#### The People of the State of New York ex rel. Union Railway Company of New York City, *v.*State Board of Tax Commissioners, Respondent, and The City of New York, Intervenor, Respondent.

First Department,

July 10, 1913.

See head note in *People ex rel. Third Avenue R. R. Co.*v. *Tax Comrs. (ante,*p. 731).

Appeal by the relator, the Union Railway Company of New York City, from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 15th day of May, 1913, confirming special franchise assessments for the year 1910, and dismissing a writ of certiorari.

*Joseph P. Cotton, Jr. [George S. Franklin*with him on the brief], for the appellant.

*William A. McQuaid,*for State Board of Tax Commissioners, respondent.

*Curtis A. Peters [Addison B. Scoville*with him on the brief], for the respondent, the city of New York.

Laughlin, J.:

The court tested these assessments by the net earnings rule, and found that the net income attributable to the special franchises was $408,164.55, and this was capitalized at six per cent. The earnings and operating expenses of the relator in the two boroughs were not kept separate. The court proceeded, in ascertaining the value, as if the entire franchises were in the same tax district, and as if the two assessments were combined in one, and found that their total value was $8,449,481.39, and as the assessments.were only about fifty-three per cent of this amount no reduction was made.

The relator leased to another company sixty-two cars, and did not use them in connection with operating its franchises. According to our ruling in the Third Avenue case *(People ex rel. Third Avenue R. R. Co.*v. *Tax Comrs.,*157 App. Div. 731), the court properly excluded the value of those cars in ascertaining the value of the tangible property.

*764The value of the real estate of the relator was stipulated at $577,600, but it appears that one parcel was a ‘1 Dismantled power house ” of the value of $150,000, and another parcel was *“*Unimproved land ” valued at $9,000. The court found that the value of its real estate used for street railway purposes was $418,600, from which it is to be inferred that the court excluded the two parcels specified. The relator failed to show facts sufficient to entitle it to a return on this real estate within our ruling in the Third Avenue proceeding.

The same claim is made by the relator here as in the Third Avenue proceeding, with respect to reproduction value of the tangible property in the streets, development expenses, *“*interest income,” and taxes paid in 1909, but assessed and due prior to that year. The court correctly ruled against the relator on those points.'

The court, however, erred in refusing to deduct from the gross receipts the salary of the receiver, amounting to $18,000, and in accepting the testimony in behalf of the respondents with respect to the items included in operating expenses, which should have been charged to depreciation, and in deducting" the sum of $121,923.21 from operating expenses on this account, instead of accepting the evidence adduced by the relator which shows that not more than $31,668.56 should have been so deducted, the testimony on this point being similar to that considered in the opinion in the Third Avenue proceeding. These items, which should be deducted from the net income as found by the court aggregate $108,254.65.

The court also erred in refusing to deduct from the gross receipts the sum of $68,056.18 for payments to the city, pursuant to the requirements of section 48 of the Tax Law (Consol. Laws, chap. 60; Laws of .1909; chap. 62). The relator claimed a return on the value of the property of the Bronx Traction Company, which it was stipulated was $285,429.91, on the basis of cost of reproduction. - The gross income of the relator was stipulated at $2,017,880.31, and it was further stipulated that it operated the Bronx Traction Company, and that it£ £ derives from the operation thereof the entire proceeds or income from such operation,” and that such income is included in the stipulated gross income of the relator. It was not shown what amount of income *765the relator derived from the operation of the Bronx Traction Company line. Special franchises are assessable to the owner. (Tax Law, § 32.)* The evidence does not show that the relator owns all the capital stock of the Bronx Traction Company or any of it. The relator should not be charged with the income received from operating the Bronx Traction Company, if it does not own the franchises of that company. Since, however, the receipts from the operation of the relator’s own franchises and those of the Bronx Traction Company have not been separately shown it is difficult to make the proper deduction. The only reduction asked by the relator on account of the Bronx Traction Company is $17,125.79 fora return on the reproduction value of the property of that company; and while, for the reasons already stated that is an erroneous theory, it is equitable since the relator has charged itself and has been charged by the trial court with the entire receipts from the Bronx Traction Company and has not been credited with any liability to that company.

Reducing the net income by these amounts, which aggregate $193,436.62, and capitalizing the remainder at seven per cent, shows the value of the intangible element of the special franchises of the relator to be $3,067,542; and adding to this the value of the tangible property in the streets gives $4,704,280 as the total value of the special franchises of the relator, and equalizing this at ninety per cent shows that they should have been assessed at $4,233,853, which requires a reduction from their assessed valuation of $186,147, and apportioning this to the assessment in each of the boroughs on the mileage basis requires that the assessment for the borough of the Bronx be reduced from $4,200,000 to $4,018,756, and for the borough of Manhattan from $220,000 to $215,097.

It follows that the order should he reversed and the assessments reduced accordingly, without costs.

Ingraham, P. J., Scott, Dowling and Hotchkiss, JJ., concurred.

Order reversed and assessments reduced as directed in opinion, without costs. Order to be settled on notice.

*

 Since repealed by Laws of 1911, chap. 315. See Tax Law, § 21, as amd. by Laws of 1911, chap. 315, and Laws of 1912, chap. 266.— [Rep.