Court Opinion

ID: 4472098
Source: CourtListenerOpinion
Date Created: 2020-01-13 23:17:00.207732+00
Date Added: 2024-06-11T13:17:18.283760
License: Public Domain

Harlan, J., dissenting: The distinction between the case at bar and Scioto Provision Co., 9 T. C. 439, and Garibaldi & Cuneo, 9 T. C. 446, would seem to be obvious. In both of the above cases the violation of the law was patent. In fact, in the Garibaldi & Cuneo case there was some evidence of a flaunting of the law and in both of these cases the process of presenting and collecting a penalty had actually been instituted. In the case at bar the record does not disclose that there was ever a violation of the OPA law. If there was, the record discloses that it would be difficult, if not impossible, to prosecute and neither had the Government presented a claim, nor is there any evidence that the Government anticipated presenting a claim for penalty. When the taxpayer herein reported its mistake in pricing, the representative of the OPA, far from claiming that any violation of law or regulations had occurred, merely “advised” the taxpayer to return the overcharge to the various customers. The taxpayer, for reasons not disclosed by the record, claimed that this would be “impracticable.” We can only infer that probably the amount of shrinkage in each case would be little more than guesswork and, since the amount of shrinkage apparently varied with each sale, with the average overcharge amounting to less than two-tenths of 1 per cent of the purchase price, it would probably not only be impracticable, but impossible, to Compute this minuscule variation from OPA price levels to each customer. At any rate the taxpayer evidently convinced the OPA representative of the utter lack of feasibility of making these computations and at the taxpayer’s suggestion the OPA agreed that the taxpayer, to remove from itself all possible breath of suspicion or criticism from its competitors, should give the money to the Government. The record discloses that the plan to give the money to the Government was “agreed upon by the parties.” There was no contention that such gift was in satisfaction of any cause of action by the Government. Indeed the record clearly shows that the Government had no cause of action and, if it had, it would have lacked' the certainty of proof necessary to establish it in court. The stipulation of facts says: Petitioner computed the selling price of its merchandise in accordance with the method prescribed by Maximum Price Regulation No. 127, making allowance for shrinkage In accordance with the actual figures specified in the finishers' contracts. Surely, if the taxpayer complied with the regulations, any judge, or jury, if the question could ever get to á jury, would conclude that it had done all that the law could reasonably require of any citizen. Furthermore, since the taxpayer contended, and the Government agreed, that it would be “impracticable” to compute the overcharges so as to make the individual refunds, and since the action for penalty would necessarily be based upon the sales to each individual customer and not upon the composite overcharge for the entire year, it would certainly be far more “impracticable” for the Government to prove a case for a penalty in the event such an unthinkable action would be undertaken and in the face of the certainty of the proof that would be required of the Government for a recovery. The fact that the letter from the taxpayer enclosing the check to the Government stated that the check was “in settlement of the Price Administration’s cause of action” does not thereby create a cause of action where none existed, nor does it present a claim from the Government where none had ever been presented and on the record none was in contemplation. All that can be drawn from this statement in the letter is that some overzealous lawyer or accountant was trying to cover all the possible numbers for his employer. If the petitioner herein had made the rebates to its customers as suggested by the OPA, there would, of course, be no question as to the deductibility of these amounts as “allowance on sales.” We can not agree with the majority that the same amount should not now be allowed under section 23 (q), I. R. C., as a gift to the Government. The majority opinion denies this deduction because it lacked “philanthropic motives,” but came from the “desire of petitioner’s president to absolve the petitioner from any stigma of price ceiling violations.” The Supreme Court of the United States, in American Dental Co. v. Helvering, 318 U. S. 322, held that the purpose of a gift was immaterial to its deductibility for income tax purposes as long as the distribution was in fact a gift. The price control act was passed to prevent price inflation and unwarranted profits. The mistake by the taxpayer herein in its sales to dealers, who in turn sold to customers, was so microscopic in its amount that by the time the price for the wholesale account was divided up into retail sales to consumers it would take a superexpert mathematician to compute the infinitely small price increase. In fact, this taxpayer’s mistake could not have affected the retail price. Furthermore, the taxpayer made no unwarranted profits, because it turned 100 per cent of those profits back to the Government. We feel that for the Government now to tax petitioner for income, 100 per cent of which was delivered to the Government as soon as possible after its mistaken receipt was discovered, is nothing less than treating a mistake as a misdemeanor and penalizing efforts at good citizenship. Leech and KeRN, JJ., agree with this dissent.