Opinion
No. H-291.
January 13, 1930.
Action by J.H. Williams Co. against the United States.
Judgment for plaintiff.
This is an action to recover $13,571.13, interest on an overpayment of income and profits taxes for the year 1918, and involves the question whether plaintiff, when it filed its amended income and profits tax return for said year showing overpayment of taxes on account of amortization, at the same time filed a proper claim for refund.
This case having been heard by the Court of Claims upon the evidence, the court makes the following special findings of fact:
I. The plaintiff, J.H. Williams Co., is a domestic corporation, organized and existing under the laws of the state of New York, with its principal place of business in the city of Brooklyn, in the state of New York.
II. On March 15, 1919, plaintiff filed a tentative return and estimate of corporation income and profits tax for the year 1918, showing the estimated amount of tax as $400,000. Said tax was neither assessed nor paid.
On July 2, 1919, plaintiff filed a corporation income and profits tax return for the year 1918, from which it appeared that the income and profits tax due thereon was $384,592.84, which tax was paid as follows:
March 15 .............. $125,000.00 June 14 ............... 75,000.00 September 15 .......... 88,444.63 December 15 ........... 96,148.21 __________ Total ............. 384,592.84
III. On March 13, 1920, plaintiff filed a tentative income and profits tax return for the year 1919 showing the estimated amount of tax as $40,046.63. On March 14, 1920, plaintiff filed an income and profits tax return for the year 1919, from which it appeared that the income and profits tax due thereon was $113,097.75, which tax was paid as follows:
March 15, 1920 ............... $10,011.66 May 14, 1920 ................. 12,829.81 May 13, 1920 ................. 5,432.97 June 15, 1920 ................ 28,274.44 September 15, 1920 ........... 28,274.44 September 15, 1920 ........... 28,274.43 __________ Total .................... 113,097.75
IV. Subsequent to the filing of the above-mentioned returns the Commissioner of Internal Revenue made a superficial examination and audit of the income and profits tax return for the calendar year 1918 and in a letter dated November 5, 1920, signed by G.V. Newton, Deputy Commissioner, notified plaintiff of his determination of the income and profits tax for the year in question to be $386,823.34 and the additional amount to be assessed, $2,230.50.
V. On January 11, 1921, the Commissioner of Internal Revenue made an additional assessment of the underpayment of tax in the amount of $2,230.50, as set forth in finding IV, above.
VI. On February 10, 1922, plaintiff filed an amended income and profits tax return for the year 1918, from which it appeared that the income and profits tax due thereon was $101,934.21, which tax was neither assessed nor paid.
VII. Subsequent to the filing of the returns mentioned above and the payment of the taxes therein as assessed and paid, the Commissioner of Internal Revenue made an examination and an audit of the income and profits tax returns in question and in a letter dated November 20, 1923, signed by J.G. Bright, Deputy Commissioner, notified plaintiff of his determination, which is as follows:
Year: Underpayment Overpayment
1918 .............................. $137,149.05 1919 ................... $5,671.29 _________ ___________ Total .............. 5,671.29 137,149.05
VIII. On February 9, 1924, the Commissioner of Internal Revenue made an additional assessment of the underpayment of taxes in the amount of $5,671.29, as set forth in finding VII, above, for the year 1919.
IX. On February 11, 1924, the Commissioner of Internal Revenue approved a schedule of overassessment, known and designated as schedule IT:A:8463 on form 7805. Said schedule of overassessments embraced, among other overpayments, an overpayment in favor of the plaintiff in the sum of $137,149.05 for the year 1918. Said schedule of overassessments was transmitted to the collector of internal revenue for the First district of New York for his action in accordance with the direction appearing thereon.
X. The said collector of internal revenue complied with the direction appearing on said schedule, and on March 31, 1924, returned said schedule to the Commissioner of Internal Revenue, together with schedule of refunds and credits, known and designated as IT:R:8463 on form 7805-A.
XI. Of the overpayment of $137,149.05 for the year 1918, $5,671.29 was credited to the underpayment of taxes for the year 1919.
XII. On April 30, 1924, the Commissioner of Internal Revenue signed said schedule of refunds and credits and transmitted the same to the Department for the issuance of a check for the amount of the refund indicated above.
XIII. On May 15, 1924, a check for the amount of $131,477.76 was forwarded to the plaintiff, together with certificate of overassessment in the amount of $137,149.05.
XIV. Plaintiff has paid no interest on the underpayment of tax for the year 1919 in the amount of $5,671.29.
XV. Plaintiff has been allowed no interest on the overpayment of taxes for the year 1918 in the amount of $137,149.05.
XVI. The Commissioner of Internal Revenue in a letter dated March 30, 1927, advised the plaintiff of his determination relative to the allowance of interest under provisions of section 1324(a) of the Revenue Act of 1921 ( 42 Stat. 316). A copy of said letter is attached to the amended petition, marked "Exhibit C," and made part hereof by reference.
