Felt & Tarrant Mfg. Co. v. United States

• Decision Date: 17 February 1930
• Docket Number: No. H-62.,H-62.
• Citation: 37 F.2d 977
• Parties: FELT & TARRANT MFG. CO. v. UNITED STATES.
• Court: U.S. Claims Court

37 F.2d 977 (1930)

FELT & TARRANT MFG. CO. v. UNITED STATES.

No. H-62.

Court of Claims.

February 17, 1930.

COPYRIGHT MATERIAL OMITTED

Thomas G. Haight, of Jersey City, N. J. (Robert H. Montgomery and J. Marvin Haynes, both of Washington, D. C., James O. Wynn., Jr., of New York City, and C. J. McGuire, of Washington, D. C., on the brief), for plaintiff.

Ralph C. Williamson, of Washington, D. C., and Herman J. Galloway, Asst. Atty. Gen. (Ottamar Hamele, of Washington, D. C., on the brief), for the United States.

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

BOOTH, Chief Justice.

The history of this tax case follows in sequential order, viz.:

                  (a) April 1, 1918: Plaintiff
                       filed income and excess-profits
                       tax return, tax
                       liability ....................  $260,328.05
                  (b) June 15, 1918: Plaintiff
                       paid tax disclosed by
                       above return .................   260,328.05
                  (c) November 10, 1919: Commissioner
                       determined an overassessment
                       of ...........................    20,769.77
                  (d) June 19, 1920: Commissioner
                       credited overassessment
                       (item c) to 1918 taxes .......    20,769.77
                  (e) February 2, 1923: Plaintiff
                       filed written waiver of
                       limitations extending date
                       to March 1, 1924
                  (f) March, 1923: Commissioner
                       determined a deficiency
                       in 1917 tax of ................   19,486.85
                  (g) February 29, 1924: Plaintiff
                       filed claim for a refund
                       of 1917 tax to amount
                       of ............................  214,122.01
                        Refund claim was accompanied
                       by a brief and request for
                       oral argument. The refund
                       claim is set out in the
                       findings
                  (h) December 17, 1924: Commissioner
                       determined plaintiff's 1917
                       tax as follows
                        Total tax liability $241,994.49
                        Overassessment ....   17,050.55
                  

                  (i) February 16, 1925: Official
                       allowance of refund claim
                       (item g) for $17,050.55
                       Rejected as to balance
                       claimed
                  (j) April 10, 1925: Plaintiff
                       paid balance of 1917 tax
                       as per rulings of the
                       commissioner ..................    2,436.30
                  (k) April 15, 1925: Commissioner
                       abated tax of 1917 to
                       extent of .....................   17,050.55
                

Plaintiff sues to recover $26,909.50 and interest, alleged as an overpayment of taxes due to a failure to allow a deduction from gross income for the year 1917 for exhaustion of patents acquired by the plaintiff and used by it in its business prior to March 1, 1913. The defendant concedes the amount and likewise admits that the single impediment to recovery is the sufficiency of the refund claim filed February 29, 1924. The various steps taken in the final determination of plaintiff's 1917 tax liability, as appears from the history of the case set forth above, discloses indisputably that the refund claim of February 29, 1924, was filed with the Commissioner within the statutory period of limitations and over a year prior to the final determination of the tax liability of the plaintiff for 1917.

The refund claim of February 29, 1924 — the important instrument involved herein — reads in part as follows:

"The taxpayer has filed with the commissioner a claim for special relief under section 210 of the 1917 Revenue Act for the excess-profits tax assessed for this period.

"This claim is filed to protect all possible legal rights of the taxpayer, pending, and at the date of, the settlement of the claim for relief. Computation has been made as follows:

                  Total profits taxes paid ... $227,789.38
                  Less: Decrease in income taxes
                     on account of profits taxes
                     credit ..................   13,667.37
                                                ___________
                  Refund claimed .............  214,122.01"
                

The taxpayer requested an oral hearing and the right of appeal in the event of an adverse decision on the part of the unit, and before any formal rejection of the claim was made.

Section 210 of the Revenue Act of 1917 (40 Stat. 307) provides for special assessments, and it is to be noted that the refund claim makes no specific mention of a deduction from gross income on account of exhaustion of patents.

Section 1318 of the Revenue Act of 1921 (42 Stat. 227, 314 26 USCA § 156), upon this subject, provides as follows:

"That section 3226 of the Revised Statutes is amended to read as follows:

"Sec. 3226. No suit or proceeding shall be maintained in any court for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner of Internal Revenue, according to the provisions of law in that regard, and the regulations of the Secretary of the Treasury established in pursuance thereof. * * *"

Article 1036, Treasury Regulations 62, prescribed as follows:

"Claims for refund of taxes erroneously collected. — Claims by the taxpayer for the refunding of taxes and penalties erroneously or illegally collected shall be made on Form 843. In this case the burden of proof rests upon the claimant. All the facts relied upon in support of the claim should be clearly set forth under oath."

Section 1318 and the regulations cited undoubtedly require that all the facts relied upon for a refund should be set forth under oath. The courts have construed section 1318 and the regulations made in pursuance of the authority granted therein. The cases, which we need not review, in detail, are harmonious upon the point that the purpose and intent of the statute is to afford the Commissioner an opportunity to correct errors specified in the refund claim, and to enable the taxpayers to escape the necessity for needless and burdensome litigation. Tucker v. Alexander, 275 U. S. 228, 48 S. Ct. 45, 46, 72 L. Ed. 253; Red Wing Malting Co. v. Willcuts (C. C. A.) 15 F.(2d) 626, 49 A. L. R. 459; Feather River Lumber Co. v. United States, 66 Ct. Cl. 54; Jonesboro Grocer Co. v. United States, 66 Ct. Cl. 320; Phœnix Glass Co. v. United States, (D. C.) 34 F.(2d) 217, P-H Fed. Tax Service, 1929, sec. 834; National Candy Co. v. United States, 67 Ct. Cl. 74. In the case of Tucker v. Alexander, supra, the Supreme Court, in speaking of the statute and regulations, used this language: "The statute and the regulations must be read in the light of their purpose. They are devised, not as traps for the unwary, but for the convenience of government officials in passing upon claims for refund and in preparing for trial. Failure to observe them does not necessarily preclude recovery."

The Alexander Case turned upon the question of waiver of the sufficiency of the refund claim. A similar contention is advanced by the plaintiff in this case. It is to be observed from the history of this case that the plaintiff did not in its original tax return claim a deduction from gross income for the year 1917 for depreciation or exhaustion of patents owned and used by it. This...