Opinion
No. H-520.
November 3, 1930.
Suit by the Atlantic Refining Company against the United States.
Petition dismissed.
This suit is for the recovery of $71,120.84, additional interest on an overpayment of $632,763.14 for 1917 credited against original installments of the tax due for 1920. The Commissioner of Internal Revenue computed and allowed interest upon the credit from September 15, 1921, a date six months after the filing of the claim therefor, to December 15, 1921, the date on which the last installment of the tax for 1920 was due.
Plaintiff claims that interest should have been computed and paid on the amount of the credit to October 30, 1923, the date on which it claims the Commissioner allowed the credit within the meaning of section 1324 of the Revenue Act of 1921 ( 42 Stat. 316).
The position of the defendant is that plaintiff was liable for interest on the unpaid installments of the 1920 tax, the payment of which was postponed by the filing of the claims for credit, and, since the credit of the 1917 overpayment was made against these installments, the interest for which the plaintiff was liable offset interest for which the government was liable on the credit under section 1324.
Special Findings of Fact.1. Plaintiff is a Pennsylvania corporation with principal office and place of business at Philadelphia. For the calendar year 1917 it was affiliated within the meaning of section 1331(b) of the Revenue Act of 1921 (26 US CA § 1067(b) declaratory of the provisions of title 2 of the Revenue Act of 1917, with the Atlantic Oil Producing Company and the Atlantic Oil Shipping Company, Delaware corporations, with principal offices and place of business at Philadelphia.
2. April 1, 1918, plaintiff filed separate income and profits tax returns for the calendar year 1917 showing a tax of $3,925,136.30, which was paid June 15, 1918. On the same date the Atlantic Oil Producing Company filed its separate income and profits tax returns for the calendar year 1917 showing that it sustained a loss for the taxable year. On the same date the Atlantic Oil Shipping Company filed a separate income and profits tax return for the calendar year 1917 showing a tax of $81,007.23, which was paid June 15, 1918.
3. February 24, 1920, plaintiff filed an amended income tax return showing a change in its net income for that year from which it appeared that the tax due was $2,471,788.47. On the same date the Atlantic Oil Producing Company filed an income tax return for 1917 showing a net loss for that year. On the same date plaintiff prepared and filed a consolidated excess profits tax return for 1917 showing the profits tax computed on the consolidated net income of it and its subsidiaries, the Atlantic Oil Producing Company and the Atlantic Oil Shipping Company. Subsequently, on February 11, 1921, plaintiff and its affiliated corporations filed a second amended income tax return and first amended consolidated profits tax return for 1917, from which it appeared that the tax due was $3,045,438.05. The income and profits tax shown on the amended returns above mentioned was not assessed and no payments were made in respect of the tax shown thereon other than the payments which had already been made.
4. March 15, 1921, plaintiff filed a claim asking that $583,750 of the income and profits tax paid for 1917 be credited against the first installment of the income and profits tax returned and assessed for the year 1920, which installment was due March 15, 1921. By letter of May 26, 1921, it advised the Commissioner of Internal Revenue of certain changes in the second amended income tax return and first consolidated profits tax return for 1917 filed by it and its affiliated corporations February 11, 1921, showing a reduction in tax from $3,045,438.05 to $2,999,096.91.
5. June 15, 1921, plaintiff filed a claim asking that $248,716.20 of the income and profits tax assessed and paid for 1917 be credited against the second installment of the income and profits tax returned and assessed for 1920 due and payable June 15, 1921. Upon the filing of the claims for credit payment of the installments of the 1920 tax was postponed under article 1035, Regulation 62.
6. February 26, 1923, plaintiff filed with the collector a claim for refund for 1917 of $3,283,529.62.
7. After an examination and an audit of the returns for the years 1909 to 1917, inclusive, the Commissioner, on June 23, 1923, notified plaintiff of his determination of an additional tax of $974.67 for 1909, $3,341.03 for 1910, $4,917.03 for 1912, $879.16 for 1913, $2,442.60 for 1915, $3,274.99 for 1916, and an overassessment of $632,763.14 for 1917, the total of the deficiencies being $15,829.36. The deficiencies mentioned were assessed by the Commissioner June 15, 1923, and upon notice and demand from the collector were paid November 7, 1923.
