Opinion
Plaintiff's Acquisition of the Claim in Suit
1. On and prior to September 15, 1927, the M.A. Hanna Company owned 80 percent of the preferred and common stock of the Rogers-Brown Iron Company, a New York corporation, hereinafter sometimes referred to as the taxpayer, and was its largest creditor, owning substantially all of a bond issue of May 1, 1922, and the entire issue of debenture notes dated January 1, 1926, and a large amount of demand notes secured by warehouse receipts for iron ore.
On that date the taxpayer was insolvent.
2. Shortly prior to said date the plaintiff devised a plan of reorganization of the taxpayer, pursuant to which a new corporation was to be created, to which the taxpayer's assets were to be transferred, and which newly organized corporation was subsequently to be merged into a then existing New York Corporation. In order to carry out this plan, a voluntary petition in bankruptcy was filed by the taxpayer and it was duly adjudicated a bankrupt. Subsequently the trustees sold to the M.A. Hanna Company all the property and assets of the taxpayer "real or personal, of whatsoever name and nature, and where so ever situate (including any and all cash, trade or brand names, and goodwill), in the hands of the receivers of the bankrupt, or elsewhere, as shown by the schedules filed in this proceeding, or as existing otherwise." Thereafter, this company, in consideration of all the capital stock of the Iron Corporation of Buffalo, which had just been organized, transferred to it all of the taxpayer's bonds and debentures and other securities of the taxpayer held by the M.A. Hanna Company, and also the bid of the M.A. Hanna Company at the bankruptcy sale for the property and assets of the taxpayer, with the right to acquire said property by the performance of that bid.
The sale was confirmed and on October 4, 1927, the trustee duly transferred to the Iron Corporation of Buffalo all the property and assets of the taxpayer, as set out in the order of sale.
Subsequently the Iron Corporation of Buffalo was merged with the Buffalo Union Furnace Company, which had acquired from the M.A. Hanna Company all the capital stock of the Iron Corporation of Buffalo; and later the name of the Buffalo Union Furnace Company was changed to the Hanna Furnace Corporation, the plaintiff herein.
Was a Timely Claim for Refund Filed
and is Plaintiff Estopped from
Now Asserting the Claims in Suit?
3. On or about March 14, 1919, the taxpayer filed a tentative consolidated income-and-profits tax return for itself and its affiliated companies; and on June 13, 1919, it filed its completed return, in which it stated that its consolidated invested capital was $7,917,217.47, its consolidated net income $2,923,314.21, resulting in a total tax liability of $1,846,665.22, of which $143,791.25 was income tax, and $1,702,873.97 was excess-profits and war-profits taxes. These taxes were duly paid.
4. In making said return the taxpayer arrived at its invested capital by deducting the sum of $2,300,936.36 on account of depreciation for years prior to January 1, 1917, such sum having been previously determined by a Revenue Agent as the proper amount of depreciation sustained in such years. Slightly over two years later, on June 24, 1921, the taxpayer filed an amended return restoring to its invested capital all of said depreciation except $532,677.10. At the same time it filed a claim for refund of taxes erroneously paid in the amount of $137,403.51, based upon the excessive depreciation deducted in its original return.
5. After an audit of said return the Commissioner of Internal Revenue on October 11, 1922, wrote the taxpayer setting forth his computation of its tax liability for said year and for prior years back to 1910. The depreciation on the taxpayer's blast furnaces was figured at a straight rate of 5 percent for all years.
6. Something over a year later, on December 19, 1923, the Commissioner sent taxpayer another audit letter, in which its invested capital was largely increased and also its consolidated net income for the year 1918, resulting in a large increase in its tax liability for 1918. These increases resulted principally from the application of a 2-percent rate of depreciation on blast furnaces for years prior to 1918 and for that year, instead of 5 percent.
