Meyersdale Fuel Co. v. United States

Full title: MEYERSDALE FUEL CO. v. UNITED STATES

Court: Court of Claims

Date published: Nov 3, 1930

44 F.2d 437 (Fed. Cir. 1930)

Opinion

No. J-261.

November 3, 1930.

Suit by the Meyersdale Fuel Company against the United States.

Petition dismissed.

This suit is for the recovery of $86,551.06; with interest, representing an alleged overpayment of income and profits tax for 1920.

The question is whether the Commissioner of Internal Revenue when he determined that certain corporations were not affiliated had authority to apportion and apply the tax returned and paid upon the consolidated return in discharge and satisfaction of the tax due by the several corporations whose incomes were included in such consolidated return.

Special Findings of Fact.

1. Plaintiff, a Pennsylvania corporation with principal place of business at Somerset, is engaged in business of mining and shipping coal. March 15, 1921, it filed a consolidated income and profits tax return for the calendar year 1920 which included the income and invested capital of the Randolph Coal Company, the Smokeless Quemahoning Coal Company, and the Franklin Gas Coal Company, hereinafter referred to as the Randolph, Smokeless, and Franklin Companies. This return was mailed to the collector by plaintiff on March 11, 1921, and disclosed a tax liability for the consolidated group of $109,639.03 which was duly assessed on March, 1921, list against the Meyersdale Fuel Company who executed the return and whose name only appeared at the head of the return in the place provided for that purpose. The total tax shown on this return was paid to the collector by the plaintiff by its checks for $27,409.76 on March 15, 1921, $27,409.78 on June 15, and September 16, and $27,409.71 on December 15, 1921. These checks were dated and mailed to the collector on March 11, June 13, September 14, and December 13, respectively. Prior to the time of each payment by plaintiff to the collector a charge was set up on its books against the Franklin, Smokeless, and Randolph companies for their proportion accrued income and profits tax shown on the consolidated return for 1920. These debits on plaintiff's books against each of the other three companies mentioned were credited by the following amounts received from each of them respectively:

------------------------------------ | Smokeless | Franklin | Quemahoning | Randolph Gas Coal | Coal | Coal Company | Company | Company -----------|-------------|---------- $21,544 07 | $ 493 37 | $1,762 45 21,544 07 | 493 37 | 1,762 45 21,544 07 | 493 37 | 1,762 45 21,544 07 | 493 37 | 1,762 45 -----------|-------------|---------- $86,176 28 | $1,973 48 | $7,049 80 ------------------------------------

These amounts were received by plaintiff from said companies in reimbursement of charges made as aforesaid in four equal installments of $21,544.07 on March 28, June 13, September 14, and December 14 from the Franklin Company, and four equal installments of $493.37 on March 16, June 13, September 14, and December 14 from the Smokeless Company, and four equal installments of $1,762.45 on March 16, June 13, September 14, and December 14 from the Randolph Company.

The amount of tax shown on the consolidated return and paid by the plaintiff out of its own funds without reimbursement was $14,439.47, for which charges were made upon its books of $3,609.87 on March 15, 1921, $3,609.86 each on June 15 and September 15, and $3,609.88 on December 15, 1921.

2. At the time the consolidated return was filed the Franklin, Smokeless, and Randolph Companies filed information returns, form 1122, which returns are marked Exhibits B, C, D, and E, respectively, and by reference are made a part of this finding. These returns showed the plaintiff as the parent corporation and under item 7 thereof they stated that: "If apportionment [of the tax] is made, state the amount of income and profits tax for the taxable period to be assessed against the subsidiary or affiliated corporation making this return." These companies wrote the word "None." There was an agreement among the corporations included in the consolidated return that the total tax shown thereon should be paid through the plaintiff, but there was no agreement among the corporations that plaintiff would assume the tax liability of the other corporations.

3. The Franklin Company also filed a return of its income and invested capital for the calendar year 1920 on March 30, 1922, on form 1120, showing a tax liability of $82,279.69, and at the bottom of the first page of this return following the computation of tax this company wrote these words: "Tax has been paid through Meyersdale Fuel Company, Somerset, Pennsylvania. See attached memorandum." The memorandum referred to and attached to said return stated as follows: "This income and profits tax return for the calendar year 1920 is filed [to] conform to instructions in office letter, reference IT:SA:CR:AF:EHN, copy of which is attached hereto. The consolidated return of the Meyersdale Fuel Company for the year 1920 included the Franklin Gas Coal Company and the tax so paid by the Meyersdale Fuel Company is sufficient to cover the liability of the Franklin Gas Coal Company as shown on this return." On February 15, 1928, the Commissioner mailed to plaintiff a letter advising it that the corporations hereinbefore mentioned were not affiliated for 1920. There is no question in this case as to the correctness of this decision of the Commissioner.

