Court Opinion

ID: 6845168
Source: CourtListenerOpinion
Date Created: 2022-07-23 20:27:35.28353+00
Date Added: 2024-06-11T16:04:57.612215
License: Public Domain

MANTON, Circuit Judge
(dissenting).
Section 327(b) of the 1918 Act (40 Stat. 1057, 1093) requires that the taxpayer, if a foreign corporation, be assessed as to its war profits and excess profits taxes under section 328(a). The Commissioner had no occasion, nor was it his duty, to determine as an administrative act whether the taxpayer was entitled to this special assessment under section 328(a), as was the requirement in Williamsport Wire Rope Co. v. United States, 277 U. S. 551, 48 S. Ct. 587, 72 L. Ed. 985, for there the Commissioner was dealing with a domestic corporation. The error below rested in the court’s determination that the discretionary power conferred on the Commissioner went beyond the determination of whether or not a domestic corporation was entitled to a special assessment under section 328, and in holding that the Commissioner had the additional administrative discretion, which was not reviewable in the courts, of determining the questions suggested in section 328(a). No discretion was reposed in the Commissioner as to computation of the special assessment. Section 328 explicitly directs how the assessment is to he made. Section 328 provides that “the tax shall be the amount which bears the same ratio to the net income of the taxpayer (in excess of the specific exemption of $3,000) for the taxable year, as the average tax of representative corporations engaged in a like or similar trade or business, bears to their average net income (in excess of the specific exemption of $3,000) for such year. In the *105ease of a foreign corporation the tax shall be computed without deducting the specific exemption of $3,000 either for the taxpayer or the representative corporations.”
The mandatory effect of section 328 was to compel the Commissioner, in computing the tax, to use as comparatives, only representative corporations whose invested capital can be satisfactorily determined and that the ratio shall be determined upon regulations prescribed by the Commissioner, with the approval of the Secretary. And section 327 provides “where the Commissioner is unable to determine”; and where “the Commissioner is unable satisfactorily to determine;” and where “the Commissioner finds * * * that the tax * * * would * * * work upon the corporation an exceptional hardship.”
This phrase of section 327 indicates an intent, as the Williamsport Case held, to confer a discretionary nonreviewable power on the Commissioner. But the phrase of section 328 is mandatory and requires the Commissioner to ascertain the average fax of the “representative corporations engaged in a like or similar trade or business.” The rest is a mathematical calculation. The task thus imposed upon the Commissioner is no different from many similar ones required in ascertaining gross income, net income, invested capital, depreciation, and allowance, which are necessary to compute the ordinary income and excess profits tax of the taxpayer. It is so well settled as to require no citation of authority to say that such determinations by the Commissioner are reviewable by the courts. The” Commissioner has made the computation, which is complained of, and the courts may reach a different conclusion if the evidence produced shows error in his determination of the representative corporations he has used for comparison or errors in the computations made as the bill of complaint charges. The question for the court on the trial would be whether the Commissioner has followed the mandatory directions of the statute in a manner free from error.
The right to sue the collector for an unjustified collection has long been recognized as a common-law remedy. United States v. Emery, etc., Co., 237 U. S. 28, 35 S. Ct. 499, 59 L. Ed. 825. The District Court has jurisdiction in a suit such as this under section 41, title 28, U. S. Code (28 USCA § 41). Unless the Revenue Act of 1918 withdrew this jurisdiction, it must still exist. No provision of the act takes away this jurisdiction or otherwise limits it. It would be no serious difficulty to review the issue presented of whether a Commissioner followed out the direction of section 328 in making the assessment. Nothing in the Williamsport Case (see page 558 of 277 U. S., 48 S. Ct. 587, 72 L. Ed. 985) indicates that the court found Congress intended to abrogate the common-law right of taxpayers to sue the internal revenue collector, and that ease held merely that the courts will not review the discretionary determination of the Commissioner as to whether special relief should be given to any domestic corporation in any given ease.
The Court of Claims in Frederick Warne & Co. v. United States, 62 Ct. Cl. 363, 369 said, referring to section 328: “The statute is in positive terms, and expressly points out its applicability to foreign corporations. Why a discrimination between foreign and domestic corporations was deemed advisable is not for judicial determination. The act used mandatory terms and mentions foreign corporations as not entitled to the exemption provided in section 302.”
And, as pointed out in Blair v. Oesterlein Mach. Co., 275 U. S. 220, 226, 48 S. Ct. 87, 89, 72 L. Ed. 249, “there is no inherent impossibility, or, indeed, serious difficulty in reviewing judicially any determination authorized by sections 327 and 328.”
For these reasons it was error to dismiss the bill, and the judgment should be reversed.