7. The taxpayer duly filed a protest against this proposed action, and on February 18, 1924, filed a memorandum or brief in support thereof, the same being entitled "Additional Information requested by conferee and Recomputation of Tax Liability in accordance with Conference Agreement of February 4, 1924." This memorandum or brief recited that it was tentatively agreed at the conference that the adjustment of depreciation on blast furnaces for all years from 1910 to 1918 should be changed from 2 percent to 5 percent, the rate used by the Commissioner in his letter of October 11, 1922. It further recited that it was agreed that the Commissioner's figures in his letter of October 11, 1922, should be treated as final, subject to certain slight amendments agreed upon at the conference. There was attached a recomputation of the tax on the basis of the Commissioner's letter of October 11, 1922, with the amendments agreed on at the conference.
8. Said memorandum concluded with a statement that the taxpayer was filing a claim for refund to protect its rights under the statute of limitations.
On February 26, 1924, such a claim was filed, claiming a refund of the entire amount of tax paid by it, to wit, $1,846,665.22. Said claim reads as follows:
"The Income Tax Unit of the Bureau of Internal Revenue has examined the taxpayer's returns for the years from 1910 to 1918, inclusive, and as a result of conferences with the officials of the Bureau, it would appear that the taxpayer will be entitled to a refund of taxes for all of the years examined but at this date the final adjustment of taxes for these years has not been made the subject of a certificate of overassessment by the Commissioner of Internal Revenue. "(G) The taxpayer hereby makes application for the assessment of the excess profits and war profits taxes for the year 1918 under the provisions of Sections 327 and 328 of the Revenue Act of 1918, 40 Stat. 1093, and in support of this claim, a brief setting forth the reasons therefor will be filed with the Bureau in due course. "(J) In view of the facts stated, this claim for refund is filed to protect the taxpayer's interests under the various sections and underlying regulations and rulings of the Revenue Acts of 1918 and 1921, 40 Stat. 1057, 42 Stat. 227, and amendments thereto, as refer to the period of limitation within which claims for refund may be filed or suit entered, in the event that all or any part of the tax heretofore paid or assessed, or to be hereafter assessed, for the year 1918, should, in our opinion prove to be excessive. And the taxpayer reserves the right to file additional facts in support of his claim."
It was received in the Bureau of Internal Revenue in Washington not later than March 7, 1924.
9. Thereafter, upon a final audit of the taxpayer's returns the Commissioner determined its consolidated invested capital, consolidated income, and total tax liability as computed in the taxpayer's memorandum of February 18, 1924, with only a slight variation. Pursuant thereto the Commissioner issued a certificate of overassessment of $2,231.16 for 1918, and on June 3, 1924, refunded said amount to the taxpayer. The overassessments for prior years, as shown in the taxpayer's memorandum of February 18, 1924, were likewise duly allowed by the Commissioner.
The refund for 1918 was made on the taxpayer's claim for refund filed on June 24, 1921.
10. Slightly over three years later, on June 21, 1927, the taxpayer filed with the Commissioner a brief entitled "Claim for adjustment of Income and War Profits Taxes for years 1910 to 1918, both inclusive, under the provisions of Section 284, Paragraph (c), of the Revenue Act of 1926," 44 Stat. 66, in which refund was claimed in the amount of $68,564.43.
The basis of the claim was: "That in determining the income and profits taxes of the Rogers-Brown Iron Company (taxpayer herein) for the taxable year 1919, the Commissioner * * * decreased the invested capital of the taxpayer by reason of the fact that the taxpayer failed to take adequate deductions for depreciation in previous years and therefore for the year 1919 the Commissioner did, in fact, adjust the surplus of the company by the sum of $466,384.90 in respect to such depreciation."
In its schedules filed in the bankruptcy proceedings, above referred to, the taxpayer listed this claim for refund.
On September 17, 1927, the Commissioner replied to the taxpayer stating that the amounts claimed were not allowable, since they had been previously allowed. Said letter concluded with the statement: "Your returns for these years are therefore considered closed."