4. On January 18, 1926, the plaintiff and the Franklin, Smokeless, and Randolph Companies each, and the Commissioner entered into written consents extending the statute of limitation with reference to the year 1920 to December 31, 1926. These consents contained provision that, if upon the Commissioner's final determination no appeal was filed with the United States Board of Tax Appeals, the date would be extended 60 days, and that, if an appeal should be filed, then the date should be extended by the number of days between the date of the mailing of the Commissioner's notice and the date of the final decision of the said board.

5. February 26, 1926, the Commissioner mailed to the Franklin Company a 30-day letter showing his computation of its tax liability on a separate basis for 1920. On May 5, 1926, the Commissioner mailed to this company a 60-day letter setting forth his final determination under the statute in respect of its tax liability for 1920 showing its total tax for that year of $82,279.69. This tax plus interest of $1,645.59, totaling $83,925.28, was assessed by the Commissioner against this company on the June, 1926, special list.

6. February 26, 1926, the Commissioner mailed to the Smokeless Company a 30-day letter showing his computation of its tax liability for 1920 on a separate basis. May 5, 1926, the Commissioner mailed to this company a 60-day letter showing his final determination under the statute in respect of its tax liability for 1920 showing a total tax for that year of $2,852.80. This tax, plus interest of $57.06, totaling $2,909.86, was assessed against this company on the June, 1926, special list.

7. February 26, 1926, the Commissioner mailed to the Randolph Company a 30-day letter showing his computation of its tax liability on a separate basis for 1920 and 1921. April 25, 1926, the Commissioner mailed to this company a 60-day letter showing his final determination under the statute in respect of its tax liability for 1920 and 1921, disclosing a tax for 1918 of $6,580.48 and additional tax of $1,405.43, totaling $7,985.91. The tax of $6,580.48 determined for 1920, plus interest of $131.61, totaling $6,712.09, was assessed by the Commissioner against this company on the June, 1926, special list.

8. February 17, 1926, plaintiff filed a claim for refund of $96,638.56 on the grounds that it filed a consolidated return and paid the total tax shown on such return.

The Department decided that the corporations were not affiliated, and in a letter of February 12, 1926, stated:

"You have filed a consolidated return for the year 1920 covering the Franklin Gas Coal Company, Smokeless Quemahoning Coal Company, and the Randolph Coal Company. It is now held by this office that you are not affiliated with any of these corporations for the year in question. The entire tax shown on the consolidated return was assessed against you, resulting in the overassessment, indicated above.

"In order fully to protect yourself against the running of the statute of limitations with respect to the apparent overassessment referred to in this letter, it is suggested that you immediately file with the collector of internal revenue for your district a claim on the enclosed Form 843, the basis of which may be as set forth herein."

August 19, 1926, the Commissioner mailed a registered notice to plaintiff in which he stated: "An examination of your income and profits tax return and of your books of account and records discloses an overassessment of $96,038.23 for the year 1920 as shown on the attached statement and schedules. Certificate of overassessment for the amount specified above will be issued through the office of the collector of internal revenue for your district and will be applied by that official in accordance with the provisions of section 284(a) of the revenue act of 1926." This letter was received by plaintiff August 21, 1926, and had reference to the audit of the consolidated return hereinbefore referred to, and the overassessment mentioned represented the difference between the total tax of $109,639.03 shown and paid on the consolidated return and the plaintiff's correct separate tax liability of $13,600.80. The Commissioner transmitted to the collector of internal revenue the result of his decision with respect to the tax liability of plaintiff and his audit of the consolidated return, together with a certificate of overassessment for $96,038.23 in the name of the plaintiff. The collector upon examination of his account with the plaintiff, which account showed that the plaintiff had been credited with the total tax of $109,639.03 shown and assessed on the consolidated return, reported an overassessment of $96,038.23 to the Commissioner as refundable.

9. July 6, 1927, the Commissioner having made a final determination in respect of the tax due by the several corporations which had been included in the consolidated return on a separate basis, instructed the collector that the difference between the total tax shown and paid on the consolidated return and the correct tax liability of the Meyersdale Fuel Company should be used by him in satisfaction and discharge of the tax due by the Franklin, Smokeless, and Randolph Companies. The Commissioner's letter of instructions to the collector was as follows:

"Transmitted herewith is supplemental Schedule No. 21798 (Form 7920) with certificate of overassessment in the amount of $96,038.23 allowed in favor of the Meyersdale Fuel Company, Somerset, Pennsylvania.

