Opinion
No. J-390.
November 3, 1930.
Suit by Wilton Lloyd-Smith, receiver for the Willys Corporation, against the United States.
Judgment for plaintiff.
This suit is for the recovery of $91,322.10, interest on an overpayment of income and profits tax by the Willys Corporation for 1919 in the amount of $224,871.17. The Commissioner of Internal Revenue allowed a refund of the amount stated, but payment thereof was withheld by the Comptroller General because of the pendency of a suit by the United States against the receivers of the Willys Corporation for the recovery of an amount in excess of the refund, on account of an alleged breach of certain contracts. The refund was paid June 6, 1927, and interest is claimed from the dates of the overpayments to the date of the allowance of the refund under section 1116 of the Revenue Act of 1926 ( 26 USCA § 153 note), and interest from the time the refund was held up to the date it was paid, under the Act of March 3, 1875, 18 Stat. 481 (31 USCA § 227).
The Commissioner determined and the defendant contends that this refund was allowed under section 1324 of the Revenue Act of 1921 ( 42 Stat. 316) and that, since plaintiff filed no claim for refund, it is not entitled to interest. It is further insisted that the withholding of payment by the Comptroller General gave plaintiff no right to interest under the Revenue Acts which it did not then have and that its right to recover interest on this refund is precluded by a closing agreement for 1919 between the receiver of the corporation and the Commissioner on May 27, 1924. The defendant submits without argument the matter of the payment of interest under the Act of March 3, 1875, upon the amount of the refund from April 2, 1924, the date on which the Commissioner signed the authorization on the supplemental schedule of refunds and credits for payment of the refund, to June 6, 1927, being the period during which the Comptroller General withheld payment.
Special findings of fact:
1. Plaintiff is the receiver for the Willys Corporation, hereinafter referred to as the corporation, having been appointed by the District Court of the United States for the Southern District of New York, November 26, 1927, to succeed Francis G. Caffey as such receiver.
2. March 15, 1920, the corporation filed a tentative income and profits tax return for 1919 showing an estimated tax of $400,000. No assessment was made on this return. At the time of filing, the corporation paid $100,000 of the estimated tax to the collector at New York. May 15 the corporation filed a completed return for 1919 showing a tax of $744,860.26. This tax was assessed. $644,860.26 of this tax was paid in four installments of $100,000 on March 15, 1920, $87,072.22 on May 25, 1920, $186,215.07 on June 17, 1920, and $186,215.06 on September 15, 1920, leaving an unpaid balance of $185,357.91. May 25, 1921, the corporation paid to the collector a further amount of $5, leaving a balance of $185,352.91.
3. December 23, 1921, Francis G. Caffey, plaintiff's predecessor as receiver of the corporation, filed an amended return for 1919 showing a tax for that year of $465,234.49, being $94,272.86 less than the tax originally paid, and $279,625.77 less than the tax assessed on the original return. No assessment was made on the amended return.
4. After an examination and an audit of the returns, the Commissioner of Internal Revenue on January 18, 1924, notified Caffey, as receiver of the corporation, of his determination of an overassessment for 1919 of $410,224.08. February 7, 1924, the Commissioner approved a schedule of overassessments, form 7805, embracing the said overassessment in favor of the corporation, which schedule was transmitted to the collector for the Second district of New York for his action in accordance with the directions appearing thereon. The collector complied, and on February 23, 1924, signed and returned the schedule to the Commissioner, together with the schedule of refunds and credits prepared by the collector on form 7805 — A. Of the overassessment mentioned, $185,352.19 was abated, and the balance of $224,871.17 was shown as refundable.
5. March 6, 1924, the Commissioner approved the schedule of refunds and credits, authorizing the disbursing clerk of the Treasury Department to issue a check for the amount refundable. Treasury Department order, based on Treasury Decision 3260, addressed to the collectors of internal revenue and others concerned, and approved by the Secretary of the Treasury December 8, 1921, attached to the petition as Exhibit B, relating to the procedure to be followed in the handling of refunds, credits, and abatement claims, and to the refunds, credits, and overpayments where no claims were filed, is, by reference, made a part of this finding, but need not be set forth in full.
6. On April 2, 1924, the overpayment of $224,871.17 was deleted from the original schedule of refunds and credits by direction of the Comptroller General of the United States and transferred to a supplemental schedule, IT:R:8441, which was signed by the Commissioner on that date, to be paid by direct settlement by the Comptroller General, for the reason that a suit was then pending in the District Court of the United States for the District of New Jersey by the United States against the receivers of the corporation on matters pertaining to other departments of the United States government for amounts alleged to be due from the Duesenberg Motors Corporation, a subsidiary of the Willys Corporation.
7. At the time of allowing the refund, the Commissioner determined that no interest was allowable on the overpayment. No interest has been allowed or paid on the overpayment of $224,871.17 for 1919. The Commissioner of Internal Revenue has refused, and still refuses, to allow and pay any interest thereon.