11. No further action was taken for nearly six years, when on June 27, 1933, the plaintiff (taxpayer's successor) wrote the Commissioner requesting consideration of its claim for refund of $1,846,665.22, filed on February 26, 1924. Said letter requested consideration of the claim " * * * on two separate and distinct grounds, the allowance of either of which will eliminate the necessity of considering the other. One basis of consideration is that the Bureau was in error in reducing invested capital for 1918, because of insufficient depreciation for prior years. The other basis is that if the Bureau refuses to adjust the invested capital previously determined an abnormal condition will have been brought about, requiring the application of the Special Assessment provisions of Sections 327 and 328 of the Revenue Act of 1918."
After argument in support thereof, the letter concluded by reserving the right to submit additional information.
12. The Commissioner replied, stating that careful consideration would be given to its letter.
On August 18, 1933, the Commissioner wrote the plaintiff denying special assessment because " * * * the audit disclosed no exceptional hardship evidenced by gross disproportion between the tax computed without benefit of the above section and the tax computed by reference to the representative corporations specified in section 328."
With reference to the other feature of the claim the Commissioner called attention to the taxpayer's memorandum filed on February 18, 1924, and to the fact that the Bureau had accepted the taxpayer's recomputation set forth therein and that he, therefore, proposed to disallow the claim, but offered an opportunity for a hearing if the taxpayer disagreed with such proposed action.
13. On August 30, 1933, the plaintiff protested against such proposed action, again urging that its claim for special assessment was well taken and also its claim that its invested capital had been improperly reduced on account of the deduction of excessive depreciation in prior years, and the plaintiff urged a further ground for recovery under its claim of February 26, 1924, as follows:
"A very substantial error has been discovered in the method of accounting for furnace relining costs in determining the taxable income for this company for the year 1918. By virtue of the general claim for refund on file for that year, it is requested that this error be corrected in accordance with the information hereinafter set forth. "In accounting for the relining costs, the Bureau in determining taxable income, disallowed the accruals to the relining reserve and allowed as a deduction the charges to the reserve when complete relining were made. This had the effect of allowing deductions in years when complete relinings were necessary, of excessive amounts, which amounts were applicable to other years. In the instant case the method used resulted in the allowance as a deduction of only $8,512.99 for the year 1918, whereas the amount properly applicable to that year under the present accepted method of spreading the cost of relinings over the tons of iron melted on the linings is $69,276.36, as shown in the attached Exhibit "A." Since the charge to the reserve in the amount of $8,512.99 represented only incidental current repairs, this amount should not be associated with the amount of relining cost to be spread on a tonnage basis. It is respectfully requested, therefore, that the deduction for relining cost applicable to the year 1918, be allowed in the amount of 469,276.36. This error in the treatment of relining costs is one of the several glaring inequities and injustices forced upon this taxpayer in the determination of the 1918 tax liability. The error may be accounted for from the fact that at the time when the 12918 return was being audited in 1924 the method of treating relining cost had not been definitely established. Under the present method of handling furnace relining cost the undepreciated balance of such cost in the amount of $174,281.51 as shown in Exhibit 'A' as at January 1, 1918, should also be allowed as an addition to invested capital for 1918 if statutory invested capital is used in the final settlement of this case."
14. Finally, after conferences and numerous communications between the parties, the Commissioner on October 1, 1934, wrote the plaintiff advising it that he held that it had not become the owner of the claim of the Rogers-Brown Iron Company in the bankruptcy proceedings, and that, "Moreover, the records of the Bureau disclose that the claims filed by that company were finally adjusted through the issuance of a certificate of overassessment in June 1924, after the consideration, as the certificate recited, 'of all claims * * * filed' by it. Subsequently, the taxpayer was notified under date of September 27, 1927, that no further overassessment was due and that its returns were 'considered closed.' "
The plaintiff was accordingly advised that its claim could not be entertained.
15. The claim for refund filed on February 26, 1924, was wholly rejected by the Commissioner on November 8, 1934, and notice of the rejection was sent to the plaintiff by registered mail on that date.
16. In no claim or in any other paper filed with the Commissioner of Internal Revenue did the taxpayer or the plaintiff make any specific claim on account of the deduction of depreciation on its blast furnaces prior to completion and use thereof.
