PHILIPPINE INTERNATIONAL TRADING CORPORATION v.

COA DTPIII
G.R. No. 132593, June 25, 1999
GONZAGA-REYES, J.:

Blurb:

Topic: How the Law Relates to Government

Doctrine: It is the intent of the legislative to protect incumbents who are receiving salaries and/or
allowances over and above those authorized by RA 6758 to continue to receive the same even
after RA 6758 took effect. In reserving the benefit to incumbents, the legislature has manifested its
intent to gradually phase out this privilege without upsetting the policy of non-diminution of pay
and consistent with the rule that laws should only be applied prospectively in the spirit of fairness
and justice.

SuperSummary: On October 19, 1988, the Philippine International Trading Corporation (PITC)
approved a Car Plan Program for its qualified officers. Under such car plan program, an eligible
officer is entitled to purchase a vehicle; PITC will shoulder 50% of the yearly car registration and
insurance premiums and 50% of the costs of registration of the chattel mortgage over the car. On
July 1, 1989, RA 6758, which prescribed the revision of compensation and position classification
system in the government, took effect. Section 12 of RA 6758 said that other additional
compensation being received by incumbents as of July 1, 1989 not integrated into the
standardized salary rates shall continue to be authorized.

To implement RA 6758, DBM issued a circular that discontinued effective November 1, 1989 all
allowances and fringe benefits granted on top of basic salary, not otherwise enumerated in the
circular. On post audit, the payment/reimbursement of the expenses of PITC under its car plan
program made after November 1, 1989 was disallowed. The disallowance was made on the
ground that the subject car plan benefits were not one of the fringe benefits or form of
compensation allowed to be continued after said date under the circular. PITC appealed but was
later denied by COA including its subsequent motion for reconsideration. Hence, the petition to
SC. The Court, as previously ruled in a previous case, said that the legislature did not intend to
revoke existing benefits being received by incumbent government employees as of July 1, 1989
(including PITC’s car plan benefits) when RA 6758 was passed.

In the case at bar, petitioner correctly pointed out that there was no intention on the part of the
legislature to revoke existing benefits being enjoyed by incumbents of government positions at the
time of the passage of RA 6758 by virtue of Sections 12 and 17 thereof. There is no dispute that
the PITC officials who availed of the subject car plan benefits were incumbents of their positions
as of July 1, 1989. The petition is granted. The payment/reimbursement of expenses under PITC’s
Car Plan Program made after November 1, 1989 shall not be disallowed by COA.

Profile of the Philippine International Trading Corporation (PITC)

The PITC is a government-owned and controlled corporation created under Presidential Decree
(PD) No. 252 on July 21, 1973, primarily for the purpose of promoting and developing Philippine
trade in pursuance of national economic development.

Facts:
● On October 19, 1988, the PITC Board of Directors approved a Car Plan Program for
qualified PITC officers.

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 o Under such car plan program, an eligible officer is entitled to purchase a vehicle,
50% of the value of which shall be shouldered by PITC while the remaining 50% will
be shouldered by the officer through salary deduction over a period of 5 years.
o Maximum value of the vehicle to be purchased ranges from P200,000.00 to
P350,000.00, depending on the position of the officer in the corporation.
o PITC will also reimburse the officer concerned 50% of the annual car registration,
insurance premiums and costs of registration of the chattel mortgage over the car for
a period of 5 years from the date the vehicle was purchased.
o The terms and conditions of the car plan are embodied in a `Car Loan Agreement'.
o The purpose of the plan is to provide financial assistance to qualified employees in
purchasing their own transportation facilities in the performance of their work, for
representation, and personal use.
o The plan is envisioned to facilitate greater mobility during official trips especially
within Metro Manila or the employee's principal place of assignment, without having
to rely on PITC vehicles, taxis or cars for hire.
● On July 1, 1989, RA No. 6758, entitled "An Act Prescribing a Revised Compensation and
Position Classification System in the Government and For Other Purposes", took effect.
o Section 12 of said law provides for the consolidation of allowances and additional
compensation into standardized salary rates save for certain additional
compensation such as representation and transportation allowances which were
exempted from consolidation into the standardized rate.
o Section 12 likewise provides that other additional compensation being received by
incumbents as of July 1, 1989 not integrated into the standardized salary rates
shall continue to be authorized.
● To implement RA 6758, DBM issued Corporate Compensation Circular No. 10 (DBM-CCC
No. 10). Paragraph 5.6 of DBM-CCC No. 10 discontinued effective November 1, 1989, all
allowances and fringe benefits granted on top of basic salary, not otherwise enumerated
under paragraphs 5.4 and 5.5 thereof.

