioner of Internal Revenue to bring the suit, arguing that the Commissioner is not an aggrieved party adversely affected by the assailed decisions.
• Constitutional Audit Jurisdiction: Respondent COA invoked its constitutionally-vested audit jurisdiction over all government agencies, contending that the statutorily granted power of the Secretary of Finance under Section 90 of P.D. 1445 must yield to COA's constitutional mandate.
• No Actual Revenue Recovery: Respondent COA insisted that Savellano was not entitled to the informer's reward because there was no actual collection of revenues under the benefit-to-the-government rule, and that Savellano's information did not lead to the discovery of fraud.
• Irregularity of Payment: Respondent COA characterized the payment as irregular because it was predicated upon violations committed by government agencies, and sought to hold the persons named in CSB No. 89-0001-104(c) liable for participation in illegal or irregular disbursements of public funds.

• COA Jurisdiction vs. BIR Authority: Whether the Commission on Audit has the authority to disallow informer's reward payments approved by the BIR and the Department of Finance, or whether such approval is conclusive upon COA under Section 90 of the Government Auditing Code.
• Entitlement to Informer's Reward: Whether Savellano is entitled to the informer's reward under Section 281 of the NIRC given that the delinquent taxpayers were government-owned corporations, and whether actual revenue was recovered for purposes of the statute.
• Collusion and Propriety: Whether the possibility of collusion among government offices and the fact that the delinquent taxpayers were government agencies provide sufficient grounds for disallowance of the informer's reward.

• COA Jurisdiction vs. BIR Authority: Yes, COA has authority to review, but its disallowance was erroneous. Section 90 of the Government Auditing Code makes the DOF's determination conclusive only upon executive agencies; COA is an independent constitutional commission, not an executive agency, and its constitutional audit jurisdiction cannot be curtailed. However, COA's disallowance may be set aside by the Court if done with grave abuse of discretion.
• Entitlement to Informer's Reward: Yes. Savellano is entitled to the reward. NCA and PNOC possess legal personalities separate from the government; their revenues do not automatically accrue to the General Fund, and taxes collected from them constitute actual government revenue. Section 281 of the NIRC makes no distinction between public and private delinquent taxpayers.
• Collusion and Propriety: No. The mere possibility of collusion is insufficient for disallowance; collusion must be proved by clear and convincing evidence and cannot be presumed. The presumption of regularity enjoyed by the BIR's and DOF's official acts was not overcome by any evidence.

• COA Jurisdiction vs. BIR Authority: The Court examined Section 90 of P.D. 1445, which provides that the final determination by the proper administrative authority as to reward entitlement is "conclusive upon the executive agencies concerned." COA is not an executive agency but one of the three independent constitutional commissions under Article IX(A) of the 1987 Constitution. Its audit jurisdiction under Section 2(1), Article IX(D) extends to all accounts pertaining to revenue, receipts, expenditures, and uses of government funds and property. Section 3, Article IX(D) prohibits any law exempting any government entity from COA's jurisdiction. Accordingly, the DOF's determination cannot bind or foreclose COA's review. However, COA's disallowance is not itself final; it may be set aside by the Court if done with grave abuse of discretion. The Court cited Dingcong vs. Guingona, Jr. to confirm COA's broad authority to examine, audit, and settle accounts, determine whether fiscal responsibility has been properly discharged, and issue certificates of settlement reflecting disallowances.

• Entitlement to Informer's Reward: The Court found COA's view that no revenue was recovered because two government agencies were involved to be "simplistic." NCA and PNOC, though government-owned and controlled corporations, possess legal personalities separate and distinct from the Philippine government and perform proprietary functions. Their revenues do not automatically devolve to the general coffers of the government; unless transferred through taxation, no part of their revenues is available for legislative appropriation. When their revenues are subjected to tax, the portion corresponding to the tax becomes revenue for the government accruing to the General Fund. The Court applied the maxim ubi lex non distinguit nec nos distinguere debemos — where the law does not distinguish, none must be made — because Section 281 makes no distinction among delinquent taxpayers, whether private persons, corporations, or public agencies. It is sufficient that the taxpayer is subject to and violated revenue laws, and the informer's report resulted in the recovery of revenues.

• Collusion and Propriety: The Court rejected COA's concern about collusion as a ground for disallowance. Collusion cannot be presumed; it must be proved by clear and convincing evidence, and no such evidence was presented. The official acts of the BIR and the Department of Finance in approving Savellano's claim enjoy a presumption of regularity under Section 3(m), Rule 131 of the Revised Rules of Court, which was not overcome. As to the argument that paying the reward rewards the government's own violations, the Court clarified that the delinquencies are not condoned or rewarded; it is the informer whose information led to the discovery of transgressions who is rewarded. Although the reward reduces the amount of revenues received, the net effect is that the government still gains from the remaining amount paid, which otherwise would have been lost entirely.

• Separate Legal Personality of Government-Owned Corporations — Government-owned and controlled corporations possess legal personalities separate and distinct from the Philippine government. Their revenues from proprietary functions do not automatically accrue to the General Fund; only when subjected to taxation does the corresponding portion become government revenue. The Court applied this doctrine to conclude that taxes collected from NCA and PNOC constituted actual revenue recovery for purposes of the informer's reward statute.

• Ubi Lex Non Distinguit Nec Nos Distinguere Debemos — Where the law does not distinguish, courts should not distinguish. Section 281 of the NIRC makes no distinction among delinquent taxpayers — whether private persons, corporations, or public agencies. The Court applied this maxim to hold that the informer's reward statute applies equally to tax delinquencies of government corporations as it does to those of private entities.

