Girard Trust Co v. United States 14 15, 1926

• Decision Date: 01 March 1926
• Docket Number: No. 137,137
• Citation: 46 S.Ct. 229,270 U.S. 163,70 L.Ed. 524
• Parties: GIRARD TRUST CO. et al. v. UNITED STATES. Argued Jan. 14-15, 1926
• Court: U.S. Supreme Court

270 U.S. 163

46 S.Ct. 229

70 L.Ed. 524

GIRARD TRUST CO. et al.

v UNITED STATES.

No. 137.

Argued Jan. 14-15, 1926.

Decided March 1, 1926.

Mr. James Craig Peacock, of Washington, D. C., for appellants.

The Attorney General and Mr. Alfred A. Wheat, of Washington, D. C., for the United States.

Mr. Chief Justice TAFT delivered the opinion of the Court.

This is an appeal from a judgment of the Court of Claims under section 242 of the Judicial Code (Comp. St. § 1219). The judgment was entered May 19, 1924, and the appeal was allowed July 3, 1924. The judgment dismissed the petition of the plaintiffs upon findings of fact. The Girard Trust Company and the other appellants are trustees of the estate of Alfred F. Moore, deceased.

Their claims are for interest not paid on refunds of taxes paid them. The proposed income tax upon the moore estate for 1920, as originally returned early in 1921, was $196,202.61. On March 15, 1921, and on June 15, 1921, quarterly payments of the tax, which amounted to $49,050.66, each were paid to the collector. On August 2, 1921, the trustees for the estate filed a claim for the refund of the two installments, aggregating $98,101.32, already paid, and claim for abatement of the two remaining quarterly installments not yet paid, aggregating the same amount. The claim for abatement was allowed in its entirety, and the claim for the refund in large part. The action of the department began December 9, 1922, in a schedule form, signed by the Commissioner of Internal Revenue, including an item of overassessments, and marked, 'Approved by the Commissioner of Internal Revenue, for transmission to the proper accounting officers for credit and refund.' This was transmitted to the collector of internal revenue for the First district of Pennsylvania to examine the account of the taxpayer, to report back the amount to be refunded and the amount to be credited on taxes due and unpaid. The collector made the report. The Assistant Commissioner of Internal Revenue confirmed the report and the Commissioner directed the refund January 16, 1923. On February 20, 1923, the trustees received by mail a certificate of overassessment dated February 10, 1923, stating that since $196,202.61 was assessed, whereas $13,663.89 was the correct tax, there had been an overassessment of $182,538.72, and that the amount of this overassessment had been applied as follows:

Amount abated $98,101.29

Amount credited 21.41

Amount refunded 84,416.02

With this certificate was a check for $84,416.02, the amount of the refund without interest. Since filing the petition in this case the trustees received, under date of October 5, 1923, a check for $4,318.97, interest on the refund and the credit of $21.41 from six months after the filing of the claim for refund to December 9, 1922.

Moore's estate made return to the collector of internal revenue for excess profits tax for the year 1917 of $108,140.15, and on March 21, 1918, paid to the collector of internal revenue $107,372.36, the amount of the tax less the credit of $767.79 allowed for payment in advance of the time fixed by law, June 15, 1918. Ascertaining that the trustees of a trust estate were not subject to excess profits tax, on August 2, 1921, they filed a claim for refund of the entire tax of $108,140,15. This claim was approved by the Commissioner of Internal Revenue for $107,372.36, on December 9, 1922, under the prescribed schedule form in which this item was marked 'Approved by the Commissioner of Internal Revenue, for transmission to the proper accounting officer for credit and refund.' It was sent to the proper collector of internal revenue who reported it back to the bureau. It was approved by the Assistant Commissioner and the refund was finally approved by the Commissioner, January 16, 1923. On February 7, 1923, the plaintiffs received by mail a certificate of overassessment dated February 6, 1923, for $107,372.36, together with a check for $112,864.53, the difference $5,492.17 being interest on the amount refunded from the date six months after the filing of the claim to December 9, 1922.

The contentions of the Trustees are that the allowances of interest on the refunds are not sufficient under the statute. Section 250(b) of the Revenue Act of November 23, 1921, 42 Stat. 227, 264, c. 136 (Comp. St. Ann. Supp. 1923, § 6336 1/8 tt), provides:

'As soon as practicable after the return is filed, the Commissioner shall examine it. If it then appears that the correct amount of the tax is greater of less than that shown in the return, the installments shall be recomputed. If the amount already paid exceeds that which should have been paid on the basis of the installments as recomputed, the excess so paid shall be credited against the subsequent installments; and if the amount already paid exceeds the correct amount of the tax, the excess shall be credited or refunded to the taxpayer in accordance with the provisions of section 252.'

