Court Opinion

ID: 9636566
Source: CourtListenerOpinion
Date Created: 2023-08-22 14:33:29.538269+00
Date Added: 2024-06-11T18:09:46.925719
License: Public Domain

ALLEN, Circuit Judge
(dissenting).
This is a case practically of first impression, involving the construction of an important section of the internal revenue law.1 It therefore seems wise, since I cannot agree with the conclusion of my colleagues, to state the reasons for my dissent.
The construction of the statute for which appellant contends, in my opinion, is reasonable and logical, and is supported not only by consistent administrative construction over a long period, but also by the legislative history of the enactment. While the evidential fact findings are based upon uncontroverted evidence, the ultimate findings of the District Court that there was no charge for admission and that the performances in the Ionian Room were not for profit involve questions of law and are contrary both to the statute and the applicable decision of the Supreme Court.
In its view that the performances could not have been given for a direct profit for the reason that no admission charge was made and that the expense of the entertainment was an overhead expense incidental to the class of business in which appellee was engaged, I think that the District Court erred as a matter of law. While the record does not show that the expense of the orchestra is allocated to general overhead, as suggested by the District Court, if it is, the fact remains that part of the charge for food contributes to the maintenance of the orchestra. The charges for services rendered in a hotel are intended to, and in a financially successful hotel do defray the overhead expenses. There is no basis here for the conclusion that the provision of an orchestra and space for dancing was a gift from the hotel. I cannot conclude that this service, which enhanced the popularity of the dining room and was advertised regularly during the period involved in newspapers of general circulation published in Columbus, Ohio, was free.
While a different statute was involved in Herbert v. Shanley Co., 242 U.S. 591, 37 S.Ct. 232, 233, 61 L.Ed. 511, the question before the court for decision was identical with that presented in the instant case in that it called for examination of the Circuit Court of Appeals’ conclusion that performances of musical compositions in a hotel dining room did not constitute performances for profit. Music was furnished only at certain times, but no admission charges were collected at any time, and no difference was made in the charges for food at the times when music was furnished. Mr. Justice Holmes, speaking for the court and holding that the conclusion of the Circuit Court of Appeals was untenable, pointed out that the performances were not “eleemosynary,” but rather were a part of the total for which the public paid. As he tersely said: “If music did not pay, it would be given up. If it pays, it pays out of the public’s pocket. Whether it pays or not, the purpose of employing it is profit, and that is enough.”
Applying this rule to the instant case, the uncontradicted facts require a finding *193that the performances were for profit. The conclusion that no charge for admission to the Ionian Room was included in the prices paid for food and refreshment is likewise based upon the untenable premise that the entertainment was free. Since the entertainment was for profit, and no cover, admission or other special charge was made, the charge for admission • was entirely included in the price for such services. Therefore the statute squarely applies, and twenty per cent of the charges made is conclusively deemed to be the admission charge.
I think that the entertainment furnished in the Ionian Room is clearly covered by the statute. The District Court made no finding or conclusion as to whether the entertainment comes within the statutory requirement of being “at any roof garden, cabaret, or other similar entertainment.” While the appellee does not operate a roof garden, and since it has no floor show it does not operate a cabaret within the dictionary definition, the performance in the Ionian Room is covered by the phrase “other similar entertainment.” The statute clearly provides for a tax upon admissions to places that are not conducted precisely as roof gardens or cabarets. Similarity in every respect is certainly unnecessary. The performance is similar to that of a roof garden or cabaret because of the fact that instrumental and vocal solo performances are given for the entertainment of patrons, and there is provision for dancing. This conclusion is supported by the portion of the applicable Treasury Regulation which is quoted in the majority opinion (Treas.Reg. 43, 1932 ed., Art. 11).
The stipulated facts show, in my opinion, that the performance, in the precise language of Article 11 of the regulation, is a public entertainment or diversion in the way of singing, solo instrumental numbers, and dancing with instrumental music, conducted for the profit of the management by professionals under the auspices of the management and in connection with the service of selling food and other refreshment in the dining room. Since the orchestra music is not unaccompanied by any other form of entertainment, the exception stated in Article 11 does not apply.
Examples 2 and 3 under Article 11, cited in the majority opinion, describe factual instances covering both the admission-charge feature and the nature of entertainment covered by the section to illustrate cases in which a tax is imposed. These examples are included in and made part of the regulations and describe situations substantially identical to that presented here.