"The overassessment which was listed on the original Schedule No. 21798 and reported by your office as refundable has been deleted from the original schedule by this office, and rescheduled, inasmuch as bureau records show that the overassessment resulted from a reallocation of the incomes of four affiliated companies and that as a further result of this adjustment additional taxes were assessed against the Franklin Gas Coal Company, the Randolph Coal Company, and the Smokeless Quemahoning Coal Company, on the commissioner's June, 1926, list, #4.

"The overassessment allowed to the Meyersdale Fuel Company should, therefore, be credited in the required amounts to the deficiencies assessed against the affiliated companies and any amounts paid by these companies in consequence of such assessment should be reported as refundable on Forms 844."

10. On July 9, 1927, the collector, having complied with the above-mentioned instructions of the Commissioner to apply the overassessment against the tax determined to be due by the corporations included in the consolidated return, returned to the Commissioner the supplemental Schedule No. 21798 mentioned in the Commissioner's letter of July 6, together with the collector's schedules of refunds and credits, forms 7776 and 7776 — A.

The collector of internal revenue made appropriate entries in the account of Meyersdale Fuel Company for 1920, 1921, and 1922, showing that the overassessment of $96,038.23 had been applied as follows:

-------------------------------------------------------------------------------------------------------------------- | Additional | | | | taxes of year | | | | against which | | | Credit or refund Company | credit was | Amount | Account No. | schedule | applied or refund | | | | made | | | -------------------------------|-------------------|-------------|-------------------------------|------------------ Franklin Gas Coal Co. ........ | 1920 | $81,789 45 | June, 1926. Addl. 70C #4 ... | 21798 Smokeless Quemahoning Coal Co. | 1920 | 2,362 80 | June, 1926. Addl. 171C #4 .. | 21798 Randolph Coal Co. ............ | 1920 | 6,383 95 | June, 1926. Addl. 143C #4 .. | 21798 Randolph Coal Co. ............ | 1921 | 1,105 43 | June, 1926. Addl. 144C #4 .. | 21798 Meyersdale Fuel Co. .......... | 1922 | 277 44 | April, 1927. Addl. 25C #5 ... | 21798 | Refunds | | | Meyersdale Fuel Co. .......... | 1920 | 4,119 16 | ............................. | 21798 | |-------------| | Total ........................ | ................ | $96,038 23 | ............................. | ............... -------------------------------------------------------------------------------------------------------------------- After these entries had been made by the collector and reported to the Commissioner, Treasury check dated September 30, 1927, for $5,657.89 made up of the refund of $4,119.16 shown above and accrued interest of $1,538.75, was issued in favor of the Meyersdale Fuel Company. This check, together with a certificate of overassessment No. 930519, Schedule 21798, showing an overassessment for 1920 of $96,038.23, hereinbefore referred to, and a copy of the Commissioner's letter of August 19, 1926, hereinbefore set forth in finding 8, were sent to plaintiff and received by it December 28, 1927.

11. March 16, 1928, the plaintiff by its attorney filed with the Commissioner of Internal Revenue a petition for reconsideration, claiming that the crediting of an overassessment of the Meyersdale Fuel Company of the consolidated return for 1920 against the tax of Franklin, Smokeless, and Randolph Companies for that year was illegal, and demanding that the action taken be reversed, and that the excess of the tax paid on the consolidated return over the correct tax liability of the Meyersdale Fuel Company be refunded to it with interest.

On March 28, 1928, plaintiff filed another claim for refund for $96,638.56 on the grounds that the collector had erroneously applied the overassessment of the Meyersdale Fuel Company's tax liability for 1920 against the additional taxes of the Randolph, Smokeless, and Franklin Companies. Upon consideration of the petition for reconsideration and the second claim for refund by the Income Tax Unit of the Bureau of Internal Revenue, that unit submitted the following memorandum to the Deputy Commissioner of Accounts and Collections, Bureau of Internal Revenue:

"Reference is made to an overassessment of income taxes in favor of the Meyersdale Fuel Company, Somerset, Pennsylvania, for the year 1920, in the amount of $96,038.23, reported on supplemental Schedule IT 21798 by the collector of internal revenue for the twenty-third district of Pennsylvania, as follows:

$81,789.45 credited to June, 1926 #4 list, #70 — C (1920). Franklin Gas Coal Company. 2,362.80 credited to June, 1926, #4 list, #161 — C (1920). Smokeless Quemahoning Coal Company. 6,383.95 credited to June, 1926, #4 list, #143 — C (1920). Randolph Coal Company. 1,105.43 credited to June, 1926, #4 list, #144 — C (1921). Randolph Coal Company. 277.44 credited to April, 1927, #5 list, #25 (1922). Meyersdale Fuel Company. 4,119.16 certified for refund. _________ 96,038.23

"Treasury check for $5,657.89, in payment of the refund and accrued interest of $1,538.73, was issued September 30, 1927.