• COA's Constitutional Audit Jurisdiction — The Commission on Audit, as an independent constitutional commission, possesses the power, authority, and duty to examine, audit, and settle all accounts pertaining to government revenue and expenditures. No law may exempt any government entity from COA's jurisdiction. The final determination of an executive agency (such as the DOF) on reward entitlement is conclusive only upon executive agencies, not upon COA. However, COA's disallowance may be set aside by the Supreme Court if made with grave abuse of discretion.

• Presumption of Regularity of Official Acts — Official acts of government agencies are presumed to have been regularly performed unless overcome by evidence to the contrary. The Court applied this presumption to the BIR's and DOF's approval of Savellano's reward claim, noting that no evidence of irregularity or collusion was presented.

• Collusion Must Be Proved, Not Presumed — Collusion cannot be presumed; it must be established by clear and convincing evidence. The mere possibility of collusion among government offices to obtain informer's rewards is insufficient basis for disallowance absent proof.

• "The final determination made by the Finance Department cannot bind respondent COA or foreclose its review thereof in the exercise of its constitutional function and duty to ensure that public funds are expended and used in conformity with law." — This passage defines the boundary between executive agency determinations and COA's constitutional audit power, establishing that Section 90 of the Government Auditing Code does not oust COA of jurisdiction.

• "It overlooks the fact that the two (2) government agencies involved, NCA and PNOC, possess legal personalities separate and distinct from the Philippine government. Although both are government-owned and controlled corporations, NCA and PNOC perform proprietary functions. Their revenues do not automatically devolve to the general coffers of the government." — This is the core ratio decidendi on the entitlement issue, articulating why taxes collected from government corporations constitute actual revenue recovery.

• "Although this results in a reduction in the amounts of revenues actually received, the net effect is that the government still gains from the remaining amount paid, which otherwise would have been lost to it." — This passage responds to the dissent's "zero net effect" argument and articulates the majority's net-benefit rationale for sustaining the reward.

• Dingcong vs. Guingona, Jr. — Cited to confirm the scope of COA's constitutional power, authority, and duty to examine, audit, and settle all accounts pertaining to government expenditures, including the authority to issue certificates of settlement reflecting disallowances. Followed as controlling authority on COA jurisdiction.
• Philippine British Assurance Co., Inc. vs. IAC, 150 SCRA 520 — Cited for the maxim ubi lex non distinguit nec nos distinguere debemos, together with a line of cases including Colgate-Palmolive Phil. Inc. vs. Gimenez, Libudan vs. Gil, and Dominador vs. Derahunan. Followed as established doctrine on statutory construction.
• Alliance of Government Workers vs. Honorable Minister of Labor, 124 SCRA 1 — Cited in the dissenting opinion for the rule that restrictive statutes imposing burdens on the public treasury do not embrace the Sovereign unless specifically mentioned. The majority did not adopt this principle.

• Section 281 (formerly Section 316), National Internal Revenue Code — Governs informer's rewards for persons who voluntarily give sworn information leading to the discovery of violations of internal revenue laws, resulting in the recovery of revenues, surcharges, and fees. The reward is 15% of revenues recovered. The Court applied this provision to hold Savellano entitled, finding that actual revenues were recovered from NCA and PNOC.
• Section 90, Government Auditing Code of the Philippines (P.D. 1445) — Provides that the final determination by the proper administrative authority as to reward entitlement is conclusive upon executive agencies concerned. The Court held this provision inapplicable to COA, which is not an executive agency but an independent constitutional commission.
• Section 2(1), Article IX(D), 1987 Constitution — Vests COA with the power, authority, and duty to examine, audit, and settle all accounts pertaining to government revenue and expenditures. The Court relied on this provision to confirm COA's jurisdiction over the reward payments.
• Section 3, Article IX(D), 1987 Constitution — Prohibits any law exempting any government entity from COA's jurisdiction. The Court cited this to emphasize that no statutory grant can foreclose COA's constitutional audit power.
• Section 3(m), Rule 131, Revised Rules of Court — Establishes the presumption of regularity of official acts. The Court applied this presumption to the BIR's and DOF's approval of Savellano's reward claim.

Gutierrez, Jr., Cruz, Feliciano, Bidin, Grino-Aquino, Regalado, Davide, Jr., Romero, Nocon, Bellosillo, Melo, and Campos, Jr., JJ., concurred.

• Padilla, J. — Justice Padilla dissented, arguing that the majority's literal application of statutory construction resulted in a loss of approximately P16 million to the government. He characterized the transaction as a mere transfer of government funds from one pocket to another — from government-owned corporations (NCA and PNOC) to the BIR in the form of taxes — with an informer's reward extracted in the process, likening it to "fry[ing] one (the government) in its own lard." He contended that Section 281 of the NIRC should be read in harmony with the Constitution, which already provides its own "informer" for government entity-taxpayers in the form of the Commission on Audit, rendering the statutory informer's reward unnecessary in such cases. He invoked the rule from Alliance of Government Workers vs. Minister of Labor that restrictive statutes imposing burdens on the public treasury do not embrace the Sovereign unless specifically mentioned, and concluded that the informer's reward should not apply where the taxpayer is a government entity. He voted to deny the consolidated petitions and to disallow payment of the informer's reward in both cases.