Court Opinion

ID: 4477717
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:12:41.124829+00
Date Added: 2024-06-11T14:53:29.572533
License: Public Domain

Turner, J., dissenting: By subsection (b) of section 141, Congress did grant broad powers to tbe Commissioner to prescribe such regulations as were deemed necessary to assure the determination, assessment, and collection of tbe income and excess profits tax of “any affiliated group of corporations making consolidated * * * returns and of each corporation in tbe group * * *, and in order to prevent avoidance of sncb tax liability.” Congress did not, however, grant to the Commissioner the power to define or name the corporations whose income should be permitted consolidated treatment, but by subsections (d) and (e), specifically stated its own definition of an “affiliated group of corporations,” and by subsection (a) made it clear that the filing of a return covering and consolidating the income of each and every corporation in an affiliated group, as so defined, was a prerequisite to consolidated treatment of the income of the group. Patently, therefore, there is no such thing within the contemplation of section 141 as a “partial” consolidated return, or, stated differently, a return which covers only a part of the affiliated group of corporations is not a consolidated return within the meaning of the statute. It would accordingly seem to me to be axiomatic that any regulation which according to its language appears to change, relax, or waive the conditions which Congress itself has unequivocally set up as a prerequisite to the consolidated treatment of corporate income must either be held to be of no force or effect, or if susceptible of an interpretation which is not in conflict with the statute in respect of which it has been promulgated, it should be so interpreted. It is true, of course, that the Commissioner in section 23.18 of his regulations did provide that in the event of “failure to include in the consolidated return the income of any subsidiary * * *, notice thereof shall be given to the common parent * * * and the tax liability of each member of the affiliated group shall be determined on the basis of separate returns unless such income is included * * * within the period prescribed in such notice.” By the regulation, the Commissioner has in language having a mandatory connotation and directed to himself, indicated that in the event of failure to include the income of a subsidiary in the return filed, as Congress prescribed it must be, he will, by notice to the common parent, provide the group with a second chance to bring itself within the statute. But, even so, there is a noticeable absence of any language to the effect that a failure to give such notice will entitle those corporations which were included in the return filed to consolidated treatment of their income. A consolidated return covering all of the corporations in an affiliated group, as Congress has defined it, is still, according to the statute, that without which consolidated treatment of the income may not be had. And in the absence of clear and unequivocal language to such effect, I know of no rule which permits us, through construction, to ascribe to a regulation the doing of that which the statute says may not be done, particularly where, as in this instance, to do so would be to abrogate conditions which Congress has specifically prescribed. Surely the rule of reenactment of the statute without change does not go that far. And yet, that is what I -understand the effect of the Opinion here to be. Though it does appear that the respondent failed to give formal notice of the defect in the return filed, it is to me apparent on the facts that through petitioner the common parent did de facto receive notice thereof, but having had such de facto notice, has not filed nor indicated any intention to file a consolidated return for the affiliated group. Without any showing of an attempt to cure the defect, and confessing that no consolidated return within the meaning of the statute has ever been filed, the petitioner comes to this Court resisting the determination of the deficiency against it as an individual corporation, seeking thereby to obtain the same effect, taxwise, from the abortive return as would flow from a proper return under the statute. A resulting question may, of course, be, how may a group of corporations which fully intended to comply with the statute, but through inadvertence failed to do so, avoid or defend against determinations against them individually, as in this case, if the first notice of defect in the return filed is by way of a notice of deficiency. The answer, it seems to me, is in the regulation itself. By its terms, the regulation permits the filing of a proper return “within the period prescribed in such notice,” and in the instant case, it does not appear that the respondent, even today, has ever prescribed the date beyond which the affiliated group herein may not take such curative action. Through the notice of deficiency, information of the defect has been present in the affiliated group since petitioner’s receipt of the notice, and certainly there was ample time for the filing of the required return between the receipt of the notice of deficiency and the trial herein. The introduction of satisfactory evidence that such a return had been filed, even though belatedly, would, I should think, have been a complete defense for petitioner in this proceeding. As matters now stand, no effective consolidated return has been filed, or offered for filing, even to this date, and I do not understand there is any indication of record of any intent to file such a return. Accordingly, it would seem to me that the return filed could, at the most, be regarded as a reporting by each of the corporations covered of its individual income, and there being no consolidated return, the respondent, mider the statute, would have no alternative but to determine the tax of the said corporations separately and individually. If the return which was filed is not to be so regarded, then, on the facts, it would appear that we have here a no return case, and are left with no alternative but to enter judgment covering the tax of the instant corporation on an individual basis. Betjob and Withey, JJ., agree with this dissent.