Allegheny Heating Co. v. Lewellyn

Decision Date01 July 1937
Docket NumberNo. 6250.,6250.
Citation91 F.2d 280
PartiesALLEGHENY HEATING CO. v. LEWELLYN.
CourtU.S. Court of Appeals — Third Circuit

William A. Seifert and William Wallace Booth, both of Pittsburgh, Pa., and Ellsworth C. Alvord and Floyd F. Toomey, both of Washington, D. C. (Reed, Smith, Shaw & McClay, of Pittsburgh, Pa., of counsel), for appellant.

Charles F. Uhl, U. S. Atty., and Orris Bennett, Sp. Asst. to U. S. Atty., both of Pittsburgh, Pa., James W. Morris, Asst. Atty. Gen., and Sewall Key, J. Louis Monarch, and Lester L. Gibson, Sp. Assts. to Atty. Gen., for appellee.

Before BUFFINGTON and THOMPSON, Circuit Judges, and MARIS, District Judge.

MARIS, District Judge.

This is an appeal from the judgment of the District Court for the Western District of Pennsylvania in a suit brought by the appellant against the former collector of internal revenue to recover income and excess-profits taxes alleged to have been erroneously paid for the years 1917 and 1918. The appellant filed returns and paid income and excess profits taxes thereon for the years 1917 and 1918. Within the periods limited by law it filed claims for refund for each year, setting forth as grounds for refund that it was entitled to additional depreciation and that it should be deemed affiliated with the Philadelphia Company and certain other corporations because of a contract between them for the purchase of gas at 50 per cent. of its sale price to others, thus resulting in an artificial distribution of income to the taxpayer.

After the period of limitation had run against filing claims for refund for the years in question, the Commissioner of Internal Revenue on November 9, 1925, mailed to the taxpayer a letter informing it that as the result of an examination of its returns there appeared to be an additional tax liability for the years 1917 and 1918 which he proposed to assess. This letter referred to the two claims for refund previously filed and stated that the taxpayer had been ruled not affiliated for those years. Thereafter on November 25, 1925, the taxpayer filed its protest against these findings of the Commissioner. No action appears to have been taken by the Commissioner on this protest, and on January 16, 1928, the taxpayer filed a further protest-brief in the nature of an application for the reconsideration of the findings embodied in the letter of November 9, 1925. In this brief for the first time the taxpayer asked for special assessment under section 210 of the Revenue Act of 1917 (40 Stat. 307) and section 327 of the Revenue Act of 1918 (40 Stat. 1093), upon the same ground alleged for affiliation in the original claims for refund, namely, the abnormal income resulting from the agreement with the Philadelphia Company for the purchase of gas.

On January 15, 1929, the Commissioner wrote the taxpayer informing it that he had allowed its application for a special assessment and had canceled the proposed deficiencies in tax for the years 1917 and 1918, but that the overpayments for those years disclosed as a result of the special assessment could not be refunded because no claim for the refund thereof upon that ground had been made. In the same letter the Commissioner advised the taxpayer that the claims for refund theretofore filed on the ground of affiliation would be rejected, since in his letter of November 9, 1925, he had advised the taxpayer that it had been ruled not affiliated. On March 29, 1929, the claims for refund were formally rejected by the Commissioner.

Thereafter the taxpayer brought this suit for the recovery of the amounts shown by the Commissioner's special assessment of January 15, 1929, to be refundable to it for the years 1917 and 1918. The court below upheld the Commissioner's contention that the refunds were barred by the statute of limitations. Its action was upon the ground that the timely claims for refund asked for relief upon a ground (affiliation) which did not entitle the taxpayer to refund and that the taxpayer's protest letter of January 16, 1928, could not be treated as an amendment of the claims since, as the court said, it was a protest directed against the proposed deficiency assessment of November 9, 1925, and did not relate to the claims for refund. From this action the present appeal was taken.

At the outset it should be noted that the applicable statutes of limitations require that claims for the refund of internal revenue taxes erroneously collected shall be presented to the Commissioner within a prescribed time and prohibit allowance of the claims if this condition is not satisfied. The claims involved in this case were filed within the period prescribed. The Revenue Act provides that no suit shall be maintained in any court for the recovery of such a tax "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." Revenue Act 1921, § 1318, 42 Stat. 314, as amended by the Act of March 4, 1923, c. 276, § 2, 42 Stat. 1505 (26 U.S.C.A. §§ 1672-1673). During the period of the transactions here involved, there had been promulgated under the Revenue Act of 1921 and was in force a treasury regulation providing that: "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." Reg. 62, art. 1036. The claims involved in the present case complied with this regulation, since they set forth the facts relied upon in their support. The relief for which they asked based upon those facts was denied, however, and it is the contention of the taxpayer that by its protest-brief of January 16, 1928, the claims were amended by the substitution of other grounds for relief to which it was entitled, that the amendment so made was timely, and that its claim should, therefore, have been allowed.

We are thus confronted with the question as to the circumstances under which a timely claim for refund may be amended after the statute of limitations has run. In United States v. Memphis Cotton Oil Co., 288 U.S. 62, 53 S.Ct. 278, 77 L. Ed. 619; United States v. Henry Prentiss & Co., 288 U.S. 73, 53 S.Ct. 283, 77 L.Ed. 626; United States v. Factors & Finance Co., 288 U.S. 89, 53 S.Ct. 287, 77 L.Ed. 633; and Bemis Bros. Bag Co. v. United States, 289 U.S. 28, 53 S.Ct. 454, 77 L.Ed. 1011, the Supreme Court passed upon various phases of this question. From these decisions the court below drew the principle that if, in the consideration of a timely claim for refund, the Commissioner, in the normal course of administrative procedure, is led into the field covered by a purported amendment, the latter, if filed before rejection of the original claim, will be treated as a part of such original claim, even though filed after the statute of limitations has run. This we think is a correct statement of the law. Applying it to the present case, two questions arise for determination.

The first is whether the Commissioner in the normal course of administrative procedure...

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  • Caswell v. United States, Civ. No. 7975.
    • United States
    • U.S. District Court — Northern District of California
    • November 15, 1960
    ...they were known, or should have been known, to the Administrator. The instant case, therefore, parallels the case of Allegheny Heating Co. v. Lewellyn, 3 Cir., 91 F.2d 280, in which there was held to be a permissible amendment of the original claim. It is quite patent that in a normal inves......

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