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CAPITOL WIRELESS v. PROVINCIAL TREASURER OF BATANGAS

FACTS:

The petitioner, Capitol Wireless Inc. (Capwire), is a Philippine corporation providing international telecommunications services. Capwire claims to be a co-owner of the "Wet Segment" of the Asia Pacific Cable Network System (APCN), while the landing stations and Segment E of APCN are allegedly owned by the Philippine Long Distance Telephone Corporation (PLDT). Capwire asserts that the Wet Segment is located in international waters. For loan restructuring purposes, Capwire engaged an appraiser to assess the market value of the submarine cable system and submitted a sworn statement of true value of the Wet Segment to the Provincial Treasurer's Office. The respondent, Provincial Assessor of Batangas, issued assessments of real property against Capwire based on the value declared by Capwire. Capwire contested the assessments, claiming that the cable system lies outside Philippine territory. Capwire received a warrant of levy and a notice of auction sale from the Provincial Treasurer. Capwire filed a petition for prohibition and declaration of nullity of the warrant of levy, notice of auction sale, and/or auction sale with the Regional Trial Court (RTC) of Batangas City. The RTC dismissed the petition, and the Court of Appeals affirmed the dismissal. Capwire filed a petition for review on certiorari before the Supreme Court, asserting that the requirements of availing administrative remedies and payment under protest are inapplicable to the case.

Capwire, a telecommunications company, disputes the authority of the assessors and treasurers of the Province of Batangas and Municipality of Nasugbu, Batangas to impose a tax on its submarine cable system. Capwire argues that its cable system, which it claims lies in international waters, is not subject to tax. The assessors and treasurers, on the other hand, argue that there are factual questions to be resolved, such as the extent and portion of the cable system within their jurisdiction and the nature of Capwire's property rights. They assert that these questions should be addressed before administrative agencies like the Local Board of Assessment Appeals. The Court is tasked with determining whether the case should have been filed before administrative bodies and whether submarine communications cables can be considered taxable real property. The Court holds that the case involves factual questions that should have been resolved before administrative bodies and that the general rule of first availing of administrative remedies applies in disputes involving real property taxation.

ISSUES:

  1. Whether Capwire's submarine cable is subject to real property tax.

  2. How much of Capwire's submarine cable is taxable.

  3. Whether the real property tax exemption previously enjoyed by Capwire, a telecommunications company, was withdrawn upon the effectivity of the Local Government Code.

  4. Whether Capwire is entitled to any other privilege or exemption that would exempt it from paying real property tax.

RULING:

  1. Capwire's submarine cable may be held subject to real property tax, as there is no express grant of exemption for its lines and cables.

  2. The determination of how much of the submarine cable is taxable based on Capwire's ownership or co-ownership and the length within the taxing jurisdiction requires factual determination best performed by the Local and Central Boards of Assessment Appeals.

  3. The Supreme Court denied the petition and affirmed the decision of the Court of Appeals. The Court held that the real property tax exemption previously enjoyed by Capwire was indeed withdrawn upon the effectivity of the Local Government Code. The Court also noted that Capwire failed to allege or provide any other privilege or exemption that would exempt it from paying real property tax. Consequently, the Court ruled that Capwire was not entitled to any exemption and was liable to pay real property tax.

PRINCIPLES:

  • Factual issues should be threshed out administratively before resorting to judicial action.

  • Legal conclusions must be substantiated by facts.

  • Submarine cables used for communications may be taxed like other real estate.

  • Things may be classified as real property for tax purposes even though they might generally be considered personal property.

  • The Philippines exercises sovereignty over the seabed and subsoil within its territorial sea and has jurisdiction over cables laid in its territory.

  • Municipal waters include marine waters between the boundaries of the municipality or city and the sea at low tide, and this term may also be used to determine the territorial extent of local authorities' power to levy real property taxation.

  • Taxation is one of the attributes of sovereignty, which has been delegated by the national legislature to local governments.

  • The burden of proving exemption from local taxation lies upon the person declaring the real property, who must file sufficient documentary evidence to support the claim.

  • Real property tax exemption under a legislative franchise may be withdrawn by subsequent laws, such as the Local Government Code.

  • Tax exemptions are strictly construed against the taxpayer because taxes are considered the lifeblood of the nation.