Addressograph-Multigraph Corp. v. United States
| Decision Date | 01 June 1948 |
| Docket Number | No. 46723.,46723. |
| Citation | 78 F. Supp. 111 |
| Parties | ADDRESSOGRAPH-MULTIGRAPH CORPORATION v. UNITED STATES. |
| Court | U.S. Claims Court |
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Leo H. Hoffman, of New York City, for plaintiff.
John A. Rus, of Washington, D. C., and Theron Lamar Caudle, Asst. Atty. Gen. (Andrew D. Sharpe and A. F. Prescott, both of Washington, D. C., on the brief), for defendant.
Before JONES, Chief Justice, and HOWELL, MADDEN, WHITAKER, and LITTLETON, Judges.
In this case we are asked to decide whether an amendment made after the Statute of Limitations has run to a pending claim for refund of taxes filed in time is of such a nature as to permit the taxpayer to recover an admitted overpayment of taxes.
At all times material hereto plaintiff was and still is a Delaware corporation with its principal office and place of business in Cleveland, Ohio.
On or about March 15, 1930, and March 14, 1931, plaintiff filed federal income tax returns for the calendar years 1929 and 1930, respectively. The return for 1929 showed a total income tax of $147,456.82 which was paid in quarterly installments, $36,864.21 on March 15, and on June 14, 1930, and $36,864.20 on September 15 and December 15, 1930. An additional tax of $657.77 was paid on November 14, 1931. The 1930 return showed a total tax of $164,854.24 which plaintiff paid in quarterly installments of $41,213.56 on March 14, June 15, September 15, and December 14, 1931.
On March 9, 1932, plaintiff filed formal claims for refund for the calendar years 1929 and 1930 in the respective amounts of $9,585.52, and $12,678.84. In each of the refund claims and as one ground for recovery, plaintiff asked for additional depreciation on cost values to the corporation of plant properties based upon an appraisal at June 30, 1927, the date of a reorganization or change of ownership referred to in each claim.
On December 9, 1932, plaintiff filed further timely claims for refund for 1929 and 1930, which were identical with those previously filed but included a new paragraph, reading:
After March 9 but before December 9, 1932, a Revenue Agent examined plaintiff's books, records, and returns for the years 1929 and 1930 in connection with the claims for refund filed March 9, 1932. This Agent prepared a report dated September 22, 1932, recommending overassessments for 1929 and 1930 which were accepted by the plaintiff as correct. These overassessments were determined upon the basis of the ground set out in the claims filed March 9, 1932, namely, that depreciation should be computed on cost values as shown by an appraisal at June 30, 1927. The Commissioner of Internal Revenue refused to accept the recommendation of the Revenue Agent with respect to the basis for depreciation and on October 24, 1935, advised plaintiff of the reasons for such refusal.
On April 19, 1939, the Revenue Agent made further examination of plaintiff's returns, books, and records for the years 1929 to 1933 and made a report showing deficiencies for each of the years 1929 and 1930. In computing such deficiencies, the Agent did not allow as deductions for the year 1929 these items:
(1) Leasehold Improvements ............ $215.58
(2) Engineering Expense ............... 36,405.67
and did not allow these items as deductions for the year 1930:
(1) Defalcation Restaurant ............ $4,087.10
(2) Leasehold Amortization ............ 431.16
(3) Engineering Expense ............... 79,201.84
An allowance of the two items as proper deductions for the year 1929 would have shown an overpayment of $856.61 in tax and $62.75 in interest. An allowance of the three items as deductions for the year 1930 would similarly have produced an overpayment of $8,157.05 in tax. No refunds were allowed for the years 1929 and 1930 for the reason that the Commissioner of Internal Revenue maintained that timely claims for refund had not been filed, which included the items just referred to.
In the report of the Revenue Agent referred to in the paragraph next above there appeared the following explanation of reasons for the allowance of an additional deduction for engineering expense:
The item "Engineering Expense," referred to above, arose in the following manner:
During the years 1929, 1930, and for some years thereafter, plaintiff made expenditures for the development of various machines, special attachments, etc., which it treated as capital items with an estimated life of eight years. These expenditures included the cost of models used in connection with applications for patents, development expenses subsequent to the filing of a patent application, and the salaries of engineers in carrying out this work, the largest portion of the total expenditure being represented by the last item. All of these expenditures were entered in an account on plaintiff's books entitled "Expenditures on New Products, Engineering Department." At the end of each calendar year the items in the account were all reviewed and a segregation made to distinguish between those considered to be ordinary expense and those considered to be of a capital nature. The former were charged to the current year's expenses and the latter were deferred and written off or amortized over a period of eight years as shown in the last mentioned Revenue Agent's report.
The approximate total of the entries in that account for each of the years 1929 and 1930 was $150,000. After that account was analyzed for the purpose of making an allocation between expense and capital items, the balance remaining was carried as a deferred capital asset account of which no part was charged to the cost of any patent. In its income tax returns, plaintiff claimed one-eighth of that deferred item as a deduction from gross income over a period of eight years.
On April 2, 1941, plaintiff filed two documents on Form 843 which were denominated "Amendatory and Supplementary Claims for 1929 and 1930" in the respective amounts of $31,585.52 and $34,678.84. The claim for 1929 contained the following statement:
"This claim amends and supplements two claims for refund heretofore filed for the calendar year 1929, one dated March 9, 1932 and filed with the Collector of Internal Revenue, Cleveland, Ohio on that date and the other dated December 9, 1932, and filed with said Collector on that date."
The claim for 1930 contains an identical statement except for the use of the year 1930 instead of 1929. These amendatory and supplementary claims incorporated by reference the claims for refund referred to in Findings 3 and 4 as well as various briefs and letters to the Commissioner. In stating the amount to be refunded as indicated above, there was added the phrase "or such greater amount as is legally refundable."
The amendatory claim for 1929 set out among others the following ground for refund:
The same statement appears in the claim for 1930 except that the amount of the engineering expenditures is shown as $79,201.84.
On June 7, 1941, the Commissioner rejected the claims for refund for 1929 and 1930 which were filed on March 9 and December 9, 1932, as stated above. On November 10, 1942, the amendatory claims for 1929 and 1930 which were filed April 2, 1941, were rejected by the Commissioner for the stated reason that they were not filed within the period of limitation prescribed by law. A communication by the Revenue Agent in Charge to plaintiff dated December 8, 1941, transmitted a copy of a report dated November 26, 1941, recommending rejection of the claims with the following explanation:
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