"The taxpayer protested the application of $91,641.63 of its overassessment to the deficiencies in tax against the above-mentioned companies, basing its contention on the bureau's ruling that the several companies were not affiliated and that this office was, in the absence of an agreement between the companies, involved, without authority to make the credits.

"An investigation made in connection with the taxpayer's petition has disclosed that the case was not adjusted in accordance with the ruling of the United States Board of Tax Appeals in the case of the Mather Paper Company, and that the greater portion of the overassessment represents an erroneous allowance, and the deficiencies in tax against the so-called affiliated companies were erroneously assessed in whole, with the exception of $5,439.35 of the tax against the Franklin Gas Coal Company.

"It is recommended that the collector be authorized to eliminate the credits totaling $91,641.63 against the Franklin Gas Coal, the Smokeless Quemahoning Coal Company, and the Randolph Coal Company, and instructed to withhold collection of the resultant outstanding taxes pending receipt of the overassessments to be allowed in favor of the several companies."

12. On April 10, 1928, the Commissioner of Internal Revenue wrote plaintiff's counsel a letter as follows:

"Reference is made to your petition for reconsideration of the action taken by this office in adjusting the 1920 income-tax accounts of Meyersdale Fuel Company and associated companies, whereby $91,641.63 of an overassessment of $96,038.23 determined in favor of the taxpayer named was applied as a credit to additional taxes assessed against its so-called subsidiaries.

"It is your contention that the bureau, having ruled that the several companies were not affiliated, was without authority to make the credits referred to, in the absence of an agreement between the companies involved, and you demand the refund, with interest, of the amount credited.

"It appears from a review of the case made in connection with consideration of your petition that the overassessment above mentioned was erroneous. As decided by the Board of Tax Appeals in the appeal of Mather Paper Company the tax reported on the original return should have been assessed against the several companies, as provided in section 240 of the Revenue Act of 1918 ( 40 Stat. 1081) on the basis of the net income properly assignable to each and credit should have been given for such amounts in the computation of deficiencies subsequently determined.

"Failure of the collector to comply with the provisions of section 240 is held by the board to be a mere ministerial error subject to be corrected at any time and it is now proposed to make such correction in this case.

"The tax reported on the consolidated return has accordingly been allocated to the various companies and their respective liabilities will be offset by such allocated amounts as indicated below:

----------------------------------------------------------------------------------------------------- | Allocation of | Correct tax liability | Overassessment | Deficiency | tax assesesd | | | -------------------------------|---------------|-----------------------|----------------|------------ Meyersdale Fuel Co. .......... | $ 23,365 41 | $ 13,600 80 | $9,764 61 | ........... Franklin Gas Coal Co. ........ | 76,840 34 | 82,279 69 | ............ | $5,439 35 Smokeless Quemahoning Coal Co. | 2,852 80 | 2,852 80 | ............ | ........... Randolph Coal Co. ............ | 6,580 48 | 6,580 48 | ............ | ........... |---------------|-----------------------|----------------|------------ Total ..................... | $109,639 03 | $105,313 77 | ............ | ........... ----------------------------------------------------------------------------------------------------- "In effecting this readjustment the credits objected to in your petition will be reversed and the accounts will be corrected to reflect the proper overassessment in favor of the Meyersdale Fuel Company and such deficiencies against the other companies as will result from the reversal of the credits."

April 14, 1928, the Deputy Commissioner of Accounts and Collections of the Bureau of Internal Revenue instructed the collector as follows:

"There is inclosed a copy of a memorandum dated April 18, 1928, from the Income Tax Unit of the bureau relative to an overassessment in favor of the Meyersdale Fuel Company, Somerset, Pennsylvania, for the year 1920, in the amount of $96,038.23, Schedule IT A-21798.

"The Income Tax Unit states that the taxpayer protested the application of $91,641.63 of its overassessment to the deficiencies in tax against the companies mentioned in the memorandum from the Income Tax Unit, basing its contention on the bureau's ruling that the several companies were not affiliated and, in the absence of an agreement between the companies involved, was without authority to make the credits.

