Source: https://m.openjurist.org/314/us/326
Timestamp: 2019-10-17 21:25:48
Document Index: 794792284

Matched Legal Cases: ['§ 117', '§ 118', '§ 122', '§ 219', '§ 122', '§ 124', '§ 221', '§ 125', '§ 222', '§ 126', '§ 117', '§ 2', '§ 2', '§ 2', '§ 118', '§ 117', '§ 117', '§ 118', '§ 117', 'Art. 143', 'Art. 562', 'Art. 262', '§ 23', '§ 23', 'Art. 262', '§ 23', '§ 118', '§ 213', '§ 213', '§ 213', '§ 213', '§ 213', '§ 213', '§ 260', '§ 375', '§ 375', 'Art. 143', '§ 23', '§ 23', '§ 23']

314 U.S. 326 - Textile Mills Securities Corporation v. Commissioner of Internal Revenue
TEXTILE MILLS SECURITIES CORPORATION
If § 117 could reasonably be construed to provide that the court, when sitting, should consist of three judges drawn from a panel of such larger number as might from time to time be authorized, reconciliation with § 118 would be obvious. Sec. 117, however, contains no such qualification. And since it establishes the court as a 'court of record, with appellate jurisdiction', it cannot readily be inferred that the provision for three judges is a limitation only on the number who may hear and decide a case. There are numerous functions of the court, as a 'court of record, with appellate jurisdiction', other than hearing and deciding appeals. Under the Judicial Code these embrace prescribing the form of writs and other process and the form and style of its seal (§ 122, 28 U.S.C.A. § 219); the making of rules and regulations (§ 122); the appointment of a clerk (§ 124, 28 U.S.C.A. § 221) and the approval of the appointment and removal of deputy clerks (§ 125, 28 U.S.C.A. § 222); and the fixing of the 'times' when court shall be held. § 126. Furthermore, those various sections of the Judicial Code provide that each of these functions shall be performed by the 'court'. In that connection it should be noted that most of them derive, as does § 117, from § 2 of the Act of March 3, 1891. The first sentence of § 2 provided that the court 'shall consist of three judges'. The next sentence stated that 'Such court shall prescribe the form and style of its seal and the form of writs and other process and procedure', etc. In that setting it is difficult to perceive how the word 'court' in the second sentence was used in a different sense than in the preceding sentence. And we look in vain for any indication12 that when those separate sentences were sectionalized in the Code, they acquired a meaning which they did not have in § 2 of the Act of March 3, 1891.
We cannot conclude, however, that the word 'court' as used in those other provisions of the Judicial Code means only three judges. That would not only produce a most awkward situation; it would on all matters disenfranchise some circuit judges against the clear intendment of § 118. Nor can we conclude that the word 'court' means only three judges when the court is sitting, but all the judges when other functions are performed. Certainly there is no specific authority for that construction. And it is difficult to reach that conclusion by inference. For to do so would be to imply that Congress prohibited some circuit judges from participation in the most important function of the 'court' (the hearing and the decision of appeals), though allowing all of them to perform the other functions. Such a prohibition as respects the ordinary responsibilities of a judicial office should be inferred only under compelling necessity, since a court usually will consist of all the judges appointed to it. That necessity is not present here. The ambiguity in the statute is doubtless the product of inadvertence. Though the problem of construction is beset with difficulties, the conclusion that § 117 provides merely the permissible complement of judges for a circuit court of appeals results in greater harmony in the statutory scheme13 than if the language of s 117 is taken too literally. And any sacrifice of literalness for common sense does no violence to the history of § 117. That history is largely negative in the sense that there is no clear statement by sponsors of this legislation that § 118 read in light of § 117 prevents the conclusion which we have reached.14 Certainly the result reached makes for more effective judicial administration.15 Conflicts within a circuit will be avoided. Finality of decision in the circuit courts of appeal will be promoted. Those considerations are especially important in view of the fact that in our federal judicial system these courts are the courts of last resort in the run of ordinary cases. Such considerations are, of course, not for us to weigh in case Congress has devised a system where the judges of a court are prohibited from sitting en banc. But where, as here, the case on the statute is not foreclosed, they aid in tipping the scales in favor of the more practicable interpretation.