Reduction of Invested Capital on
Account of Depreciation Deducted
on Blast Furnaces Prior to
Completion and Use
17. In computing depreciation sustained in years prior to 1918 the Commissioner deducted depreciation on the taxpayer's blast furnaces Nos. 3 and 4 in the amount of $262,715.64 before said furnaces had been completely constructed and before they were ever in use, and plaintiff's invested capital for the year 1918 was reduced by this amount.
Amounts Alleged to Have Been
Erroneously Included in the Plaintiff's
Invested Capital by the Commissioner
18. Included in the cost of the construction of the taxpayer's blast furnaces Nos. 3 and 4 were the following items:
Discount on bonds to finance construction................
$ 658,900.00
Interest on bonds during construction period............
386,425.08
Mortgage tax ......................
35,768.39
Legal services ....................
13,968.78
State taxes .......................
20,458.82
Office expense .......................
532.09
Traveling expense ....................
776.00
-------------
Total .....................
$1,116,829.16
For the year 1918 depreciation was deducted on this sum, less $217,000, which represented the amount of the discount on bonds which had been written off prior to January 1, 1919.
There is insufficient evidence in the record to determine the amount of depreciation deducted on the above amounts in years prior to 1918.
Amortization of Discount on Bonds, Premium Thereon, and Other Expenses in Connection With the Issuance Thereof
19. There is evidence in the record of the amount of the discount on the bonds issued and of the premium payable and other expenses in connection with the issuance thereof, but there is not sufficient evidence in the record from which to determine the period the several bonds were outstanding and therefore, insufficient evidence from which to compute the amount to which the taxpayer may be entitled for amortization of this discount, premium, and expense.
Depreciation of Furnace Linings
20. In the year 1917 the taxpayer's four blast furnaces were relined at an expense of $199,366.62. Prior to and during the year 1918 the taxpayer maintained on its books a reserve for relining furnaces computed at a stated amount per ton for each ton of iron manufactured. for the years prior to 1917 the taxpayer deducted from its gross income the credits to this reserve made in the years in question.
In 1917, in auditing the taxpayer's returns for prior years, the Commissioner deducted the actual expenditures for relining in the year the expenditures were made, and disallowed in other years the credits to this reserve. In accordance with this ruling, in preparing its return for 1917, the taxpayer deducted the actual expenditures for this purpose in that year, to wit, $199,366.62 instead of the credits to this reserve of $17,909.10.
During the year 1918 the taxpayer credited to this reserve $107,743, computed at a rate of 25 cents a ton for each ton of pig iron manufactured during the year. During the year the taxpayer expended for furnace relining the sum of $8,512.99. In making its return for 1918 it deducted from its gross income said sum of $8,512.99, but did not deduct the reserve of $107,743.00.
21. The life of the linings is indefinite, indeterminable in advance, and of relatively short duration, averaging approximately from two to three years.
22. The cost of relining each of the four furnaces in 1917, the date of the next replacement of the lining in each furnace, the number of tons of iron produced in each, the consequent average lining cost per ton of iron produced in each, the consequent average lining cost per ton of iron produced, and a distribution of such lining cost over the years 1917, 1918, 1919, 1920 and 1921 according to the tone of iron produced in each year are as follows:
Furnace No. 1
Blown out for relining September 17, 1917.
Blown in for operation on new lining December 20, 1917.
Blown out for next relining January 5, 1921.
Cost of relining ..................
$76,521.86
Tons produced on lining ..............
289,896
Cost per ton .........................
$0.2639
Cost applicable to 1917 (2,733 tons at $0.2639)...................
$721.24
Cost applicable to 1918 (108,582 tons at $0.2639)................
$28,654.79
Cost applicable to 1919 (86,490 tons at $0.2639)................
$22,824.71
Cost applicable to 1920 (90,592 tons at $0.2639)................
$23,907.23
Cost applicable to 1921 (1,499 tons at $0.2639)...................
