Court Opinion

ID: 6874587
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:06:02.530476+00
Date Added: 2024-06-11T16:05:28.254554
License: Public Domain

WILSON, Circuit Judge
(concurring),.
I concur in the result of the opinions, of Judge Bingham in these cases on the-grounds set forth below.
The two cases present somewhat different state of facts, but involve similar questions and the same sections of Act 74-of the Laws of 1925 of Puerto Rico, hereinafter referred to as the Act, relating to income taxes, and may be disposed of in one-opinion.
The intent of the statute, though inartistically worded in some particulars, is cleai when considered in its entirety. Substan-*401tially all income and excess-profits taxes are without doubt paid voluntarily on their due date, without the necessity of levy, assessment or any other kind of action on the part of the Treasurer or Collector. That is what the Legislature intended. It is the procedure adopted by the Federal Income Tax laws, and is of substantial benefit to the public treasury, making available -for public purposes ascertainable income at definite dates, which taxpayers must pay or become liable for penalties and interest.
Neither the treasury department nor the taxpayers are, however, infallible upon a complicated subject such as income taxes, and the Treasurer of Puerto Rico is required as soon as is practicable to examine the taxpayer’s return and determine whether he has paid the correct amount of tax. The law contemplates that overpayments made by the taxpayer shall be returned, and that underpayments shall be collected. The Act sets up a procedure by which the taxpayer can compel the return of overpayments, and by which the Treasurer can compel the payment of the correct amount of the tax in case of underpayments.
The intention of the Legislature to encourage taxpayers to pay what they think is owing, upon the assurance that it will be refunded if found to be in excess of what is properly due, is manifest from the Act, and the requirement for payment under protest as a condition precedent for a suit to recover is limited only to those cases in which the taxpayer has been put upon notice by receipt of a notice of deficiency and that his determination of his own tax has been contested.
The statute should be interpreted with this intent in mind.
The plaintiff in the first case, the Porto Rico Fertilizer Company, hereinafter referred to as the Fertilizer Company, filed a return for the several years from 1924 to 1931, both inclusive, showing interest paid each year on money borrowed of a Virginia corporation and used in Virginia or other places in the United States for the purchase of materials to be used in its business.
The petition of the taxpayer alleged that the Treasurer of Puerto Rico notified the plaintiff that he had assessed against the plaintiff according to its returns the several amounts provided by the Act, which it paid voluntarily and without protest as a withholding company for the Virginia company (Sec. 22). The defendant demurred to the petition.
Eight actions were brought by the Fertilizer Company against the Treasurer of Puerto Rico to recover the sums illegally collected by him for the several years in question, but abandoned its first five causes of action as being prescribed by Section 64(b) of the Act.
The District Court of San Juan held that, since the taxes were not paid under protest, as provided in Section 76(a).of the Act, as a condition of bringing suit against the Treasurer, and as no appeal had been taken to the Bureau of Review and Equalization from the refusal of the Treasurer to refund the sum erroneously collected, the plaintiff could not recover. \
On appeal to the Supreme Court of Puerto Rico, that Court sustained the judgment of the District Court. “For the reason that the payment was not made under protest, and no appeal was taken to 'the Board of Review and Equalization, the judgment appealed from should be affirmed.”
Since the cases were presented on demurrer, the allegations of the complaints must be taken as containing all the facts. It is alleged in the Fertilizer case that the Treasurer notified the taxpayer that he had assessed the taxes therein set forth. The sums alleged as assessed were voluntarily paid and without protest, though the statute imposing the taxes in December, 1932, was held by this. Court to be invalid under the Organic Act of Puerto Rico, 39 Stat. 951, as imposing taxes on non-residents upon income outside the Island. Domenech v. United Porto Rican Sugar Co., 1 Cir., 62 F.2d 552.
It is clear that the sums so paid were not in the nature of deficiency taxes under Sections 56 and 57 of the Act, but may be treated as an overpayment under Sections 23(b) and 64 of the Act. The plaintiff requested that the sums paid by it be refunded, presumably under Section 75 of the Act, which was refused by the Treasurer, but the plaintiff did not appeal therefrom to the Board of Review and Equalization.
While the Income Tax Acts of 1919 and 1921, when examined in their entirety, were also intended to provide for the assessment, payment, and the determination of income taxes by the Treasurer, and an adjustment of any differences by an appeal to a Board of Review and Equalization, and an appeal to the Courts, see Sections 57-63, and Section 66 of the 1919 Act, and Sections 42-47 of the 1921 Act. The Legislature by the *402Act of 1925 attempted to clarify pertain provisions of the prior Acts.
However, the procedure under the Income Tax Act of 1919, 1921 and 1925 has been so confused by the decisions of the Supreme Court of Puerto Rico that, while ordinarily this Court will follow the interpretation of the law of Puerto Rico by the Insular Supreme Court, we think we are warranted in determining, without regard to the many conflicting decisions of the Insular Supreme Court, what seems to us to be the intent of the Insular Legislature in the passage of Act 74 of the Laws of 1925 so far as it affects the decision of these-cases.
Sections 22, 27(a), 37(a), 39, 53, 54, 55, 56, 57, 64, 75 and 76 of the Act of 1925 are clearly intended to provide for returns by taxpayers (Secs. 22, 37); the voluntary payment by the taxpayer of the tax provided by law according to his return within a specified time (Sec. 53) ; the examination of his return by the Treasurer (Sec. 54); and if he finds on examination of the return, or from any additional evidence, that the sum voluntarily paid by the taxpayer was less than the amount due from the taxpayer, the Treasurer then notified the taxpayer of the determination of a deficiency tax (Sec. 57); and if he finds that the taxpayer has overpaid the sum due from him (Secs. 55, 64), any such overpayment shall be refunded immediately to the taxpayer.