"An investigation made in connection with the taxpayer's petition discloses that the case was not adjusted in accordance with the ruling of the United States Board of Tax Appeals, in the case of the Mather Paper Company, and that the greater portion of the overassessment represented an erroneous allowance and the deficiencies in tax against the so-called affiliated companies were erroneously assessed in whole, with the exception of $5,439.35 of the tax against the Franklin Gas Coal Company. It, therefore, will be necessary for you to reverse the credits totaling $91,641.63 against the Franklin Gas Coal Company, the Smokeless Quemahoning Coal Company, and the Randolph Coal Company, and to withhold collection of the resultant outstanding taxes pending receipt of the overassessments to be allowed in favor of the several companies.

"Your accounts should be adjusted by debiting account 6a and crediting account 18. Please attach a copy of this letter to the Form 820 on which these transactions are reflected. An appropriate notation should be made on your copy of the certificate of overassessment and the schedule.

"The credit of $277.44 and the refund of $4,119.16 will be allowed to stand and will be considered in the computation of a further overassessment which will be allowed in favor of the Meyersdale Fuel Company in connection with the Mather Paper Company decision."

On April 17, 1928, the Deputy Commissioner wrote the collector as follows:

"Reference is made to an overassessment of income taxes in favor of the Meyersdale Fuel Company, Somerset, Pennsylvania, for the year 1920, in the amount of $96,038.23, reported by your office on supplemental Schedule IT — 21798, as follows:

$81,789.45 credited to June, 1926 #4 list, #70 (1920). Franklin Gas Coal Company. 2,362.80 credited to June, 1926, #4 list, #161 (1920). Smokeless Quemahoning Coal Company. 6,383.95 credited to June, 1926, #4 list, #143 (1920). Randolph Coal Company. 1,105.43 credited to June, 1926, #4 list, #144 (1921). Randolph Coal Company. 277.44 credited to April, 1927, #5 list, #25 (1922). Meyersdale Fuel Company. 4,119.16 certified for refund. _________ 96,038.23

"An investigation in connection with the taxpayer's protest against the application of $91,641.63 of its overassessment to the deficiencies in tax against the above-mentioned companies, disclosed that the case had not been adjusted in accordance with the ruling of the United States Board of Tax Appeals in the case of the Mather Paper Company and that the greater portion of the overassessment represents an erroneous allowance and the deficiencies in tax against the so-called affiliated companies for 1920, were erroneously assessed in whole, with the exception of $5,439.35 of the tax against the Franklin Gas Coal Company.

"In a communication from the accounts and collections unit dated April 14, 1928, you were authorized to eliminate the credits totaling $91,641.63 and advised that overassessments were to be allowed in favor of the several companies for 1920.

"The overassessments are listed on Schedule IT — 29648, which was mailed to your office April 16, 1928.

"Inasmuch as the additional tax for 1921 was correctly assessed against the Randolph Coal Company and no certificate will be issued for that year, the $1,105.43 outstanding on the June, 1926, #4 list, #144, as a result of eliminating the credit, should be collected."

13. The collector of internal revenue, pursuant to the instructions from the Commissioner's office and in conformity with the letter of the Commissioner of April 10, 1928, to counsel for the plaintiff, hereinbefore mentioned, changed the entries on his books with reference to the total tax of $109,639.03 shown on the original consolidated return and included on the original March, 1921, assessment list, No. 401322, in the name of the Meyersdale Fuel Company, in order to show a distribution of this total tax to the plaintiff, the Franklin, Smokeless, and Randolph Companies, on the basis of net income properly assignable to each; and after such distribution the collector's records showed the following:

Meyersdale Fuel Company, Somerset, Pennsylvania, No. 401322 — A ......................... $23,365.41 Franklin Gas Coal Company, Somerset, Pennsylvania, No. 401322 — B ......................... 76,840.34 Smokeless Quemahoning Coal Company, Somerset, Pennsylvania, No. 401322 — C ......................... 2,852.80 Randolph Coal Company, Somerset, Pennsylvania, No. 401322 — D ....... 6,580.48

In the final decision of the Commissioner, to the extent of the tax liability of the several companies, the original assessment of $109,639.03 was not canceled or abated. No new or further assessment against any of the companies was made by the Commissioner, and no new or further assessment list or lists were ever signed by the Commissioner in respect of any portion of the original assessment of $109,639.03. The pages of the collector's record upon which he made a distribution and appropriate entries in order to allocate the total tax shown on the consolidated return and on the assessment list in the name of plaintiff to the several companies, as above set forth, were headed "Assessment list" and were on form 23 — A, but were not signed by the Commissioner or by any one else. When the Commissioner of Internal Revenue makes an assessment of taxes he signs a list entitled "Commissioner's assessment list" on form 23 C — 1. No such list was signed by the Commissioner with respect to the tax of any of the companies hereinbefore mentioned subsequent to the assessments made by him against the Franklin, Smokeless, and Randolph Companies in June, 1926.

