Etiwan Fertilizer Co. v. South Carolina Tax Commission
| Decision Date | 28 July 1950 |
| Docket Number | 16392. |
| Citation | 60 S.E.2d 682,217 S.C. 354 |
| Parties | ETIWAN FERTILIZER CO. v. SOUTH CAROLINA TAX COMMISSION. |
| Court | South Carolina Supreme Court |
Thomas, Cain & Lumpkin, Columbia, S. C., E. D. Smith Jr., of counsel, for appellant.
John M. Daniel, Atty. Gen., Claude K. Wingate, Asst Atty. Gen., for respondent.
This action was brought to recover the sum of $5,979.11, representing a deficiency income tax assessed against appellant by the South Carolina Tax Commission for its fiscal year ending June 30 1945.
Appellant contends that the additional tax was illegally exacted for the reason that it was entitled to charge off, as a bad debt during such taxable year, the indebtedness hereinafter referred to. The tax in question was paid under protest, and thereafter this action was instituted for its recovery pursuant to the provisions of Section 2449, subsection 7 of the Code.
Respondent by its answer denied that the amount charged off was the uncollectible portion of the debt due appellant, or that it was ascertained to be worthless and charged off on its books prior to June 30, 1945, as required by law.
The portion of the statute applicable to the issue presented, Section 2449 sub-section 7, reads as follows: 'Debts ascertained to be worthless and actually charged off the books of the taxpayer within the income year.'
Respondent concedes that the actual entry does not have to be made upon the books of the taxpayer on or before the last day of the year involved, but may be done at any reasonable time thereafter, provided the debt has been ascertained to by worthless before the expiration of the taxable year.
The Master to whom the cause was referred, found and reported, as contended by appellant, that the quoted portion of the statute should be construed to mean that the taxpayer could estimate, approximate, or reasonably ascertain before the close of the taxable year, the amount claimed to be a bad debt and uncollectible. He held that the amount of the claimed worthless debt did not have to be ascertained with accuracy or precision before the end of the taxable year, and recommended that respondent be ordered to pay appellant the amount demanded. However, before reaching this conclusion, the Master determined that the word 'ascertain', in accordance with its usual disctionary definition, means 'to make a thing certain to the mind, to free from obscruity or doubt.' It appears to us that the definition of the word 'ascertain' and the decision reached by the Master present an inconsistency.
The cause came on to be heard before the circuit court upon exceptions filed by the Tax Commission, and that court held that the applicable statute hereinabove quoted is clear and unambiguous. The statute was construed to mean that the amount of the bad debt claimed could not be an estimate or an approximation; that such amount must be ascertained or determined accurately prior to the closing of the books for the taxable year ending June 30, 1945. Accordingly it was ordered that the complaint be dismissed.
The only testimony offered by the appellant consisted of two depositions. No evidence was offered by the respondent. Hence we look mainly to the testimony of Mr. W. R. Sullivan to decide the issue as to whether or not the bad debt claimed was legally ascertained before the close of appellant's fiscal year.
Prior to November, 1944, Shipyard River Terminal Company, of Charleston, was indebted to appellant in the sum of $187,186.94. Some time during the month of November, the Terminal Company suffered a fire loss which destroyed substantially all of its physical property, in consequence of which it had to cease doing business. The appraised value of its physical assets after the fire, amounted to $55,934.65, which represented the net worth of the company after taking into consideration all obligations except the amount due the appellant. In addition to the appraised value of the physical assets, the Terminal Company held a policy designated as use and occupancy insurance carried on the property destroyed by fire, which policy was turned over to appellant.
The respondent extended the time for the filing of appellant's income tax return from June 30, 1945 to September 30, 1945. In preparing its income tax return, which was filed some time in September, 1945, appellant believed that it could collect from the insurance company on this policy, by way of compromise, the net amount of $20,000, which figure when added to the appraised value of the physical assets would bring the total amount to $75,934.65. This latter amount subtracted from the total indebtedness of $187,186.94 left a claimed uncollectible bad debt of $111,252.29, which was entered in the return.
Mr. Sullivan who testified, was not only the president of the Shipyard River Terminal Company, but was also vice...
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