Plainly, the regulation was applicable. The ban against deductions of amounts spent for 'lobbying' as 'ordinary and necessary' expenses of a corporation derived from a Treasury Decision in 1915. T.D. 2137, 17 Treas.Dec., Int.Rev., pp. 48, 57, 58. That prohibition was carried into Art. 143 of Treasury Regulations 33 (Revised, 1918) under the heading of 'Expenses' in the section on 'Deductions'.16 Beginning in 1921 the regulation was entitled 'Donations.' (Art. 562, Treasury Regulations 45.) And in the regulations here in question Art. 262 appeared under § 23(n) which covered 'Charitable and other contributions' by individuals. It assumed that form and content in 1921 and appeared since then without change in all successive regulations.17 Sec. 23(n) and § 23(a), 26 U.S.C.A. Int.Rev.Acts, pages 356, 358, both deal with deductions; and a 'donation' by a corporation though not deductible under the former might be under the latter. Art. 262 purports to specify when a certain type of expenditure or donation by a corporation may or may not be deducted as an 'ordinary and necessary' expense. The argument that it was not applicable because it was not specifically incorporated under § 23(a) is frivolous.
Petitioner's argument that the regulation is invalid likewise lacks substance. The words 'ordinary and necessary' are not so clear and unambiguous in their meaning and application as to leave no room for an interpretative regulation. The numerous cases which have come to this Court on that issue bear witness to that. Welch v. Helvering, 290 U.S. 111, 54 S.Ct. 8, 78 L.Ed. 212; Deputy v. Du Pont, 308 U.S. 488, 60 S.Ct. 363, 84 L.Ed. 416, and cases cited. Nor has the administrative agency usurped the legislative function by carving out this special group of expenses and making them non-deductible. We fail to find any indication that such a course contravened any Congressional policy.18 Contracts to spread such insidious influences through legislative halls have long been condemned. Trist v. Child, 21 Wall. 441, 22 L.Ed. 623; Hazelton v. Sheckells, 202 U.S. 71, 26 S.Ct. 567, 50 L.Ed. 939, 6 Ann.Cas. 217. Whether the precise arrangement here in question would violate the rule of those cases is not material. The point is that the general policy indicated by those cases need not be disregarded by the rule-making authority in its segregation of non-deductible expenses. There is no reason why, in absence of clear Congressional action to the contrary, the rule-making authority cannot employ that general policy in drawing a line between legitimate business expenses and those arising from that family of contracts to which the law has given no sanction. The exclusion of the latter from 'ordinary and necessary' expenses certainly does no violence to the statutory language. The general policy being clear it is not for us to say that the line was too strictly drawn.
Judicial Code § 118, 28 U.S.C. § 213, 28 U.S.C.A. § 213; Act of June 10, 1930, c. 438, 46 Stat. 538, 28 U.S.C. § 213d, 28 U.S.C.A. § 213d; Act of June 24, 1936, c. 753, 49 Stat. 1903, 28 U.S.C. § 213d—1, 28 U.S.C.A. § 213d—1.
As distinguished from judges retired under the provision of § 260 of the Judicial Code, 28 U.S.C. § 375, 28 U.S.C.A. § 375.
Art. 143 provided: 'Lobbying expenses.—Sums of money expended for lobbying purposes, the promotion or defeat of legislation, the exploitation of propaganda, and contributions for campaign expenses are held not to be an ordinary and necessary expense in the operation and maintenance of the business of a corporation, and are therefore not deductible from gross income in arriving at the net income upon which the income tax is computed.'
In the Revenue Act of 1936, 26 U.S.C. § 23(q), 26 U.S.C.A. Int.Rev.Acts, page 830, 49 Stat. 1648, Congress specifically provided for deductions of certain contributions by corporations to specified corporations, trusts, funds, or foundations, 'no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation'. And see the Revenue Act of 1938, 26 U.S.C. § 23(q), 26 U.S.C.A. Int.Rev.Code, § 23, 52 Stat. 447.