14. When the collector had made appropriate entries in his records, as last above mentioned, the Commissioner on June 15, 1928, issued a second certificate of overassessment, No. 930519, Schedule 29648, to the plaintiff showing an overassessment for 1920 in the amount of $5,368.01 and interest thereon of $1,739.01. There was attached to this certificate of overassessment Treasury check payable to the plaintiff for these two amounts totaling $7,107.02.

15. June 15, 1928, the Commissioner issued to the Smokeless Company a certificate of overassessment, No. 1096526, Schedule 29648, showing an overassessment for 1920 of $2,862.80. This was the assessment made by the Commissioner against this company in June, 1926. This certificate of overassessment showed a partial abatement of this amount of $2,362.80 and a refund of the balance of $500 with interest, or $33.04. This refund came about by reason of the fact that before the final credits made by the collector, as last above set forth, certain collections had been made from this company. There was sent to the plaintiff with this certificate of overassessment Treasury check payable to it in the amount of $533.04.

16. May 16, 1928, the Commissioner issued to the Randolph Coal Company a certificate of overassessment, No. 1096524, Schedule 29648, showing an overassessment for 1920 of $6,683.95. This overassessment resulted from the assessment made against this company in June, 1926, hereinbefore referred to. The certificate showed that $6,383.95 of the overassessment was abated and that $300 was credited to a tax due by this corporation for 1921.

17. May 16, 1928, the Commissioner issued to the Franklin Gas Coal Company a certificate of overassessment, No. 1096525, Schedule 29648, showing an overassessment for 1920 of $76,841.31. This overassessment arose by reason of the assessment in June, 1926, hereinbefore referred to. The certificate of overassessment showed that this entire amount was abated.

R. Lester Moore, of Washington, D.C. (J.S.Y. Ivins, of Washington, D.C., and John T. Duff, Jr., of Pittsburgh, Pa., on the brief), for plaintiff.

Ralph C. Williamson, of Washington, D.C., and Charles B. Rugg, Asst. Atty. Gen. (Charles F. Kincheloe, of Washington, D.C., on the brief), for the United States.

Before BOOTH, Chief Justice, and LITTLETON, WILLIAMS, and GREEN, Judges.

LITTLETON, Judge.

Plaintiff brings this suit to recover $76,551.06 alleged to represent the balance of an overpayment of income and profits tax due it for 1920 resulting from the filing of a consolidated return for that year for itself and three other corporations known as the Franklin Gas Coal Company, the Smokeless Quemahoning Coal Company, and the Randolph Coal Company. The consolidated return was filed in plaintiff's name, and the total tax shown thereon upon the consolidated net income of all of the corporations amounting to $109,639.03 was paid in four installments to the collector of internal revenue by plaintiff with its checks. Before plaintiff paid these amounts, however, it charged the other three corporations whose income was included in said return with their proportionate part of the total tax in accordance with their net income, and they each paid to the plaintiff the amounts so charged on the dates set forth in the findings. The amount of the total tax paid by plaintiff representing its proportion of the tax due upon the consolidated net income shown in the return, and for which it was not reimbursed by the other corporations, was $14,439.47.

After the consolidated return had been filed the collector of internal revenue, according to his usual custom, entered the total tax shown on the return on an assessment list of March, 1921, in the name of plaintiff whose name only appeared at the head of the consolidated return. In due course the list was duly signed by the Commissioner of Internal Revenue. Subsequently the Commissioner audited the return and ruled that the corporations were not affiliated within the meaning of section 240 of the Revenue Act of 1918 ( 40 Stat. 1081) and computed the tax of plaintiff and the other corporations separately upon their individual incomes. The correct tax liability of plaintiff was determined to be $13,600.80 and there is no dispute in this proceeding about that.

