Opinion
Docket No. 21337.
1951-01-31
FRANK A. GRAY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
Emmett E. Eagan, Esq., for the petitioner. Cyrus A. Newman, Esq., for the respondent.
Emmett E. Eagan, Esq., for the petitioner. Cyrus A. Newman, Esq., for the respondent.
Petitioner is held to be not entitled to deductions for amortization of war facilities under section 124, Internal Revenue Code, where no application for certificate of necessity was timely filed and no certificate of necessity was issued.
Respondent has determined deficiencies in income and victory tax for the calendar year 1943 in the amount of $41,544.61. These deficiencies, to the extent here in controversy, arise through respondent's disallowance of deductions taken by petitioner upon his returns for 1942 and 1943, representing amortization of war facilities taken as allowable under section 124, Internal Revenue Code. The deficiencies are only for the year 1943, but the determination of income under the return for 1942 is necessary by reason of the provisions of the Current Tax Payment Act. One issue raised by the petition with respect to an item of capital gain has been conceded by petitioner, leaving for consideration the one issue with respect to the allowability of the deductions taken for amortization. The facts were stipulated and are so found, and such of the facts as are necessary for an understanding of the issue are hereinafter set forth.
FINDINGS OF FACT.
Petitioner is an individual residing in Detroit, Michigan. His returns for the periods here involved were filed with the collector of internal revenue for the district of Michigan. Petitioner, during the years here involved, was engaged in the manufacture and sale of precision tools, jigs, dies, fixtures, and gauges as an individual proprietor under the name of Amco Gage Company.
The petitioner purchased certain real property and tangible personal property after December 31, 1939, and prior to April 23, 1943, for the sum of $262,117.34, for use in the operation of the business conducted by him.
All during the years here involved the petitioner employed a firm of public accountants to make periodic audits of his books of account and to advise and assist in the preparation of his tax returns and any reports or applications of necessity in connection with his business to be filed with department of the Federal Government.
Sometime subsequent to the enactment of the Revenue Act of 1942, petitioner's tax accountant advised him that by reason of the amendment of section 124(f) of the Internal Revenue Code by section 115(f) of the Revenue Act of 1941, petitioner had the right to file with the Secretary of War an application for a certificate of necessity with respect to the machinery, equipment, furniture and fixtures, and real property acquired after December 31, 1939, and referred to above, even though the time for filing such an application under section 124(f), supra, prior to its amendment, had expired. Petitioner thereupon directed his accountant to prepare such an application for his execution and filing.
On or prior to April 20, 1943, petitioner's tax accountant prepared an application for a certificate of necessity with respect to all of the machinery, equipment, furniture and fixtures, and real property used in connection with the operation of petitioner's business and referred to above. The assets set out in the schedule to such application which had been acquired by petitioner subsequent to December 31, 1939, and prior to October 20, 1942, had a cost to the petitioner of $229,027.38 and the machinery and equipment covered by the application which were acquired by petitioner wholly subsequent to October 20, 1942, and prior to April 20, 1943, had a cost to petitioner of $33,089.96.
On April 20, 1943, the application for certificate of necessity prepared by the accountant was mailed by him to the petitioner with directions to execute the same and mail it to Washington for filing with the Secretary of War. This application with schedule attached was received by the petitioner on April 21, 1943, and was executed by him on that date and mailed by registered mail on the afternoon of the same day, addressed to the Tax Amortization Headquarters Service of Supply Section, Army War Department, Washington, D.C. The office to which these documents were thus addressed and mailed represented the Secretary of War in the receipt and execution of certificates of necessity with respect to war facilities. This document, mailed on the afternoon of April 21, 1943, was received by the War Department, Headquarters Service of Supply, Tax Amortization Section, on April 23, 1943, and thereafter, on May 14, 1943, the Chief of the Tax Amortization Branch advised petitioner that the application did not appear to have been filed within the time limit set in section 124, supra, with respect to such of the facilities listed as had been acquired subsequent to December 31, 1939, and prior to October 20, 1942, but that the application was timely as to any facilities included which were acquired subsequent to October 20, 1942, and prior to April 20, 1943.
As a result of the correspondence with the War Department, a second application for certificate of necessity was filed covering the assets acquired or completed subsequent to October 20, 1942, and prior to April 20, 1943, which had a cost of $33,089.96. As to these facilities a certificate of necessity was subsequently issued and allowance of the amortization of this cost has been made to the petitioner by respondent in determining the deficiencies here involved.
Petitioner, in his returns for 1942 and 1943, took deductions for amortization for the full amount of the cost of facilities, including those acquired subsequent to December 31, 1939, and prior to October 20, 1942, in the sum of $229,027.38, with respect to which a certificate of necessity had not been issued by the Secretary of War, such refusal being upon the ground that the application therefor had not been filed within the time prescribed by the statute.
OPINION.
