Hewitt-Robins Inc. v. Comm'r of Internal Revenue

• Decision Date: 10 April 1959
• Docket Number: Docket No. 39101.
• Citation: 32 T.C. 60
• Parties: HEWITT-ROBINS INCORPORATED (SUCCESSOR BY MERGER TO ROBINS CONVEYORS INCORPORATED), PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: U.S. Tax Court

32 T.C. 60

HEWITT-ROBINS INCORPORATED (SUCCESSOR BY MERGER TO ROBINS CONVEYORS INCORPORATED), PETITIONER,

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 39101.

Tax Court of the United States.

Filed April 10, 1959.

William E. Murray, Esq., for the petitioner.

Arnold I. Weber, Esq., for the respondent.

Petitioner filed timely applications for relief under section 722(b((2), (3), and (5), for the years 1940, 1941, and 1942, based upon alleged facts external to petitioner. After expiration of the statutory period for filing original claims for said years, petitioner filed purported amendments, seeking relief under section 722(b)(4), and alleging certain changes internal to petitioner in or immediately prior to the base period. Held: The claims under section 722(b) (4) are outside the scope of the investigation called for by the original claims and supporting material submitted within the statutory period, and are therefore new claims. As such they are untimely and barred.

FORRESTER, Judge:

Respondent has disallowed claims by petitioner for relief under section 722(b) of the Internal Revenue Code of 1939¹ in respect of excess profits taxes for the taxable years 1940 to 1944, inclusive. Petitioner requested and we have granted a severance of the issue relating to the period of limitation set forth in section 322(b)(1) of the Internal Revenue Code of 1939² as to 1940, 1941, and 1942, and petitioner has agreed that should respondent prevail here, it will abandon all other issues. Accordingly, the sole issue for decision is whether the provisions of said section 322(b)(1) bar any relief under section 722(b)(4) for said years.

FINDINGS OF FACT.

The stipulated facts are so found.

Petitioner is a corporation with principal office in New York City. Robins Conveyors Incorporated, known prior to 1943 as Robins Conveying Belt Company, was a corporation with principal office in Passaic, New Jersey. It filed its income and excess profits tax returns for the taxable years in controversy with the then collector of internal revenue for the fifth district of New Jersey.

Petitioner is apparently the successor to Robin Conveyors Incorporated, by virtue of a merger in 1947. The term ‘petitioner’ shall hereinafter be used without distinction to designate both Robins Conveyors Incorporated and the present litigant.

Petitioner's corporation income and declared value excess-profits tax returns (Form 1120) and its corporation excess profits tax returns (Form 1121) for the years 1940, 1941, and 1942 were filed on the following dates:

+----------------------------------------+
                ¦Taxable year  ¦           ¦Date filed   ¦
                +--------------+-----------+-------------¦
                ¦              ¦( Tentative¦Mar.¦12, 1941¦
                +--------------+-----------+----+--------¦
                ¦1940          ¦( Final    ¦June¦16, 1941¦
                +--------------+-----------+----+--------¦
                ¦              ¦( Tentative¦Mar.¦16, 1942¦
                +--------------+-----------+----+--------¦
                ¦1941          ¦( Final    ¦May ¦15, 1942¦
                +--------------+-----------+----+--------¦
                ¦              ¦( Tentative¦Mar.¦15, 1943¦
                +--------------+-----------+----+--------¦
                ¦1942          ¦( Final    ¦May ¦15, 1943¦
                +----------------------------------------+
                

On December 17, 1943, petitioner and respondent entered into an agreement extending until June 30, 1945, the time within which respondent might make an assessment of excess profits taxes for the taxable year 1940. No further such agreements were entered into with respect to 1940, 1941, or 1942.

The last payments by petitioner of excess profits taxes in respect of each year were as follows:

+-------------------------------------+
                ¦Taxable year  ¦Date of last payment  ¦
                +--------------+----------------------¦
                ¦1940          ¦Oct.   ¦2, 1944       ¦
                +--------------+-------+--------------¦
                ¦1941          ¦Dec.   ¦21, 1942      ¦
                +--------------+-------+--------------¦
                ¦1942          ¦June   ¦2, 1945       ¦
                +-------------------------------------+
                

On September 15, 1943, petitioner filed original Form 991 applications for relief under section 722 for 1940, 1941, and 1942. For each year petitioner checked as applicable sections 722(b), (2), (3), and (5). The following statement was attached to each application:

Rider attached to the application for relief under Section 722 of the Internal Revenue Code (Form 991) filed by Robins Conveyors Incorporated, a New Jersey corporation, with respect to the calendar year * * *

It is not possible for the taxpayer, prior to September 16, 1943, to obtain, prepare, and present all the detailed information required to establish its eligibility for relief and the amount of its constructive average base period net income. In accordance with the provisions of Section 30.722-5(a)(1) of Treasury Regulations 109, as amended by T.D. 5264, the taxpayer expects to submit such information within a reasonable time after filing this application, as a supplement to the application. In this application, the taxpayer has estimated the amount of its constructive average base period net income tentatively on the basis of the results for the years 1925 to 1928 inclusive, and has, in turn, computed an estimated amount as the refund to which it claims to be entitled. Since both such amounts are merely estimates, such amounts may be changed by reason of the detailed information to be furnished in the supplement to this application, subsequently to be filed, and the taxpayer accordingly reserves the right so to change such amounts.

The taxpayer's excess profits tax computed under Subchapter E of Chapter 2 of the Internal Revenue Code (without the benefit of Section 722 of such Code) results in an excessive and discriminatory tax, within the meaning of Section

722 of the Internal Revenue Code. Grounds for relief under Section 722 claimed by the Taxpayer (supplementing Schedule B of Form 991)

The taxpayer is engaged principally in the manufacture and erection of material handling equipment.

The excess profits tax is considered discriminatory because the business of the taxpayer was depressed during the base period and such years did not represent a period of normal earnings for the taxpayer.

Also, the taxpayer's business cycle is different from that of the general business cycle.

Relief is claimed on the above grounds in pursuance of Section 722(b)(2) and 722(b)3A.

The taxpayer claims that the factors above mentioned as constituting grounds for relief under Section 722(b) of the Internal Revenue Code have the effect of causing the average base period net income of the taxpayer not to reflect the normal earnings, and to result in an excessive and discriminatory tax. The taxpayer also claims that all such factors may reasonably be considered as resulting in an inadequate standard of normal earnings during the base period, and to the extent that it may be held that such factors do not furnish adequate grounds for relief under the aforementioned section, taxpayer claims relief with respect to such factors under Section 722(b)(5) of the Internal Revenue Code.

The taxpayer further claims that there are other factors affecting its business which may reasonably be considered as resulting in an inadequate standard of normal earnings during the base period within the meaning of Section 722(b)(5) and it reserves the right to submit detailed information with respect to such factors, as a supplement to this application, at a later date.

Those portions of the Form 991 applications checked by petitioner read as follows:

X 2. The business of the taxpayer was depressed during the base period or the taxpayer was a member of an industry which was depressed during the base period because of temporary and unusual economic events (section 722(b)(2)).

(a) Describe the temporary economic events unusual in the case of the taxpayer or an industry of which it was a member.

(b) If claim of depression is based on membership in depressed industry, describe industry, and furnish names and addresses of other members of such industry.

3. The business of the taxpayer was depressed in the base period because of membership in an industry affected by conditions subjecting the taxpayer to:

X A profits cycle differing materially from the general business cycle (section 722(b)(3)(A)), or

X Sporadic and intermittent periods of profits inadequately represented in the base period (section 722(b)(3)(B)).

(a) Describe character of the industry and furnish names and addresses of other members of the industry.

(b) Furnish data establishing that the taxpayer was depressed by reason of an unusual profits cycle, or

(c) Furnish data establishing that the taxpayer was depressed by reason of realization of sporadic profits inadequately represented in the base period.

X 5. Other factors producing an average base period net income which is an inadequate standard of normal earnings and which are not inconsistent with the principles and limitations of section 722(b) (section 722(b)(5)).

(a) Describe other factors claimed to affect business during the base period and to result in an average base period net income which is an inadequate standard of normal earnings.

That portion of the application relative to section 722(b)(4), which was not so checked, reads as follows:

4. The business of the taxpayer was commenced or there was a change in the character of the business immediately prior to or during the base period (section 722(b)(4)).

(a) On what date did commencement of business or change in character of business occur?

(b) If change in character of the business has occurred, submit statement of:

(1) Nature of change in character of business.

(2) Portion of the definition in section 722(b)(4) within which such change is claimed to have occurred.

(3) Evidence supporting contention that average base period net income does not reflect normal operations for the entire base period.

(c) Did the business reach, by the end of the base period, the earning level it would have reached if the business had...