The Commissioner first made additional assessments against the other corporations in June, 1926, in respect of their tax for 1920, and, according to instructions the collector satisfied the tax so determined and assessed against these three corporations by applying thereto a proportion of the tax shown and paid on the consolidated return. A certificate of overassessment was first issued for $96,038.23, being the difference between the plaintiff's correct tax liability and the total tax shown on the consolidated return. A small proportion of this tax paid on the consolidated return was also credited against additional assessments against the Randolph Coal Company for 1921 and the plaintiff for 1922. After making these credits and subtracting the correct tax of plaintiff of $13,600.80 from the remainder of the total tax paid on the consolidated return, there was left the amount of $4,119.16 paid on such return. The last-mentioned amount was refunded to plaintiff with interest by Treasury check dated September 30, 1927. The plaintiff's counsel protested this action of the Commissioner claiming that, in the absence of an agreement among the corporations involved, the credits were illegal, and demanded that the difference between the total tax of $109,639.03 paid on the consolidated return and the plaintiff's correct tax liability of $13,600.80 computed on a separate basis, or $96,038.23, be refunded to the plaintiff with interest as an overpayment by it for 1920.

The Commissioner might well have denied this protest of plaintiff of illegality, because in our opinion the plaintiff, under the facts, was not entitled to a refund of more than $838.65, being the difference between the tax of $14,439.47 paid by it on the consolidated return out of its own funds without reimbursement from the other corporations and its correct tax liability of $13,600.80. The other corporations might have had some cause to make objections as to amounts, but we need not consider this matter here. After the filing of plaintiff's protest of illegality and request for reconsideration, the Income Tax Unit of the Bureau of Internal Revenue concluded that, under the decision of the United States Board of Tax Appeals in Mather Paper Co., 3 B.T.A. 1, the separate tax liability of the corporations included in the erroneous consolidated return, with the exception of a certain amount against the Franklin Company, should be satisfied on the collector's books out of the total tax paid on the consolidated return without further assessment, and submitted a memorandum to that effect to the Accounts and Collections Unit of the Bureau of Internal Revenue. As a result the Commissioner of Internal Revenue in a letter of April 10, 1928, to plaintiff's counsel, set out in finding 12, advised that the previous credits should be reversed, and that the total tax paid on the consolidated return should be allocated to the tax due by the corporations which had been included in the consolidated return in proportion to the net income assignable to each in conformity with the decision of the Board of Tax Appeals in Mather Paper Co., supra. On April 14, 1928, the Deputy Commissioner of Accounts and Collections instructed the collector of internal revenue that the previous certificate of overassessment of $96,038.32 and the additional assessments in June, 1926, were erroneous and to reverse the credits previously made and withhold further action by the bureau under the decision of the Board of Tax Appeals in Mather Paper Company, supra. The collector did so. Subsequently, in May and June, 1928, certificates of overassessment were issued as set forth in findings 15, 16, and 17. Thereupon the collector of internal revenue made appropriate entries in his records showing the payment and satisfaction without further assessment of the tax liability of the several companies, with the exception of a deficiency of $5,439.35 against the Franklin Company finally determined by the Commissioner, out of the tax of $109,639.03 originally collected on the consolidated return which had previously been assessed in its entirety against the plaintiff as the parent corporation. By this action the plaintiff was given a further refund of $5,316.01 with interest.

Upon these facts we are of opinion that plaintiff is not entitled to recover. It has no just cause to complain concerning that which the Commissioner did, and we need not enter into a discussion whether the other companies might have had any valid objection. They are not parties to this suit. The Commissioner followed the decision of the Board of Tax Appeals in Mather Paper Co., supra, and we find no reason for holding that the decision of the board in that case was wrong.

Plaintiff's contention, as summarized in its reply brief, is as follows: "The plaintiff does not assume that a certificate of overassessment in itself justifies a refund, but in this case the plaintiff was assessed and paid $109,639.03 for 1920. It is admitted by the defendant that the plaintiff's correct tax liability for 1920 is $13,600.80. The Meyersdale Fuel Company therefore was overassessed and overpaid for 1920 in the amount of $96,038.23. The Commissioner of Internal Revenue has already made refunds of $4,119.16 and $5,368.01.

"The plaintiff is still entitled to a further refund of $86,551.06 with legal interest. There is no question but that the Meyersdale Fuel Company paid to the Commissioner of Internal Revenue during 1921 by its own checks and from its own funds $109,639.03 for the assessment made for the year 1920. The fundamental error of the defendant is in assuming that the Commissioner of Internal Revenue can take money paid to him by one corporation and apply it in payment of the taxes of other corporations. The commissioner's so-called reallocation in June, 1928, is nothing more than an assessment against each of the four individual companies made at that time, and taxes paid by the plaintiff in 1921 cannot be applied as a credit to offset such assessments made against the Franklin, Smokeless, and Randolph companies."