XVII. The Commissioner of Internal Revenue has refused and neglected to pay to the plaintiff any interest on said refund in the sum of $137,149.05 on the ground that plaintiff had not filed a claim for refund within the meaning of section 1324(a) of the Revenue Act of 1921, although such interest on said refund had been demanded by the plaintiff.
XVIII. On the 10th day of February, 1922, the plaintiff filed in the office of the Commissioner of Internal Revenue at Washington, D.C., a claim and demand for refund in the sum of $282,658.63 of income and excess profits taxes, paid by the plaintiff for the year 1918.
XIX. The said claim and demand for refund were prepared on the form for such refund claims then in common use, signed by an officer of the plaintiff company and sworn to by him before a notary public.
XX. The reasons stated in said claim and demand for refund why the same should be allowed were that the plaintiff was entitled to a deduction in computing its income and excess profits taxes for the year 1918, in the sum of $399,158.90 for amortization of war facilities pursuant to section 234(a)(8) of the Revenue Acts of 1918 ( 40 Stat. 1078) and 1921 ( 42 Stat. 255) as set forth in the amended return for the year 1918 filed by the plaintiff on February 10, 1922.
XXI. The amount demanded in the said refund claim in the sum of $282,658.63 was the difference between the amount of tax theretofore paid by the plaintiff for the year 1918 in the sum of $384,592.84 and the tax as estimated in the said amended return in the sum of $101,934.21.
XXII. The refund was paid the plaintiff on May 15, 1924, pursuant to a determination of the Commissioner of Internal Revenue made on November 20, 1923, that plaintiff was entitled to an allowance for amortization under section 234(a)(8) of the Revenue Acts of 1918 and 1921.
XXIII. Plaintiff has at all times borne true allegiance to the government of the United States, and has not in any way voluntarily aided, abetted, or given encouragement to rebellion against said government; it is the sole and absolute owner of the claim herein presented, and has made no transfer or assignment of said claim or any part thereof, or interest therein.
Malcolm C. Law, of New York City (James L. Dohr, of New York City, on the brief), for plaintiff.
Charles R. Pollard, of Washington, D.C., and Herman J. Galloway, Asst. Atty. Gen. (Ralph E. Smith, of Washington, D.C., on the brief), for the United States.
Before BOOTH, Chief Justice, and GRAHAM, WILLIAMS, LITTLETON, and GREEN, Judges.
The detailed facts in this case are set forth in the findings, and it is unnecessary to review them, for the reason that there is but one question raised, and that is a question of fact, viz., whether or not plaintiff on February 10, 1922, when it filed an amended income and profits tax return for the year 1918 showing a large sum due it for overpayment of taxes on account of amortization, at the same time filed a proper claim for refund. The findings settle this question in favor of the plaintiff, and find that such a claim for a refund was filed on the 10th of February, 1922.
The question raised was one of allowance of interest. The plaintiff claimed interest on the basis of section 1019 of the Revenue Act of 1924, 43 Stat. 253, 346 ( 26 USCA § 153 note) which provides as follows: "Upon the allowance of a credit or refund of any internal-revenue tax erroneously or illegally assessed or collected, * * * interest shall be allowed and paid on the amount of such credit or refund * * * from the date such tax * * * was paid to the date of the allowance of the refund; * * *" that is to say, from the 10th of February, 1922, the date of the filing of the claim, to the 30th of April, 1924, the date of the allowance of the refund.
After plaintiff's petition was filed, the Supreme Court in the case of United States v. Magnolia Petroleum Co., 276 U.S. 160, 162, 48 S. Ct. 236, 72 L. Ed. 509, decided that section 1019, supra, of the Revenue Act of 1924, could not be construed retroactively as substituting that basis of interest recovery for the basis in the act of 1921 as to refunds which had been allowed under an earlier act, but not computed or paid when the later act was passed. It is therefore conceded by both parties that this decision is controlling here, and that interest can only be recovered from six months after the date of the demand, February 10, 1922, that is to say, from August 10, 1922, to April 30, 1924, the date the Commissioner signed the schedule of refunds as reported to him by the collector (Girard Trust Co. v. United States, 270 U.S. 163, 46 S. Ct. 229, 70 L. Ed. 524), on the amount shown by the said schedule of refunds, viz., $131,477.76, which makes the recoverable amount of interest $13,571.13, and for this amount judgment should be entered in favor of the plaintiff, and it is so ordered.