Approval of the District Court’s conclusion overthrows the consistent and uniform interpretation adopted by those charged with the administration of these tax provisions. The substance of the pertinent provisions of the present regulations was announced December 4, 1917, by Treasury Decision 2603 which was promulgated by the Commissioner of Internal Revenue with the approval of the Secretary, pursuant to the express authority of Section 700 of the Revenue Act of 1917, 40 Stat. 318. Treasury Decision 2603 provided in substance that twenty per cent of the amount paid for refreshment, etc., at any public performance for profit at any cabaret or other similar entertainment to which the charge for admission is wholly or in part included in the amount so paid “shall be regarded and deemed to be paid for admission to such performance,” and also provided that “A hotel * * * affording in connection with the service of refreshment, food, or merchandise, entertainment in the form of dancing by its patrons is included.”
This administrative construction was cited in the report prepared by the Committee on Ways and Means of the House of Representatives upon the bill which became the Revenue Act of 1918. It was pointed out in this report (H.R. No. 767, 65th Cong., 2d Sess., p. 32) that the Treasury Department had determined that a general rule could be laid down to the effect that twenty per cent of the amount paid for refreshment, service or merchandise represented approximately the amount covered by the total price paid which could be attributable to the admission charge and that the bill embodied this treasury ruling as a basis for determining the tax upon the admission where the admission charge is included in the price paid for refreshment. It is evident that Congress thus had brought to its attention at the same time in the same Treasury Decision the administrative interpretation that “a hotel, restaurant or hall affording, in connection with the service of refreshment, food, or merchandise, entertainment in the form of dancing by its patrons” was included by the phrase “similar entertainment,” but no material change was made in the pertinent statutory provi*194sion so construed. The fact that the legislative history of the section supports the administrative interpretation of the statute provides an independent reason for adopting that construction. Estate of Sanford v. Commissioner, 308 U.S. 39, 44, 60 S.Ct. 51, 84 L.Ed. 20; Apex Hosiery Co. v. Leader, 310 U.S. 469, 489, 60 S.Ct. 982, 84 L.Ed. 1311, 128 A.L.R. 1044; United States v. American Trucking Ass’ns, Inc., 310 U.S. 534, 546 et seq., 60 S.Ct. 1059, 84 L.Ed. 1345; United States v. Dickerson, 310 U.S. 554, 562, 60 S.Ct. 1034, 84 L.Ed. 1356; United States v. Cooper Corp., 312 U.S. 600, 611, 613, 61 S.Ct. 742, 85 L.Ed. 1071; United States v. Wrightwood Dairy Co., 315 U.S. 110, 62 S.Ct. 523, 86 L.Ed. 726.
The bill with these provisions was enacted into law and’ was subsequently reenacted in the Revenue Acts of 1921 and 1924, with no change in the definitive language. Section 500(a) (5) of the 1926 Act retained the identical phraseology. The statute is not so explicit as to leave no room for elucidation. Under such circumstances it is held that “Congress must be taken to have approved the administrative construction and thereby to have given it the force of law.” Helvering v. R. J. Reynolds Tobacco Co., 306 U.S. 110, 115, 59 S.Ct. 423, 426, 83 L.Ed. 536; United States v. Dakota-Montana Oil Co., 288 U.S. 459, 53 S.Ct. 435, 77 L.Ed. 893. Cf. Helvering v. Reynolds, 313 U.S. 428, 432, 61 S.Ct. 971, 85 L.Ed. 1438, 134 A.L.R. 1155.
The majority of the court in effect concedes that the interpretation of the statute for which appellee contends is at variance with the interpretation consistently adhered to by those charged with its administration. This interpretation would ordinarily be entitled to great respect. Edwards’ Lessee v. Darby, 12 Wheat. 206, 210, 6 L.Ed. 603; Brewster v. Gage, 280 U.S. 327, 336, 50 S.Ct. 115, 74 L.Ed. 457. The variance is justified by the majority upon the ground that the statute is so clear and unambiguous as to leave no room for extrinsic aids to construction.
In the interpretation of statutes the function of the courts is simply to construe the language used so as to give effect to the intention of Congress and there is no more persuasive evidence of the purpose of a statute than the words by which the Legislature undertook to give expression to its wishes. But no matter how clear the meaning of words as used in a statute may appear upon independent examination, there is no rule of law which forbids the use of any aid to a determination of the intended meaning of the Congress that may be available. Boston Sand & Gravel Co. v. United States, 278 U.S. 41, 48, 49 S.Ct. 52, 73 L.Ed. 170; United States v. Dickerson, supra, 310 U.S. page 562, 60 S.Ct. 1034, 84 L.Ed. 1356. Acceptance of a “literal interpretation dogma which withholds from the courts available information for reaching a correct conclusion” increases the danger, ever present, that the courts’ conclusion as to legislative purpose will be unconsciously influenced by the judges’ own views or by factors not considered by the legislative body. United States v. American Trucking Ass’ns, Inc., supra, 310 U.S. page 542 et seq., 60 S.Ct. page 1064, 84 L.Ed. 1345.
The judgment of the District Court should be reversed.

 In United States v. Broadmoor Hotel Co., D.C.Colo., 30 F.2d 440, tlie only other ease construing this section, the facts differentiate the case. It was there held that the tax could not be collected from a resort hotel which furnished orchestra music for dancing in connection with the service of afternoon tea. A large percentage of those dancing were not guests of the hotel, did not purchase refreshments, or otherwise pay for dancing. The music did not include soloists, either instrumental or vocal.