Plaintiff also contends in support of its claim for judgment that the Commissioner made assessments against the Franklin, Smokeless, and Randolph Companies in May and June, 1928, which he was not permitted to do under the statute of limitation and waiver, and that, therefore, the application of a portion of the total tax paid on the consolidated return in satisfaction of such assessments was barred and was illegal. Assuming this claim were true, which we think is not the case, it would not benefit this plaintiff. Plaintiff's claim is predicated upon a technicality and a too literal interpretation of the provisions of section 284(a) of the Revenue Act of 1926 (26 USCA § 1065(a) with reference to overpayments, refunds, and credits. There was no agreement among the corporations that plaintiff would assume the tax of the other corporations or that their tax should be assessed against plaintiff. However, the facts establish that there was an agreement among the several corporations that the tax shown on the consolidated return of the corporations included in such consolidated return was to be paid through the plaintiff as the parent corporation. Each subsidiary corporation paid to plaintiff its proportion of the tax. In substance, so far as concerns the total tax paid on the consolidated return in question, with the exception of $14,439.47, the plaintiff was not "the taxpayer" within the meaning of the statute. It merely acted as the medium through which the other corporations paid the amounts which they believed to be due upon their net income. This is clearly established by the charges which plaintiff made on its books against the other corporations of their proportion of the tax before it made payments to the collector, and the payment by such other corporations to the plaintiff in each instance, except one payment made by the Franklin Gas Coal Company on March 28, of the amounts so charged before the plaintiff's checks reached the collector of internal revenue. Even if all of the tax shown on the consolidated return had been remitted by the plaintiff to the collector before it received the actual cash from the other corporations in reimbursement, this was done for the convenience of all, and plaintiff would have been in the position of having advanced money to the other corporations to the extent of their liability. The provisions of section 252 of the Revenue Act of 1918 ( 40 Stat. 1085) and section 284(a) of the Revenue Act of 1926 (26 USCA § 1065(a) must be construed and applied in the light of the situations arising in connection with the filing of consolidated returns under the provisions of section 240 of the Revenue Act of 1918 ( 40 Stat. 1081). When the facts in this case are viewed in the light of these provisions, it is clear that plaintiff is not entitled to recover. The Commissioner had already refunded to plaintiff amounts in excess of its tax which it paid out of its own funds as a "taxpayer," and, even if the Commissioner had retained money belonging to the other corporations on assessments against such corporations, this plaintiff is not entitled to recover these amounts. Taxes may be and often are collected without assessment, and this is recognized by sections 273 of the Revenue Acts of 1924 and 1926 (26 USCA § 1047), but, in such a case, the tax, if legally due, cannot be recovered merely because it had not been formally assessed. The Commissioner did not make a new assessment in May or June, 1928, against the Franklin, Smokeless, and Randolph Companies. So far as these corporations were concerned, the tax due by them had been collected without assessment specifically against them. The action of the Commissioner as disclosed by his letter of April 10, 1928, in applying the amount shown, assessed, and paid in the name of plaintiff on the consolidated return in excess of plaintiff's tax liability in satisfaction of the tax of the other three corporations computed on a separate basis and the issuance of certificates of overassessments, was not a new or further assessment, but was a reversal of a former credit which he had made and the making of a new distribution of the total tax paid, to the tax liability of the other companies out of moneys paid by them as their tax through the plaintiff.

This last distribution made by the collector in conformity with the Commissioner's instructions only slightly changed the amounts which had theretofore been allocated to the several companies. No assessment list was signed by the Commissioner. The entry by the collector of the names of the Franklin, Smokeless, and Randolph Companies upon certain pages of his records, designated as Treasury Department form 23A, upon which pages opposite the name of the companies he made certain entries and notations under the headings "Old Balance," "Date," "Debit," "Credit," "New Balance," "Remarks," did not constitute an assessment by the Commissioner, even though such pages were headed "Assessment list." These pages are uniformly used by the collector to show a proper record of the accounts of taxpayers. When the Commissioner makes an assessment, he signs an entirely different document headed "Commissioner's assessment list" designated Treasury Department form 23 C — 1. There appears upon such list statements nowhere contained in the list used by the collector upon which to make his entries.

The plaintiff is not entitled to recover. The petition must therefore be dismissed, and it is so ordered.

WHALEY, Judge, did not hear this case, and took no part in the decision thereof.