8. July 13, 1923, the Commissioner approved a schedule of overassessment, IT:A: 6254, form 7805, which embraced the overassessment in favor of plaintiff for 1917 above mentioned. This schedule was transmitted to the collector for the first district of Pennsylvania for his action in accordance with the directions appearing thereon. The collector complied, examined the accounts of the taxpayer, and made appropriate entries upon the schedule and prepared a schedule of refunds and credits, IT:R:6254, form 7805 — A, showing the amount of the overassessment to be an overpayment. These schedules were signed and certified by the collector to the Commissioner, September 25, 1923. Upon receipt by the Commissioner they were checked in the Income Tax Unit of the Bureau of Internal Revenue and the schedule of refunds and credits, form 7805 — A, was approved by J.G. Bright, Deputy Commissioner of Internal Revenue, and by D.H. Blair, Commissioner of Internal Revenue on October 30, 1923.
9. Subsequently the Commissioner issued a certificate of overassessment, No. 250765, showing an overassessment of $632,763.14 in respect of the tax of the plaintiff for 1917.
10. The overpayment of $632,763.14 was credited against the unpaid installment of the original tax for 1920 due and payable December 15, 1921, leaving a balance due in respect of the original tax for 1920 of $199,703.06, representing the difference between $832,466.20, for which claims for credit of $583,750 and $248,716.20 had been filed, and $632,763.14, the amount credited. This balance of $199,703.06, original tax for 1920, was paid to the collector after notice and demand on February 9, 1924.
11. The overpayment of $632,763.14 and the interest computed thereon of $9,491.45 were eliminated from the original schedule of refunds and credits, IT:R:6254, form 7805 — A, approved October 30, 1923, and entered on a supplemental schedule of refunds and credits of the same number and form for direct settlement in accordance with the memorandum from the General Accounting Office dated November 8, 1923.
12. Plaintiff received no payment on account of interest until July 15, 1924, when it received a notice of settlement of claim from the Comptroller General of the United States with which was inclosed Treasury warrant in favor of plaintiff for $9,491.45.
13. The Commissioner computed and allowed interest on the overpayment of $632,763.14 for 1917 credited against the unpaid installments of the original tax assessed for 1920 from September 15, 1921, the date of the overpayment, to December 15, 1921, the date on which the last installment of the original tax for 1920 was due.
14. On March 29, 1927, plaintiff requested the Commissioner to allow and pay additional interest on the overpayment for 1917. April 12, 1927, the Commissioner denied this claim for additional interest on the following ground: "The overassessment in question was credited to outstanding taxes for the year 1920 due December 15, 1921. The revenue act of 1918, under which the taxes for the year 1920 were determined, provided, under certain conditions, for the collection of interest at the rate of 6 per cent per annum on any tax remaining due and unpaid. This office holds, therefore, that any interest allowable on an overassessment credited to such taxes must be computed only to the due date, December 15, 1921, or it must be concluded that such taxes were not paid when due and the question of the collection of interest considered."
15. Plaintiff has paid no interest on the underpayment of tax for the years 1909, 1910, 1912, 1913, 1915, and 1916, and no demand has been made for interest thereon.
A.S. Lisenby, of Washington, D.C. (Weill, Wolff, Satterlee Blakely, of Washington, D.C., on the brief), for plaintiff.
Charles R. Pollard, of Washington, D.C., and Charles B. Rugg, Asst. Atty. Gen. (D. Louis Bergeron, of Washington, D.C., on the brief), for the United States.
Before BOOTH, Chief Justice, and LITTLETON, WILLIAMS, and GREEN, Judges.