$413.89
Furnace No. 2
Blown out for relining January 5, 1917.
Blown in for operation on new lining March 31, 1917.
Blown out for next relining September 21, 1919.
Cost of relining ..................
$75,173.19
Tons produced on lining ..............
272,815
Cost per ton .........................
$0.2755
Cost applicable to 1917 (87,902 tons at $0.2755)................
$24,217.00
Cost applicable to 1918 (107,131 tons at $0.2755)................
$29,514.59
Cost applicable to 1919 (77,782 tons at $0.2755)................
$21,441.60
Furnace No.3
Blown out for relining July 12, 1917.
Blown in for operation on new lining August 16, 1917.
Blown out for next relining September 21, 1919.
Cost of relining ..................
$28,129.91
Tons produced on lining ..............
231,936
Cost per ton .........................
$0.1212
Cost applicable to 1917 (42,059 tons at $0.1212).................
$5,097.55
Cost applicable to 1918 (113,525 tons at $0.1212)................
$13,759.23
Cost applicable to 1919 (76,352 tons at $0.1212).................
$9,273.13
Furnace No. 4
Blown out for relining August 13, 1917.
Blown in for operation on new lining September 16,1917.
Blown out for next relining September 21, 1919.
Cost of relining ..................
$19,541.66
Tons produced on lining ..............
210,930
Cost per ton .........................
$0.0926
Cost applicable to 1917 (30,809 tons at $0.0926).................
$2,852.91
Cost applicable to 1918 (101,734 tons at $0.0926).................
$9,420.57
Cost applicable to 1919 (78,387 tons at $0.0926).................
$7,268.18
The actual depreciation of the furnace linings of the taxpayer for the years 1917, 1918, and 1919, based upon the actual life of the linings and the number of tons of pig iron produced in each furnace, was $32,888.70 for 1917, $81,349.18 for 1918, and $60,807.62 for 1919.
23. If taxpayer's income and invested capital were adjusted by the deduction of the depreciation for 1917 and 1918 on the foregoing basis, there would be a deficiency in taxes for 1917 of $29,205.85, and an overpayment of taxes for 1918 of $71,737.06.
24. For thirty-five years the practice in the pig-iron industry has been that followed by the taxpayer prior to 1918, of setting up on its books a reserve for the replacement of furnace linings computed at a fixed sum per ton for each ton of pig iron manufactured during the year, but in 1917 and 1918 this practice had not been approved by the Commissioner of Internal Revenue. This is the practically universal practice today, and has now been approved by the Commissioner. [Copyrighted Material Omitted] [Copyrighted Material Omitted] [Copyrighted Material Omitted] [Copyrighted Material Omitted] [Copyrighted Material Omitted] Ralph Ulsh, of Buffalo, N.Y. (Slee, O'Brian, Hellings & Ulsh, of Buffalo, N.Y., on the brief), for plaintiff.
S.E. Blackham, of Washington, D.C., and Samuel O. Clark, Jr., Asst. Atty. Gen. (Robert N. Anderson and Fred K. Dyar, Sp. Assts. to Atty. Gen., on the brief), for defendant.
Before WHALEY, Chief Justice, and WILIAMS, LITTLETON, GREEN, and WHITAKER, Judges.
WHITAKER, Judge.
Plaintiff's suit is based on two grounds: (1) It alleges that the Commissioner, in computing the taxpayer's liability for 1918, erroneously decreased its invested capital by deducting in prior years depreciation on certain of its blast furnaces prior to the time they had been completed and put in operation; and (2) that no deduction was taken for depreciation on the linings of its blast furnaces in the taxable year.
The defendant defends on the ground, among others, that no claim for refund on these grounds was filed within the statutory period. The plaintiff replies to this that a general claim for refund was filed within the statutory period and that this was subsequently amended to include these grounds.
No claim filed with the Commissioner ever specifically stated that depreciation had been deducted in prior years on certain of its blast furnaces before they had been completed and put in use, but the plaintiff says that some of its amendments were broad enough to cover this allegation. The first claim with respect to depreciation on furnace linings was made on August 30, 1933.
