Central Fibre Products Co. v. United States

• Decision Date: 28 May 1953
• Docket Number: No. 50 C 1609.,50 C 1609.
• Citation: 115 F. Supp. 147
• Parties: CENTRAL FIBRE PRODUCTS CO. v. UNITED STATES.
• Court: U.S. District Court — Northern District of Illinois

115 F. Supp. 147

CENTRAL FIBRE PRODUCTS CO. v. UNITED STATES.

No. 50 C 1609.

United States District Court N. D. Illinois, E. D.

May 28, 1953.

Edmund A. Spencer, Chicago, Ill., for plaintiff.

Otto Kerner, Jr., U. S. Atty., Chicago, Ill., for the Government.

LA BUY, District Judge.

The above cause has been submitted to the court on stipulated facts.

The taxpayer in the instant case pursuant to Section 1346(a) (1), 28 U.S.C., seeks to recover the amount of $3808.32 statutory interest which he alleges was erroneously assessed and collected on an excess profits tax which he paid for the year June 30, 1944.

The taxpayer filed its tax return for the taxable year 1944 and paid the sum of $952,782.82 in four equal installments on September, 1944, December 1944, March 1945 and June 1945. On July 15, 1947 the Collector determined that the taxpayer was entitled to an overassessment refund of $65,557.61 and this sum, together with interest of $8951.17 from June 15, 1945 to July 15, 1947 was paid to the taxpayer. Thereafter, on February 27, 1948 the Bureau determined that the taxpayer owed $987,735.25 for the same taxable year, or a deficiency of $100,510.04, which was paid together with interest in the amount of $19,577.47 from September 15, 1944, the date of the first quarterly installment to the date of the payment of the redetermined deficiency.

Section 292(a) of the Internal Revenue Code, 26 U.S.C.A. § 292(a), provides that where a tax is paid in installments, any subsequently determined deficiency shall be deemed to have become deficient for interest purposes from the date of the first quarterly installment due and payable; in the instant case September 1944. Section 3771 of the Internal Revenue Code, 26 U.S.C.A. § 3771, provides that interest on a refund shall be allowed from the date of the overpayment to a date preceding the date of the refund check by not more than thirty days. The date of the overpayment where the tax is payable in installments is the last quarterly payment of the tax; in the instant case June 1945.

It is the contention of the taxpayer that the net effect of the double examination for the same tax year was a determination of a deficiency of $34,952.93, or the difference between the gross deficiency of $100,510.04 found due on February 27, 1948 and the $65,557.61 overassessment refund made on July 15, 1947; that the net interest charges assessed against the taxpayer was the difference between the sum of $8,951.17 which the taxpayer received on the overassessment refund and the $19,577.47 it paid on the determined deficiency, or the net sum of $10,526.30; that if the single net deficiency had been assessed on the date of final examination, the interest charges, including the interest on the refund, would only have been approximately $7500; that the excess interest charge of $3808.32 is the amount of interest for nine months from September 1944 to June 1945 on the $65,557.61 and is therefore caused by the double examination for the one taxable year and should be refunded to the taxpayer.

The issue is whether the overpayment interest provisions of Section 3771 of the Internal Revenue Code should be read into and interrelated with the deficiency interest provisions of Section 292(a) of the Internal Revenue Code in determining the correct deficiency interest liability of the instant taxpayer under Section 292(a). The taxpayer urges that the two sections should be read together since there is both an overpayment and a deficiency for the same taxable year and a single transaction may not be broken into various elements in order to avoid or create a tax. The government...