COA Audit
● On post audit, the payment/reimbursement of the 50% of the yearly car registration and
insurance premiums and 50% of the costs of registration of the chattel mortgage over the car
made after November 1, 1989 was disallowed by the resident COA auditor.
● The disallowance was made on the ground that the subject car plan benefits were not one of
the fringe benefits or form of compensation allowed to be continued after said date under the
DBM-CCC No. 10.
● PITC appealed the decision of the resident COA auditor but to no avail.
● PITC’s motion for reconsideration was likewise denied by COA.

Issues:
WON the legislature intended to revoke existing benefits being received by incumbent government
employees as of July 1, 1989 (including PITC’s car plan benefits) when RA 6758 was passed. – NO

Ruling:
NO. In Philippine Ports Authority v. COA, the Court confirmed the legislative intent to protect
incumbents who are receiving salaries and/or allowances over and above those authorized by RA
6758 to continue to receive the same even after RA 6758 took effect.

In reserving the benefit to incumbents, the legislature has manifested its intent to gradually phase
out this privilege without upsetting the policy of non-diminution of pay and consistent with the rule
that laws should only be applied prospectively in the spirit of fairness and justice.

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In the case at bar, petitioner correctly pointed out that there was no intention on the part of the
legislature to revoke existing benefits being enjoyed by incumbents of government positions at the
time of the passage of RA 6758 by virtue of Sections 12 and 17 thereof. There is no dispute that the
PITC officials who availed of the subject car plan benefits were incumbents of their positions as of
July 1, 1989.

Thus, it was legal and proper for them to continue enjoying said benefits within the five-year period
from date of purchase of the vehicle allowed by their Car Loan Agreements with PITC.

The Court further supported the rationale behind PITC’s Car Plan Program:
● As to the insurance premium, PITC, at least, up to the extent of 50% of the value of the
vehicle, has an insurable interest in said vehicle in case of loss or damage thereto.
● The vehicle being utilized by the officer is actually being used for corporate purposes
because the officer concerned is no longer entitled to utilize company-owned vehicles for
official business once he/she has availed of a car plan. Neither is said officer allowed to
reimburse the costs of other land transportation used within his principal place of assignment
(i.e. Metro Manila) as the vehicle is presumed to be his official vehicle.

Other Issues:
● DBM-CCC No. 10, the issuance upon which COA relied its disallowance of the subject car
plan benefits, has been declared by the Court as having no force and effect due to the
absence of publication thereof in the Official Gazette or in a newspaper of general
circulation.
o The disallowance of the subject car plan benefits would hamper the officials in the
performance of their functions to promote and develop trade which requires mobility
in the performance of official business.
● Although DBM-CCC No. 10 was subsequently re-issued in its entirety in the Official Gazette,
the defect cannot be cured and retroacted to the time the items were disallowed in audit
because laws should only be applied prospectively in the spirit of fairness and justice.

Disposition:
● WHEREFORE, the Petition is hereby GRANTED. The assailed Decisions of the Commission
on Audit are SET ASIDE.
● In other words, the payment/reimbursement of expenses under PITC’s Car Plan Program
made after November 1, 1989 shall not be disallowed by COA.

Additional Notes:
COA Disallowance
“A disallowance is a disapproval by the COA, in whole or in part, of a disbursement by a government
agency. It is made after an audit of the transaction through the issuance of a Notice of Disallowance.

An expenditure may be disallowed when it is found to be irregular, unnecessary, excessive,

extravagant, or unconscionable – hence, the acronym “IUEEU” that every COA auditor knows by
heart.

Irregular expenditures are those incurred contrary to relevant laws, rules and regulations, as well as
established guidelines, policies, principles, or practices that have gained recognition in law.”

Reference: https://news.mb.com.ph/2018/07/04/coa-disallowances-101/