We think this amendment came too late for two reasons: first, because the Commissioner had previously rejected plaintiff's claim for refund; and, second, if his action did not amount to a rejection thereof, still, the former general claim had previously been amended on a specific ground, which did not include a claim for depreciation on furnace linings, and was not subject to further amendment.
Plaintiff filed a general claim for refund on February 26, 1924. This was filed under these circumstances: When the taxpayer filed its income-tax return for 1918 it decreased its invested capital by the sum of $2,300,936.36 on account of depreciation which the Commissioner had found had accrued in years prior to 1917. About two years later the taxpayer came to the conclusion that this was too much depreciation to have been deducted and filed an amended return reducing the amount of depreciation to $532,677.10. This resulted, of course, in an increased invested capital for the year 1918 and a smaller amount of tax due. Accordingly, the taxpayer filed a claim for refund on June 24, 1921, for $137,403.51.
After auditing the taxpayer's returns the Commissioner wrote it on October 11, 1922, setting forth his computation of its tax liability. In this letter he deducted depreciation at the rate of 5 percent for the year 1918 and for years prior thereto. About a year later, however, the Commissioner wrote the taxpayer another letter setting forth a recomputation of the taxpayer's liability, which differed from his former computation chiefly because he applied a rate of depreciation of 2 percent for the year 1918 and prior years instead of 5 percent. The taxpayer protested against this action, and at a conference with the Commissioner tentatively agreed with him on a rate of depreciation of 5 percent, as originally used by him, and, generally, that his computation in his letter of October 11, 1922, with slight adjustments, was correct.
At this conference certain additional facts were requested by the commissioner, which were furnished him by the taxpayer on February 18, 1924,and at the same time the taxpayer set forth its recomputation of its tax liability, using the rate of 5 percent in computing depreciation, instead of 2 percent. The taxpayer also stated in its communication that it was filing a claim for refund to protect its rights under the statute of limitations. This claim was filed on February 26, 1924,and is the general claim upon which the plaintiff relies in this suit.
Subsequent thereto the commissioner wrote the taxpayer adopting the taxpayer's computation of its tax liability, which showed an overpayment of tax of $231.16. This amount was refunded to the taxpayer on June 3, 1924. This refund was made on the claim filed on June 24, 1921, and no mention was made of the general claim filed on February 26, 1924, but apparently the parties considered this as a final adjustment of the taxpayer's liability because no further action was taken with reference thereto for more than three years. However, shortly prior to the time that the taxpayer went into bankruptcy, and apparently in preparation therefor, it filed with the Commissioner a paper entitled, "Claim for adjustment of Income and War Profits Taxes for years 1910 to 1918, both inclusive, under the provisions of Section 284, Paragraph (c), of the Revenue Act of 1926," in which a refund was claimed in the amount of $68,564.43. This did not mention the general claim of February 26, 1924. This claim was subsequently listed by the taxpayer in its schedules filed in the bankruptcy proceedings.
It is doubtful whether or not the taxpayer under the law was entitled to file this claim. It was not entitled to do so as an original claim, since the statute had long since run, and it is questionable whether or not it could have filed it as an amendment to its claim of February 26, 1924, since the Commissioner's action in refunding to the taxpayer the $2,231.16 was evidently intended to be final action on the taxpayer's liability for that year, and if final action, by implication the claim of February 26, 1924, was thereby rejected. We have no doubt that when this refund was made the Commissioner overlooked the fact that the taxpayer had filed this claim of February 26, 1924.
But even if the taxpayer did have the right to file this claim on June 21, 1927, as an amendment to its claim of February 26, 1924, we think this claim, as amended, was rejected by the Commissioner on September 17, 1927. On that date the Commissioner wrote the taxpayer stating that the amounts claimed were not allowable because they had been previously allowed, and the letter concluded with the statement: "Your returns for these years are therefore considered closed." He made no reference to the claim for refund of February 26, 1924, but we think that his statement, "Your returns for these years are therefore considered closed," under all the circumstances, amounts to a rejection of this claim. Plaintiff's returns could not be closed so long as there was a claim for refund outstanding.