Section 252 of the above act, 42 Stat. 268 (Comp. St. Ann. Supp. 1923, § 6336 1/8 uu) provides:

'That if, upon examination of any return * * * it appears that an amount of income, war profits or excess profits tax has been paid in excess of that properly due, then, notwithstanding the provisions of section 3228 of the Revised Statutes, the amount of the excess shall be credited against any income, war profits or excess profits taxes, or installment thereof, then due from the taxpayer under any other return, and any balance of such excess shall be immediately refunded to the taxpayer. * * *' Section 1324(a) of the same statute, 42 Stat. 316 (Comp. St. Ann. Supp. 1923, § 6371 4/5 j), contains the provision as to interest as follows:

'That upon the allowance of a claim for the refund of or credit for internal revenue taxes paid, interest shall be allowed and paid upon the total amount of such refund or credit at the rate of one-half of 1 per centum per month to the date of such allowance, as follows: (1) If such amount was paid under a specific protest setting forth in detail the basis of and reasons for such protest, from the time when such tax was paid, or (2) if such amount was not paid under protest but pursuant to an additional assessment, from the time such additional assessment was paid, or (3) if no protest was made and the tax was not paid pursuant to an additional assessment, from six months after the date of filing of such claim for refund or credit. The term 'additional assessment' as used in this section means a further assessment for a tax of the same character previously paid in part.'

The claims made by the trustees, appellants here, are, first, that the government erred in its construction of section 1324, by which it allowed interest, not to the dates of payments of the refunds February 20 and February 7, 1913, but only to the date when the Commissioner approved the schedule finding the amount of the overassessments and transmitted the schedule to the accounting officers December 9, 1922. The interest between December 9, 1922, down to the dates of payment amounts to $2,028.11. The question is whether the words 'to the date of the allowance' mean to the date of the decision of the Commssioner that an overassessment has been made, i. e., to December 9, 1922, to the final approval of the refund by the Commissioner January 16, 1923, or to the date of payment.

The next claim of the trustees is for $3,889.67, and this turns on the question whether under section 1324 the interest on the refund for the 1920 taxes should be calculated under clause (1) in that section as for a payment made under a specific protest or whether as upon a payment under clause (3) for which no protest was made. The Commissioner held that no sufficient protest had been made and therefore allowed interest, not from the time of payment as provided under clause (1), but from six months after the filing of the claim for refund under clause (3), which made a difference of $3,889.67.

The third claim of the trustees is for $767.79. This is based on the fact that under the Revenue Act of October 3, 1917, 40 Stat. 300, 326, c. 63, § 1009, a credit on taxes to be paid in advance, calculated at the rate of 3 per cent. per annum upon the amount so paid from the date of payment to the date fixed by law for payment was allowed and the amount paid was $767.79 less than the amount assessed. The claim for refund was allowed for the amount actually paid, but not for the discount. The trustees now seek to recover the discount.

The Court of Claims dismissed the petition for all these claims on the authority of Stewart v. Barnes, 14 S. Ct. 849, 153 U. S. 456, 38 L. Ed. 781. The taxpayer in that case had already received and accepted the principal of the amount improperly collected by a collector of internal revenue, and this was an action for the interest. This court held that the taxpayer could not maintain an independent action for interest, for the reason that in such cases interest is considered as damages, does not form the basis of the action, and is only an incident to the recovery of the principal debt. We do not think that it controls this case. The payment of interest in the Stewart Case was not expressly provided for in the act. In this case there is statutory provision for it, and it is analogous to a suit in debt or covenant in which the contract specifically provides for payment of interest on the principal debt. In such cases the authorities all hold that the acceptance of the payment of the principal debt does not preclude a further suit for the interest unpaid. Fake v. Eddy, 15 Wend. (N. Y.) 76; Kimball v. Williams, 36 App. D. C. 43, Ann. Cas. 1912B, 1331; New York Trust Co. v. Detroit Railway Co., 251 F. 514, 163 C. C. A. 508; King v. Phillips, 95 N. C. 245, 59 Am. Rep. 238; Bennett v. Federal Coal & Coke...