Source: https://supreme.justia.com/cases/federal/us/288/89/case.html
Timestamp: 2017-06-29 12:36:00
Document Index: 649145514

Matched Legal Cases: ['§ 210', '§ 210', '§ 327', '§ 210', '§ 327', '§ 210', '§ 207', '§ 210', '§ 210', '§ 327', '§ 327', 'Art. 52', '§ 210', '§ 327', '§ 210', '§ 327', '§ 210', '§ 327']

United States v. Factors & Finance Co. (full text) :: 288 U.S. 89 (1933) :: Justia US Supreme Court Center Log In
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United States v. Factors & Finance Co. 288 U.S. 89 (1933)
U.S. Supreme CourtUnited States v. Factors & Finance Co., 288 U.S. 89 (1933)United States v. Factors & Finance Co.No. 141Argued December 8, 1932Decided January 9, 1933288 U.S. 89CERTIORARI TO THE COURT OF CLAIMS
Certiorari to review a judgment allowing a claim based on overpayment of income and excess profits taxes. Page 288 U. S. 90
In February, 1923, the audit by the Commissioner was still incomplete, and the amount of the assessment not finally determined. The taxpayer was fearful, so it seems, that the time might go by within which claims for overpayments were due under the law. To forestall any Page 288 U. S. 91 default, it lodged with the Commissioner on February 27, 1923, a claim for $177,606.04 in terms of sweeping generality. It stated in so doing that there had been at that time no final audit of its return or assessment of the tax, and that the purpose of the notice was to save the taxpayer's rights under the applicable statutes "and to permit the Commissioner to refund to deponent any excess paid over taxes actually found to be due." There was no statement in this notice as to the grounds of the claim that the payments were excessive. No such statement was made until July 17, 1925, when there was filed with the Commissioner an amended claim for refund, setting forth grounds in detail. In this amended claim, the taxpayer explains the reasons why a special assessment should be made in accordance with § 210 of the Revenue Act of 1917 (c. 63, 40 Stat. 300, 307), permitting that procedure where the amount of the tax cannot otherwise be determined with accuracy or justice. A copy of that section is quoted in the margin. * Page 288 U. S. 92
The claim for abatement had thus been disposed of, but no action had yet been taken upon the claim for refund. The Commissioner permitted this to slumber, without deciding or considering it, till after the filing of the amendment in July, 1925. Upon receipt of that amendment, or soon afterwards, he proceeded to a consideration of the claim upon the merits. There were hearings and rehearings at which the taxpayer gave evidence in support of its claim that its payments had been excessive and that there was need of a special assessment to arrive at a computation consistent with equity and justice. The Commissioner decided the merits of the controversy in favor of the taxpayer. He held that a case had been made out for a special assessment in accordance with § 210 of the Revenue Act of 1917. He held, after computing the tax accordingly, that there had been an overpayment of taxes in the sum of $32,634.89. He held, however, that the notice of claim of February 27, 1923, was defective for failure to state the grounds of the taxpayer's objections; that the notice of July 17, 1925, was without avail as an amendment in respect of overpayments made in 1918 and 1920, since as to these it was too late; that it was good as an original claim for the refund of the overpayment made in November, 1923; Page 288 U. S. 93 and hence that, of the total overpayments of $32,634.89, there should be a refund of $12,639.45, the 1923 installment, with $3,028.24, interest paid thereon, and that, as to the residue of the overpayments, $19,995.44, a refund should be refused. A very different case would be here if the Commissioner had ruled that no adequate reason for a special assessment had been established, and had refused relief upon that ground. We do not say that a justiciable controversy would then have arisen for a court. Williamsport Wire Rope Co. v. United States, 277 U. S. 551, 277 U. S. 562; United States v. Henry Prentiss & Co., ante, p. 288 U. S. 73. What he did was to find that there was need for a special method, that the application of such a method would reduce the tax by a stated sum, but that, because of defects in the form of the claimant's notice, there could be relief only in part. For the amount thus disallowed, the taxpayer brought suit in the Court of Claims, which overruled the action of the Commissioner and gave judgment accordingly. 56 F.2d 902, 73 Ct.Cls. 707. A writ of certiorari brings the case here.