LEECH, Judge:
Section 124, Internal Revenue Code, provides for the allowance of a deduction with respect to amortization over a period of 60 months of the adjusted basis (for determining gain) of any emergency facility. Subsection (e) defines emergency facility as follows:
(1) EMERGENCY FACILITY.— As used in this section, the term ‘emergency facility‘ means any facility, land, building, machinery, or equipment, or part thereof, the construction, reconstruction, erection, installation, or acquisition of which was completed after December 31, 1939, and with respect to which a certificate under subsection (f) has been made. * * *
Subsection (f) of section 124, supra, provides:
(1) There shall be included only so much of the amount otherwise constituting such adjusted basis as is properly attributable to such construction, reconstruction, erection, installation, or acquisition after December 31, 1939, as either the Secretary of War or the Secretary of the Navy has certified as necessary in the interest of national defense during the emergency period, which certification shall be under such regulations as may be prescribed from time to time by the Secretary of War and the Secretary of the Navy, with the approval of the Resident.
(3) The certificate provided for in paragraph (1) shall have no effect unless an application therefor is filed before the expiration of six months after the beginning of such construction, reconstruction, erection or installation or the date of such acquisition, or before December 1, 1941, whichever is later, except that
(B) in the case of an emergency facility completed or acquired after December 31, 1939, by a person other than a corporation, such certificate shall have no effect unless an application therefor is filed before the expiration of six months after the beginning of such construction, reconstruction, erection, or installation or the date of such acquisition, or before the expiration of six months after the date of the enactment of the Revenue Act of 1942, whichever is later.
The Revenue Act of 1942 was enacted on October 21, 1942, and the 6 months period with which to file an application for certificate of necessity accordingly expired on April 21, 1943.
Respondent, by Regulations 111, section 29.124-1, in accordance with the provisions of section 124, supra, provided that the certification by the certifying officer that a facility is necessary in the interest of national defense during the emergency period shall have no effect
(c) in the case of an emergency facility completed or acquired after December 31, 1939, by a person other than a corporation, unless an application therefor is filed before the expiration of six months after the beginning of the construction, reconstruction, erection, or installation of such facility or the date of its acquisition, or before April 22, 1943, whichever is later.
Here no certificate of necessity has ever issued with respect to the facilities whose cost the petitioner here seeks to amortize. Even if such certificate had issued and the application therefor had been filed after the expiration of the statutory period, such certificate would have been null and void by reason of the express language of the statute, and no allowance of amortization could be made. American Twist Drill Co., 11 T.C. 200.
Here we have the question often raised in the past as to the actual date of filing. The application for certificate of necessity was put in the United States mails at Detroit, Michigan, on April 21, 1943, which manifestly was the last day for its filing under the terms of the statute. It could not, even in due course of the mails, have reached the certifying officer for filing by him prior to the expiration of the statutory period. As a matter of fact, it was not received until April 23, 1943, two days after the expiration of the period. The general rule is clear that where the statute provides for the ‘filing‘ as of a certain date, the document must be received by the office with which it is to be filed not later than such date. It can not be considered as filed merely by its being mailed within the statutory period. United States v. Lombardo, 241 U.S. 73; Poynor v. Commissioner, 81 Fed.(2d) 521; Barron Estate Co. v. Commissioner, 93 Fed.(2d) 751; Lewis-Hall Iron Works v. Blair, 23 Fed.(2d) 972, certiorari denied, 277 U.S. 592.
The case of William Howard Doriss et al., 3 T.C. 219, has no application. That case involved the question of the timely filing of an estate tax return. The respondent had, by his regulations, authorized the acceptance by collectors of returns as timely filed in those cases where it was shown they were mailed by the taxpayer in time to be received in the ordinary course of business in the collector's office. The validity of this regulation was not contested, and the sole question presented was whether or not the return upon the record was mailed at such a time that it would have been received in the collector's office in the normal course of business. In that case it was found that the return had been delivered into the custody of employees of the collector's office prior to the close of business on the last day but had not been opened and stamped ‘filed‘ until the following day. It was held that the return had been timely filed within the provisions of the Commissioner's regulations. In the present case the regulations of the Secretary of War with respect to the filing of applications for certificates of necessity provide:
7. Place and time of filing of application; making of election.— An application for a necessity certificate is filed when received at the office of the certifying authority in Washington, D.C. (7 Fed.Reg. 4235)
It is clear to us that petitioner's application for a certificate of necessity was not timely filed. Petitioner's counsel urges that even though not filed on or prior to the last day permitted, the delinquency is of such a short period that the petitioner not be penalized by a strict application of the statute, as the amount involved is large and a great hardship will result. In answer to that we may merely say that this Court is without equity jurisdiction. On the other hand there is another reason why the petitioner's contention here can not be accepted. The allowance of a claimed deduction for amortization could not be granted by the respondent or the action of the respondent reviewed by this Court unless a certificate of necessity had in fact issued. Even if we agreed the petitioner's contention that his application for a certificate of necessity was timely filed, the existence of jurisdiction in this Court to take any action toward allowing the deduction for amortization of these facilities would be doubtful, to say the least. We have no authority to determine whether the facilities in question were necessary in the interest of national defense during the emergency, and certainly we have no jurisdiction to order the Secretary of War to issue this certificate of necessity. Thus if we agreed with petitioner in his contention that his application was timely filed, such determination without his certificate would be wholly without effect.
Decision will be entered for the respondent.