Cleveland daily leader. [volume] ([Cleveland, Ohio]) 1865-1873, 1865-11-30
IMPORTANT DECISION.
Foreign Holders OF American Bonds
Exempt from Taxation Delivered
by Chief Justice Chase at Baltimore
Kova@har o16

Exempt
by Chief Justice Chase at Baltimore
November 22d.
From tie Baltimore Commercial, Nov. %
In the United States Court yesterday,
Chief Justice Chase and Judge Giles on
the bench, an important decision was
rendered in the case noticed in the Com
mereidt of yesterday.
The Court stated that they had cOnsid-
cred the question argued on the previous
day, on the prayer of the counsel for the
defendant in the case of John g.. jackson
against the Northern Central Railroad
Company, and would proceed to state
their conclusions.
1t is admitted that Jackson is a British
subject, resident in Ireland. He has
brought suit against the Northern Central
Railroad Company, a corporation orgBniz-
ed under laws of Maryland and Pennsyl-
vania, to recover the sum due on certain
interest coupons, amounting to ($2,65O)
twenty-six hundred and fifty dollars, now
due and detached from the bonds of the
company. resgu.
The Company does not deny the plain
tiff title to the coupons, or its own obll-
cation to pay them but claims that it l.
bound to deduct and withhold from him
certain percentages to be paid into the
treasures of the United States and Penn
~sylvania respectively, and he can recover,
therefore, only the mount of the coupons
less these deductions. The counsel for the
Company prays the Court so to instruct
the Jury. The plaintiff denies the right of
the defendant to have these deductions
made. a
The deductions claimed are two: five
per GaDtum-ou tba. aP,naH4Rdt IF ttthee 4fRFFeN6n
each dollar of the principal, or of the
amount of the bonds, for Pennsylvania.
They would consider each in turn. The
Internal Revenue Act of Congress, ap-
proved March Sd, 1865, imposes on the in
come of every person residing in the
United States, and of every citizen of the
United States residing abroad, whether
derived from interests, dividends or other
sources, a duty of five per centum on the
excess over six hundred dollars, and of ten
per centum on the excess over five thou
sand dollars.
In the same section it is provided that
in a~scertaining the income of any person
liable to an income tax the amount of in
come received as dividends from institu-
tons, whose officers, as required by law,
withheld a per centum of their dividends
and paid the same over to an authorized
officer of the Government. shall be inclu-
ded, and the amount so withheld shall be
deducted from the tax which would be
otherwise assessed. This act, however.
imposes no tax on citizens of the United
States, and therefore none on the plaintiff.
who is neither such citizen nor resident.
1t is clear, also, that Congress regarded
the duty on dividends directed to be with
held by the officers of the companies paw
ing them, and to be paid over by them to
the proper officers of the Government as
an income tax, to be paid only by citizens,
or residents of the United States.
The fact that Congress regarded the
duty of dividends in this light aids ma
in the construction of the I22d
section of the Internal Revenue Act,
which is mainly relied upon by the de-
PENDANT. This section subjects ali railroad,
canal, turnpike, canal navigation or slack
water companies to a duty of five per cen.
on all interests and dividends derived
from their bonds or shares, and authorizes
them to withhold that amount from bond
holders and shareholders, and make pay
ment to the Government a discharge to
that extent from payment to them. The
language is general, and if the section
stood alone, an argument of some force
be drawn from it that Congress in
tended to impose an income on interests
and dividends from such bonds and shares,
reference to the citizenship or
residence of the holder.
But the section does not stand alone.
1t must be considered in connection with
parts of the act, and the llth section,
rs We have already observed, regards divi-
lends, subject to deduction by the officers
the companies paying them, as income,
not taxable except when payable to citi-
zens or residents. 1t is impracticable to
scribe to Congress a different intention
n regard to interests. Sound principles
If construction required the Court to re-
'Re c tbR!f Se sh8n efAiEelSalRRan elSri ggggapESiR4i8 81 t f2g
on incomes derived from the bonds
md shares of the companies described,
md not at llas-+ettehinS the number or
'iasses of income tax payers. The in
erests and dividends on which the duty is
hus collected must be regarded as the
anne interests and dividends on which a
-uty is imposed by the Il6th section, and
s subject to duty only when held by citi-
ems or residents of the United States.
The defendants prayer for instruction,
therefore,, must be denied so far as it as
erts a right on the part of the railroad
ompany to deduct five per cent. from the
mount of interest coupons held by the