We are holding in United States v. Memphis Oil Co., ante, p. 288 U. S. 62, that a general claim for refund, not specifying grounds, is subject to amendment until final rejection irrespective of a limitation running in the interval. We are holding in United States v. Henry Prentiss Co., Inc., ante, p. 288 U. S. 73, that, under the Revenue Act of 1918, a claim specifying as the sole ground for relief the necessity for a special assessment by reason of anomalous conditions prevailing in the claimant's business may not be turned by amendment into one for the revision of an assessment by increasing the value of real estate included in invested capital. The present case falls midway, or near to that, between the other two. Here, the taxpayer did not specify any ground in the claim first presented, but offered an amendment afterwards setting forth the reasons why the assessment should be special. Page 288 U. S. 94
There are other elements of difference, however, besides the presence or absence of agreement, that divide the Prentiss case from this one. These other elements of difference are even more important, for the Prentiss ruling would have been the same if agreement had been absent. When the two cases are considered in the light of administrative practice, a distinction is to be noted at the outset between the nature of a special assessment under the Revenue Act of 1918, § 327(d), 40 Stat. 1093, and the nature of such an assessment under the Act of 1917, Page 288 U. S. 95 § 210. The application in the Prentiss case was made under § 327(d) of the Act of 1918, whereby the taxpayer, ignoring a possible challenge of the computation of invested capital, plants itself upon the ground of a variance between the statutory definition and the economic concept, and calls upon the Commissioner to exercise a dispensing power given to him, in circumstances of hardship, by the provisions of the statute. In an application for special relief under § 210 of the Act of 1917, the grounds of challenge are very different if the letter of the section is the measure of relief thereunder. The value of the invested capital under the statutory definition (Revenue Act of 1917, § 207) is not put aside in such circumstances as an irrelevant inquiry. On the contrary, it becomes the very essence of the claim by the taxpayer that there must be a recourse to another method. Under § 210 of the Act of 1917, the special method is not permissible unless "the Secretary of the Treasury is unable in any case satisfactorily to determine the invested capital." In brief, § 210 of the Act of 1917 is the precursor of § 327(a) of the Act of 1918, and is not at all the analogue of § 327(d). Cf. Williamsport Wire Rope Co. v. United States, 277 U. S. 551, 277 U. S. 558.
We are not forgetful of the fact that, by the regulations of the Commissioner and the practice of his Bureau, the distinction between the two acts has been obscured, if not destroyed. Relief has been granted under the Act of 1917 as if its provisions were the same as those of the act adopted later. Treasury Regulations 41, 1918, Art. 52. Cf. R. H. Montgomery, Excess Profits Tax Assessment (1920), pp. 242, 243. The validity of the regulations, if applied to proceedings under the Act of 1917, is a question not now before us. The practice, we may say in passing, has not been left unchallenged, but has been criticized in the Report of the Senate Committee for the Investigation of the Bureau of Internal Revenue. See Page 288 U. S. 96 Report No. 27, pt. I, pp. 214, 215, et seq., 69th Congress, First Session, 1925-26. Certain at all events it is that an appeal to the Commissioner to exercise his jurisdiction under § 210 of the Act of 1917 is not confined to the occasions stated in § 327(d) of the Act of 1918, if indeed it covers them at all. It is at least broad enough to give notice that jurisdiction should be exercised in accordance with the letter of § 210, upon the ground, that is to say, of the inability of the Commissioner to arrive at a conclusion as to value satisfactory to himself. Under § 327(d) of the Act of 1918, a special assessment is not ordered except on the motion of the taxpayer, setting forth the special reasons why the statutory definition is oppressive, and why another method should be adopted. Under § 210 of the Act of 1917, as under § 327(a) of the Act of 1918, the Commissioner acts of his own motion whenever he is unable to satisfy himself that the valuation will be accurate if there is adherence to the statute.