Edwards v. Cuba Co, 324
| Citation | 45 S.Ct. 614,268 U.S. 628,69 L.Ed. 1124 |
| Decision Date | 08 June 1925 |
| Docket Number | No. 324,324 |
| Parties | EDWARDS, Formerly U. S. Collector, v. CUBA R. CO |
| Court | United States Supreme Court |
Mr. Alfred A. Wheat, of New York City, and the Attorney General, for plaintiff in error.
Mr. Howard Mansfield and Allen Evarts Foster, both of New York City, for defendant in error.
Plaintiff, a New Jersey corporation, owns and operates a railroad in Cuba. In March, 1917, it made return of its income for 1916, and, in due time, paid the tax assessed on the basis of its return. Plaintiff had received in 1911 to 1916, inclusive, subsidy payments from the republic of Cuba, amounting in all to $1,696,216.20, but did not report any part of them as taxable income. January 1, 1918, the Commissioner of Internal Revenue assessed against plaintiff for 1916 an additional tax of $33,924.32, being 2 per cent.—the rate prescribed in the Revenue Act of 1916 (Act Sept. 8, 1916, c. 463, 39 Stat. 756)—on the total of such payments. Notwithstanding its objection that the assessment was without authority of law, plaintiff was required to pay the tax. It applied for refund. The commissioner adhered to the view that the amounts so received constituted income, but held that the payments were taxable in the years when received. Prior to the act of 1916, the tax rate was 1 per cent. There was repaid to plaintiff one per cent. on the payments made before that year, but its application was denied as to the balance, $20,239.18. This action was brought to recover that amount with interest. The complaint alleged that the subsidy payments were not income within the meaning of the Sixteenth Amendment. Defendant moved to dismiss the case on the ground that the complaint failed to state a cause of action. The court denied the motion and gave judgment for plaintiff. Defendant brought the case here on writ of error. Judicial Code § 238 (Comp. St. § 1215).
An act of the Congress of the republic of Cuba of July 5, 1906, authorized the President to contract with one or more companies for the construction and operation of certain lines of railroad on designated routes between places specified. The republic granted a subsidy up to $6,000 per kilometer, payable in six annual installments, to the companies constructing and maintaining in use the specified lines. Any company having such a contract was entitled to receive subsidies for that part of the railroad constructed after the passage of the act, as well as for the part constructed after the making of the contract. March 25, 1909, the President of the republic and the plaintiff made a contract, by which the latter agreed, in consideration of $6,000 per kilometer to be paid by the republic as specified in the law of 1906, to construct and operate a railroad on the routes and between the places specified; and the plaintiff agreed to reduce by one-third the tariffs then in force for the transportation of permanent employees and troops of the government, and, in case of war or any disturbance of the public order, to transport troops in special trains at the rate of one cent per man per kilometer, and also agreed to reduce the fares for all first-class passengers. The entire line covered by this contract was completed in 1911. The subsidy payments amounted in all to $1,642,216.20, about one-third of the cost of the railroad.
An act of June 1, 1914, added to the law of 1906 an article which provided that the subsidy per kilometer for the construction of a railroad from Casilda to Placetas del Sur should be 6,000 pesos for a part and 12,000 pesos for the rest of the distance. June 30, 1915, in accordance with that act, the President of the republic and plaintiff made a contract for the construction of the railroad. It bound the company to carry public correspondence free of charge on the lines of this railroad, to carry small produce for 50 per cent. of the tariff, and to allow telegraph and telephone stations to be established by the government alongside the railroad. And there was handed over to the plaintiff certain land, buildings, construction and equipment then in the possession of the state, which theretofore had been acquired and built in an earlier effort to complete that line. The subsidy payment in 1916 was $54,000.
All the subsidy payments under both contracts were credited to a suspense account and, June 30, 1916, were transferred to the surplus account, and were used for capital expenditures. The cost of construction as carried on the books was not reduced by such payments.
The power given Congress by the Sixteenth Amendment is to 'lay and collect taxes on incomes from whatever source...
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