The plaintiff is correct in its contention that the credit was allowed on October 30, 1923, Revolution Cotton Mills v. United States, 41 F.2d 898, decided by this court June 16, 1930, but this does not entitle it to recover unless the Commissioner was wrong in his decision that plaintiff was liable for interest on the unpaid original tax for 1920 against which the credit was taken. We think the Commissioner correctly held that plaintiff was liable for interest under section 250(e) of the Revenue Act of 1918, 40 Stat. 1082, and section 250(e) of the Revenue Act of 1921, 42 Stat. 266, on the original tax returned and assessed for 1920 against which claims for credit were filed. Subdivision (a) of section 250 of the 1918 act provided for the payment of the tax in four installments and fixed the date on which each installment was due and should be paid. Subdivision (e) of that section provided, with certain exceptions not material here, that "if any tax remains unpaid after the date when it is due, and for ten days after notice and demand by the collector, * * * there shall be added as part of the tax the sum of 5 per centum on the amount due but unpaid, plus interest at the rate of 1 per centum per month upon such amount from the time it became due"; and further provided that "as to any such amount which is the subject of a bona fide claim for abatement the 5 per centum shall not be added and the interest from the time the amount was due until the claim is decided shall be at the rate of ½ of 1 per centum per month; that in the case of the first installment provided in subdivision (a) of this section the instructions printed on the return shall be sufficient notice of the date when the tax is due and sufficient demand." Subdivision (e) of section 250 of the 1921 act contained similar provisions, and the further provision that: "In the case of each subsequent installment the collector may, within thirty days and not later than ten days before the installment becomes due, mail to the taxpayer notice of the amount of the installment and the date on which it is due for payment." Subdivision (h) made the provisions of section 250(e) of the Revenue Act of 1921 applicable to taxes assessed under the Revenue Acts of 1917 and 1918.
We have held in Andrews Steel Company v. United States, 42 F.2d 573, that, where an overpayment for 1917 was credited against the first installment of the tax for 1919, the taxpayer was liable for interest on the installment from the date it became due, and the Commissioner correctly offset such interest against the interest provided in section 1324 of the Revenue Act of 1921 upon the amount credited. The reason for so holding was that demand had been made for the tax and it was not paid when it became due. The rule announced in the Andrews Steel Company Case applies here and prevents the recovery of the additional interest claimed. In this case plaintiff made a return for 1920 and the tax shown thereon was assessed. It claimed an overpayment for 1917 and filed two claims asking that the alleged overpayment for 1917 be credited against the first and second installments of the tax due for 1920. The effect of article 1035, Regulation 62, was to relieve the taxpayer from the necessity of immediate payment of tax against which credit was asked until the claim was decided, but the regulation put the taxpayer upon notice that in such a case he would not be relieved from the payment of interest at the rate of ½ of 1 per cent. a month, which was a lower rate of interest than that provided in the statute for failure to pay a tax when due and was the rate of interest provided by the statute when a bona fide claim for abatement was filed. We think this regulation was a reasonable one. The plaintiff does not attack it.
It does not specifically appear that the collector of internal revenue gave plaintiff notice of the amount of the second and subsequent installments of the 1920 tax and the date on which they were due for payment, but, if such notice were necessary in view of the regulations, article 1035, it would be incumbent upon the plaintiff to establish the fact relative thereto. In the absence of proof, it will be presumed that the collector performed his duty. Ross and Morrison v. Reed, 1 Wheat. 482, 4 L. Ed. 141; Rankin v. Hoyt, 4 How. 335, 11 L. Ed. 996; Gonzales v. Ross, 120 U.S. 605, 7 S. Ct. 705, 30 L. Ed. 801; Nofire v. United States, 164 U.S. 657, 17 S. Ct. 212, 41 L. Ed. 588; United States v. Royer, 268 U.S. 398, 45 S. Ct. 519, 69 L. Ed. 1011.
We are of opinion that plaintiff was liable for interest upon the 1920 tax against which the credit was taken at the rate of at least ½ of 1 per cent. a month, as charged by the defendant. The defendant allowed and paid interest on the credit from a date six months after the filing of the claim to December 15, 1921, the latter date being the date on which the last installment of the 1920 tax became due. It does not specifically appear against which installment, or installments, the overpayment was credited but, since the plaintiff was liable for interest on the 1920 tax against this credit, it has no right to complain because the defendant computed and paid interest on the credit to the due date of the last installment for 1920.
The plaintiff does not controvert the proposition that it was liable under the statute for interest on the unpaid tax for 1920. It insists that the positive provisions of section 1324 of the Revenue Act of 1921 require the government to pay interest upon a credit to the date of the allowance thereof and contends that it is entitled to recover the additional interest because this was not done. Its position would seem to be that the government should have paid interest on the credit to the date of allowance, and, if the plaintiff was liable for interest on the 1920 tax, the government should have required it to pay the same. We think such a procedure was unnecessary since the interest for which the plaintiff was liable after the due date of the 1920 tax exactly equaled the interest for which the government was liable on the credit after that date. Andrews Steel Co. v. United States, supra.
The petition must be dismissed, and it is so ordered.
WHALEY, Judge, did not hear this case and took no part in the decision thereof.