8. May 27, 1924, Francis G. Caffey, receiver, acting under authority of appointment by the United States District Court for the Southern District of New York and the Commissioner of Internal Revenue entered into an agreement consenting to the final determination of the income and profits tax of the Willys Corporation for 1919 previously arrived at, as hereinbefore shown, in accordance with the provisions of section 1312 of the Revenue Act of 1921, which agreement was approved by the Secretary of the Treasury May 28, 1924, and is as follows:
"Agreement as to Final Determination and Assessment of Tax under Section 1312 of the Revenue Act of 1921"This agreement, made in duplicate this 27th day of May, 1924, under and in pursuance of section 1312 of revenue act of 1921, by and between Willys Corporation, a taxpayer residing at, or having its principal office or place of business at 52 Vanderbilt Avenue, New York, New York, and the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury:
"Whereas, there has been a determination and assessment of three hundred thirty-four thousand six hundred thirty-six dollars and eighteen cents ($334,636.18) as the amount of tax or tax and penalty due the United States of America from said taxpayer on account of income and excess profits taxes (character of tax) for the years 1919, 1920, and 1921; and
"Whereas, said taxpayer has without protest paid the amount of tax or tax and penalty so determined and assessed; and
"Whereas, the taxpayer has accepted the adjustment made by the Commissioner of Internal Revenue with respect to any and all claims for abatement, credit, or refund filed in connection with such determination and assessment;
"Now, this agreement witnesseth, that said taxpayer and said Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, hereby mutually agree that such determination and assessment shall be final and conclusive.
"In witness whereof, the above parties have subscribed their names to these presents in duplicate as of the day and year first above written.
"Willys Corporation, Taxpayer. "By Francis G. Caffey, Receiver. "D.H. Blair, "Commissioner of Internal Revenue. "Approved: May 28, 1924. "A.W. Mellon, Secretary of the Treasury."
9. The suit by the United States against the receiver of the Willys Corporation was decided adversely to the United States on December 6, 1926.
10. May 28, 1927, a certificate of settlement was issued by the Comptroller General of the United States and addressed to the Secretary of the Treasury, Division of Bookkeeping and Warrants, by which it was directed that a Treasury check for $224,871.17, the portion of the overassessment for 1919 found by the Commissioner to be refundable, be paid. June 6, 1927, Treasury check No. 123075, based on Treasury warrant No. 25480, for $224,871.17 was issued and mailed to the corporation in care of Francis G. Caffey, receiver.
Charles C. Parlin, of New York City (Joseph P. Cotton and Cotton Franklin, all of New York City, on the brief), for plaintiff.
Charles R. Pollard, of Washington, D.C., and Herman J. Galloway, Asst. Atty. Gen. (Ralph E. Smith, of Washington, D.C., on the brief), for the United States.
Before BOOTH, Chief Justice, and WILLIAMS, GREEN, and LITTLETON, Judges.
The Commissioner of Internal Revenue allowed the refund for 1919 on March 6, 1924, under section 1324 of the Revenue Act of 1921 ( 42 Stat. 316). Girard Trust Co. v. United States, 270 U.S. 163, 46 S. Ct. 229, 70 L. Ed. 524. This refund resulted from an audit by the Commissioner of the original return filed by the corporation and the amended return filed by the receiver. At the time of the allowance of refund, the Commissioner determined that no interest was payable thereon under the above-mentioned section, inasmuch as no claim for refund had been filed.
We are of opinion, for the reasons set forth in Parish Bingham Corp. et al. v. United States (Ct.Cl.) 44 F.2d 993, this date decided, that plaintiff is precluded by section 1312 of the Revenue Act of 1921 ( 42 Stat. 313) from recovering interest on the overpayment in question under the provisions of section 1324 of the Revenue Act of 1921, or section 1116 of the Revenue Act of 1926 ( 26 USCA § 153 note), to the date of the allowance of refund by the Commissioner. We need not, therefore, consider whether the Commissioner was right in this determination or whether the amended return filed by the receiver showing a tax liability much less than that which had been paid on the original return might be regarded as a claim for refund which would entitle plaintiff to interest under section 1324, or whether payment of interest on the refund is authorized by section 1116(c) of the Revenue Act of 1926. When the Commissioner of Internal Revenue allowed the refund, he determined that plaintiff was not entitled to interest thereon. Thereafter, on May 27, 1924, the receiver and the Commissioner, with the approval of the Secretary of the Treasury, entered into an agreement as to the final determination and assessment by the Commissioner for 1919 under the provisions of section 1312 of the Revenue Act of 1921 ( 42 Stat. 313). By reason of this agreement, this court is without jurisdiction, under the provisions of section 1312, supra, to annul, modify, or set aside the Commissioner's determination with respect to interest on the overpayment. Cf. Parish Bingham Corp. et al. v. United States, supra. Plaintiff is, therefore, not entitled to recover any amount as interest under the provisions of either the Revenue Act of 1921 or the Revenue Act of 1926.
As to the question of interest on the amount of the overpayment from April 2, 1924, the date when payment thereof was withheld by direction of the Comptroller General, to the date of payment on June 6, 1927, the situation is different, and plaintiff is entitled to recover interest for this period. The closing agreement had no effect upon plaintiff's right to interest under the provisions of the Act of March 3, 1875, 18 Stat. 481 (31 USCA § 227), during the time payment for refund was withheld. That act provides:
"When any * * * claim duly allowed by legal authority, shall be presented to the Secretary of the Treasury for payment, and the plaintiff or claimant * * * shall be indebted to the United States in any manner, * * * it shall be the duty of the Secretary to withhold payment. * * * And if such debt is * * * already in suit, it shall be the duty of the Secretary to cause legal proceedings * * * to be prosecuted to final judgment with all reasonable dispatch. And if in such action judgment shall be rendered against the United States, * * * the balance shall then be paid over to such plaintiff * * * with 6 per centum interest thereon for the time it has been withheld from the plaintiff."
Judgment will therefore be entered in favor of plaintiff for $42,875.43, interest at 6 per cent. from April 2, 1924, to June 6, 1927. It is so ordered.
WHALEY, Judge, did not hear this case, and took no part in the decision thereof.