In case the Treasurer, upon the examination of a return, finds that the sum paid by the taxpayer is less than the sum due from him as taxes under the Act, and determines that a deficiency exists and notifies the taxpayer of such deficiency, the taxpayer may, within thirty days, file an appeal with the Board of Review and Equalization (Sec. 57 (a), the decision, of which is final. The amount so determined by the Board shall be assessed by the Treasurer (Sec. 57(b).
In case an overpayment is not refunded as provided in Section 23 (b) and 64, and the taxpayer under Section 75 applies to the Treasurer, who is authorized to make the refund, and the Treasurer refuses for any reason, as in case a dispute exists as to the amount of the overpayment, the taxpayer under Section 76(b) may appeal to the Board of Review and Equalization, and if the Board of Review finds that there was an overpayment and the Treasurer still refuses to refund the amount of overpayment determined by the Board, it is clear, we think, that a suit may be brought to recover.
It is clear that the Fertilizer Company neither paid under protest the taxes involved in the action brought by it, nor did it appeal from the Treasurer’s refusal to make a refund to the Board of Review. It had a remedy at law, if it had followed the provisions of the Act. Mandamus does not lie to compel action by an official where the law provides a remedy.
The Treasurer, however, without warrant of a legal statute, collected the taxes for the years 1929, 1930 and 1931; as a result an action at law existed against the Treasurer, Jimenez v. Domenech, 1 Cir., 80 F.2d 767, 768, for money had and received, which appears to be provided for in Sections 1795— 1801 of the Civil Code of Puerto Rico. Also see Sage et al. v. United States, 250 U.S. 33, 39 S.Ct. 415, 63 L.Ed. 828; George Moore Ice Cream Co., Inc., v. Rose, Collector, 289 U.S. 373, 53 S.Ct. 620, 77 L.Ed. 1265; United States v. Hvoslef, 237 U.S. 1, 35 S.Ct. 459, 59 L.Ed. 813, Ann.Cas.1916A, 286.
The plaintiff’s present action is, however, based on Act 74 of the Laws of 1925, and since it has not complied with its provisions, the judgment of the Supreme Court of Puerto Rico must be affirmed with costs, not to include counsel fees.
The case of the Yabucoa Sugar Company, hereinafter referred to as the Sugar Company, presents, a somewhat different, state of facts from that in the case brought by the Fertilizer Company.
From the complaint in this case, to which a demurrer was filed by the defendant, it appears that on the return of the plaintiff filed with the Treasurer, no tax was at first assessed against the plaintiff, but the plaintiff at the request of the Treasurer voluntarily paid the amount due according to the return. Later the Treasurer, having practiced an investigation of the books of account of the Yabucoa Sugar Company, a notice of a deficiency tax of $1,301.51 was prepared by the. Treasurer and was served on the plaintiff October 31, 1928.
From this notice of a deficiency tax the plaintiff appealed to the Board of Review and Equalization, which found that there was no deficiency but an overpayment by the plaintiff of $6,803.66, which was made at the request of the Treasurer on its original return. The plaintiff then filed a petition with the Treasurer for refund and credit, who granted a refund of $525.56 instead of the amount found to have been overpaid by the Board of Review; where*403upon the plaintiff again appealed from the decision of the Treasurer to the Board of Review. The Board confirmed its prior decision on the former appeal, whereupon the plaintiff brought this action to recover of the Treasurer the sum found to have been overpaid by the Board of Review and Equalization.
The District Court of San Juan held that, inasmuch as the taxes involved were not paid under protest, no recovery could be had. The Supreme Court on appeal affirmed the judgment of the District Court and held that under Section 75 of the Act of 1925, the Treasurer having refused to make the refund, there was no redress for the taxpayer by applying to the courts; that Section 75 gave to the Treasurer sole discretion as to whether he would allow a refund in any case. We think this interpretation of Section 75 is not warranted. Section 64 requires a refund of any overpayment. No discretion is imposed on the Treasurer as to whether he will grant it or not. In case a question is raised as to the amount of the overpayment, the Treasurer may refuse to grant a refund according to the plaintiff’s claim, but the taxpayer may appeal to the Board of Review, the decision of which is final, which was done in this case.
There appears to be no question but that the plaintiff has complied with all the necessary requirements of the Act, including Section 76(b), for bringing a suit to recover the overpayment found by the Board of Review.
It had the right of appeal to the Board of Review on two grounds: (1) from the decision of the Treasurer refusing to grant a refund of the overpayment, and (2) from the Treasurer’s determination of a deficiency tax of $1,301.51. Section 76(b) clearly implies that a suit may be brought to recover any sum found to be due by the Board of Review as an overpayment.
Since the Board found that no deficiency tax was due and its decision is final, there was no occasion for the plaintiff to pay under protest the sum levied by the Treasurer as a deficiency tax. Any other interpretation of the Act permits no effect to be given to Section 76(b), or to the provisions of Section 64, which provides that all over-payments, after crediting the amount to any other tax due for a different year, shall be returned to the taxpayer.
It is unnecessary to consider the effect of Act 8 of the Laws of 1927, since the Supreme Court of Puerto Rico has finally-concluded that that Act, as this Court indicated in its opinion in Domenech v. Verges, 69 F.2d 714, 716, in no way modified or repeals any provision of the Act of 1925, which is a complete Act in itself for the assessment and collection of income taxes.