Court Opinion

ID: 9443284
Source: CourtListenerOpinion
Date Created: 2023-08-03 19:16:45.564227+00
Date Added: 2024-06-11T17:29:26.402292
License: Public Domain

MAGRUDER, Chief Judge
(concurring).
I concur in the view, expressed in the court’s opinion, that on the proper interpretation of the law and of the accompanying Treasury Regulation, the taxpayer here was entitled, in computing its gross income from business, to subtract from total sales the full cost to it of goods sold, even though the taxpayer violated a regulation under the Emergency Price Control Act by paying more than the established maximum price. But I hope the court’s opinion will not give the impression that there is any serious doubt of the constitutional *225power of Congress to exclude from the offset so much of the cost of the goods sold as represented payment by the taxpayer in excess of the applicable ceiling price.
It may be that a merchant’s gross receipts from sales of a commodity represent a return of capital, and not gross income, at least to the extent of the cost to the merchant of the goods sold. In this view, a tax by Congress on the merchant’s gross receipts, as such, would not be a tax on income, sustainable under the Sixteenth Amendment. The question then would be whether such a tax fell within the general taxing power of Congress conferred by Article I, § 8, of the Constitution, or whether it would be deemed a “direct” tax which had to be laid in proportion to the population, as provided in Article I, § 9. See Spreckels Sugar Refining Co. v. McClain, 1904, 192 U.S. 397, 410 et seq., 24 S.Ct. 376, 48 L.Ed. 496. No such problem is presented here, for the tax now in question purports to be an income tax, in which the starting point for the computing of the tax is the taxpayer’s “gross income”, not his gross receipts, with no statutory qualification to cover the situation presented in this case. And the applicable Treasury Regulation defines ‘‘Gross income from business” as meaning, without qualification, “the total sales, less the cost of the goods sold”.
The imposition of price controls, as provided in the Emergency Price Control Act of 1942 (56 Stat. 23), was within the constitutional power of Congress. Yakus v. United States, 1944, 321 U.S. 414, 64 S.Ct. 660, 88 L.Ed. 834. Since Congress has power under Article I, § 8, to “make all Laws which shall be necessary and proper for carrying into Execution” all the powers vested by the Constitution in the Government of the United States, it would be within the incidental power of Congress, within broad limits, to provide what it deemed to be appropriate sanctions to secure compliance with the price control legislation.
Section 4(a) of the Emergency Price Control Act made it unlawful “for any person to sell or deliver any "commodity, or in the course of trade or business to buy or receive any commodity,” in violation of any price regulation issued pursuant to the authority of the Act. Section 205(b) of the Act provided that any person who willfully violated any provision of § 4 shall be guilty of a crime, and subject to fine or imprisonment, or both. A buyer who, in the course of trade or business, willfully bought a commodity at a price in excess of the ceiling price established in a price regulation, equally with the seller, was guilty of a crime. As an additional sanction in such a case, § 205(e) of the Act provided that the Price Administrator might bring a civil action on behalf of the United States to recover from the seller three times the amount of the overcharge. Since the buyer in the course of trade or business was also guilty of an unlawful act in paying more than the ceiling price, it would seem clear that Congress might, had it chosen, have provided a further sanction against the buyer too, subjecting him to a civil suit for recovery on behalf of the United States of three times the amount of his overpayment.
If Congress could have done the latter, as incidental to its power to provide appropriate sanctions for a price control program, it can hardly be doubted that it would have had power to provide a much less rigorous sanction against the buyer, by enacting that the merchant, in computing his gross income from business, may take as an offset to his gross receipts from sales only so much of the cost of the goods sold as might lawfully have been paid under the price regulation. Such an enactment would have required the merchant to pay to the United States, in the guise of a tax, somewhat more than he would have had to pay had he not been in violation of the price regulation. But the violator might consider himself lucky to be subjected to such a sanction, instead of being required to forfeit to the United States; in a civil action brought by the Price Administrator, three times the amount of the overpayment. It seems to me clear that Congress would have constitutional power to impose such a sanction, to be applied in the administration of the tax laws, whether or not Con*226gress would have power to impose a general tax on gross receipts, applicable to the law-abiding as well as to law violators.
But the flaw in the deficiencies asserted by the Commissioner in the case at bar is that for the tax year now in question, as the opinion of the court makes clear, Congress imposed no such additional sanction upon buyers who paid more than the ceiling prices, evidently considering the sanctions provided in the Emergency Price Control Act to be sufficient. It is not for the Commissioner or the courts to add a further sanction which Congress did not choose to provide.
The government’s argument is not strengthened by reference to the matter of deductions from gross income. In § 23(a) (1) of the Internal Revenue Code, 26 U.S. C. § 23(a) (1), 'Congress has allowed the deduction from gross income, not of all trade or business expenses, but only of “All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business”. This statutory language necessarily opens up a wide field for interpretation, as the line is drawn from case to case between what is and is not an “ordinary and necessary” business expense within the meaning of § 23(a) (1).