Source: https://supreme.justia.com/cases/federal/us/260/512/
Timestamp: 2019-04-26 15:43:33+00:00

Document:
1. A judgment of the district court in an action against the United States under Jud.Code, § 24, par. 20, to recover taxes paid under protest is reviewable here by writ of error. P. 260 U. S. 514.
2. In computing the excess profits tax imposed by the Act of October 3, 1917, c. 63, 40 Stat. 300, the exaction prescribed by § 201 is to be imposed, in its successive stages, upon the entire net income, except that, from the part of the net income prescribed for the first stage, the allowances made by § 203 are to be deducted. So held where the allowances were less than 15 percent of the invested capital. P. 260 U. S. 514.
Error to and appeal from a judgment of the district court sustaining a demurrer and dismissing the complaint in an action against the United States to recover taxes.
Federal Court for the Eastern District of New York, under the Tucker Act (Judicial Code, § 24, par. 20). That court sustained a demurrer to the petition and entered judgment for defendant. 269 F. 58. The case is brought here by both writ of error and appeal. It is properly here on writ of error, Chase v. United States, 155 U. S. 489; J. Homer Fritch, Inc. v. United States, 248 U. S. 458. The sole question presented for decision is whether the method of calculating the taxes adopted by the Treasury is in harmony with the provisions of the Revenue Act.
The method of calculation adopted by the Treasury follows the clear language of the act, and its correctness is confirmed by the statement, and the illustrative tables, presented by the chairman of the Ways and Means Committee in submitting the Conference Report on the bill. Cong.Rec., 65th Congress, 1st Session, part 7, pp. 7580-7593. As the language of the act is clear, there is no room for the argument of plaintiff drawn from other revenue measures. Nor is there anything in La Belle Iron Works v. United States, 256 U. S. 377, 256 U. S. 383-388, which lends support to plaintiff's contention.
"Section 201. That, in addition to the taxes under existing law and under this act, there shall be levied, assessed, collected, and paid for each taxable year upon the income of every corporation, partnership, or individual, a tax . . . equal to the following percentages of the net income:"
"Twenty percentum of the amount of the net income in excess of the deduction (determined as hereinafter provided) and not in excess of fifteen percentum of the invested capital for the taxable year;"
"Twenty-five percentum of the amount of the net income in excess of fifteen percentum and not in excess of twenty percentum of such capital;"
"Thirty-five percentum of the amount of the net income in excess of twenty percentum and not in excess of twenty-five percentum of such capital;"
"Forty-five percentum of the amount of the net income in excess of twenty-five percentum and not in excess of thirty-three percentum of such capital; and"
"Sixty percentum of the amount of the net income in excess of thirty-three percentum of such capital."
"Section 203. That, for the purposes of this title, the deduction shall be as follows, except as otherwise in this title provided:"
"(a) In the case of a domestic corporation, the sum of (1) an amount equal to the same percentage of the invested capital for the taxable year which the average amount of the annual net income of the trade or business during the prewar period was of the invested capital for the prewar period (but not less than seven or more than nine percentum of the invested capital for the taxable year), and (2) $3,000."
Treasury Regulation No. 41, Article 17, provided that, if the deduction exceeded 15 percent of the invested capital, the amount in excess should be applied to the next succeeding tax bracket, and so on until the deduction should be absorbed. Compare § 301(d), Act of February 24, 1919, c. 18, 40 Stat. 1057, 1089.
(1) $32,342.33 minus $18,093.08 leaves $14,249.25.

References: § 24
 § 201
 § 203
 § 24
 v. 
 v. 
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 § 301