It is evident that the parties themselves so understood the Commissioner's action, because nothing further was done in the matter for nearly six years.
We do not regard it as essential that the Commissioner in so many words should say that the claim was disallowed or that a disallowance of it should appear on a schedule signed by the Commissioner. Pratt & Whitney Co. v. United States, 80 Ct.Cl. 676, 681, 6 F.Supp. 574, 10 F.Supp. 148; United States v. Bertelsen & Peterson Engineering Co., 306 U.S. 276, 280, 59 S.Ct. 541, 83 L.Ed. 647; Savannah Bank & Trust Co. v. United States, 75 Ct.Cl. 245, 248, 58 F.2d 1068. The only requirement of the law at that time was that the Commissioner should notify the taxpayer of his action by mail. This he did.
On June 27, 1933, the taxpayer apparently discovered that there had been no formal action on its claim of February 26, 1924, and undertook to reopen it, but we think its long silence prior thereto shows that at the time the Commissioner acted in 1927 the taxpayer treated that as final action and, therefore, as a rejection of its outstanding claim. It is clear the Commissioner so intended it.
If the taxpayer's claim had been rejected, it, of course, was not subject to later amendment after the statute had run.
But whether or not we are correct in the foregoing, we think the taxpayer's amendment of August 30, 1933, when it first claimed depreciation on its furnace linings, came too late. The amendment of plaintiff's general claim on June 21, 1927, if such it can be treated, was based upon the Commissioner's alleged error in decreasing its invested capital for 1918 by the deduction of excessive depreciation in prior years. This, of course, did not include the allegation that he did not allow any depreciation on furnace linings for the taxable year.
When the taxpayer amended its former general claim it then became a specific one, and under the decisions of the Supreme Court in United States v. Henry Prentiss & Co., Inc., 288 U.S. 73, 53 S.Ct. 283, 77 L.Ed. 626, But, with respect to its right to rely on its claim that depreciation was deducted on some of its furnaces prior to their completion, the taxpayer says that its claim for special assessment, included in its general claim of February 26, 1924, called in question the entire valuation of its invested capital, which includes the matter of deducting depreciation on blast furnaces prior to their completion and use, and, therefore, under the authority of Bemis Bros. Bag Co. v. United States, 289 U.S. 28, 53 S.Ct. 454, 77 L.Ed. 1011, it is entitled to later amend its general claim by asserting this specific error.
In the first place, neither the taxpayer nor its successor ever presented this alleged error to the Commissioner; it was first asserted in this suit. The Commissioner's regulations required the taxpayer to set out under oath all the facts relied on in support of its claim, and this regulation was never waived. The law provides that no suit shall be maintained until a claim for refund shall have been filed with the Commissioner according to the law "and the regulations of the Secretary of the Treasury established in pursuance thereof." Section 1113, 44 Stat. 116.
In the Bemis Bros. Bag Company case, supra, the ground for the claimed overassessment was specifically stated. No new ground was advanced; only a different form of relief on the same ground was prayed.
In the second place, this claim for special assessment later, and before any action thereon by the commissioner, was restricted solely to the claim of an abnormal condition affecting its invested capital; a later amendment complaining of the Commissioner's action in determining its value is not relevant thereto. United States v. Henry Prentiss & Co.,Inc., supra.
The claim for the restoration to its invested capital of depreciation deducted on blast furnaces prior to their completion and use cannot form a basis of this suit because this ground was never presented to the Commissioner. Nor can the claim for depreciation on the linings of blast furnaces be allowed, first because it was presented after rejection of the claim by the Commissioner; and, second, because it was not included in the amendment of the general claim filed on June 21, 1927.
This view makes it unnecessary to discuss the other issues raised.
It results that plaintiff's petition must be dismissed. It is so ordered.