Cheney v. East Tex. Motor Freight, Inc.
| Decision Date | 29 May 1961 |
| Docket Number | No. 5-2408,5-2408 |
| Citation | 233 Ark. 675,346 S.W.2d 513 |
| Parties | J. Orville CHENEY, Comm., Appellant, v. EAST TEXAS MOTOR FREIGHT, INC., Appellee. |
| Court | Arkansas Supreme Court |
Herrn Norcutt and Lyle Williams, Little Rock, for appellant.
Warren & Bullion, Little Rock, for appellee.
The ultimate question presented on this appeal is whether the appellee is liable for additional State income taxes as claimed by the appellant.
Appellee East Taxes Motor Freight, Inc. (hereinafter called 'East Texas') is a Texas corporation engaged in interstate and intrastate transportation of property as a common carrier. It operates partly within and partly without Arkansas, and is duly certificated by the Interstate Commerce Commission and the Arkansas Commerce Commission, and is subject to the regulation of both agencies. At all times herein involved East Taxes was authorized, and doing business in Arkansas, and such carrier. Appellant J. Orville Cheney (hereinafter called 'Commissioner') is, and was at all times herein involved, the Commissioner of Revenues of the State of Arkansas and charged by law with enforcing the Arkansas Income Tax Law ().
East Texas operates on a fiscal year basis ending on June 30th; and for the fiscal years ending in June 1955, 1956, 1957, and 1958 (the four years here involved) East Texas made its Arkansas Income Tax return to the Commissioner and paid the tax as shown on such return. By letter of April 27, 1959, the Commissioner advised East Texas that an additional tax was due by it for each of these four years because of the method East Texas had used in figuring depreciation. The Commissioner also advised East Texas that an additional tax was due for the year 1958 because of certain sales tax payments East Texas claimed it had made to the State of Texas. Upon receipt of the letter by East Texas, there ensued a series of conferences between the representatives of East Texas and the representatives of the Commissioner, with each side trying without success to convince the other. Finally, East Texas paid the claimed additional tax of $3,426.99, and filed this suit for refund, alleging that in seeking such refund East Texas was proceeding under § 84-2031 et seq., Ark.Stats. The Trial Court rendered a decree in favor of East Texas, and the Commissioner prosecutes this appeal, presenting, inter alia, the points now to be discussed.
I. The Method For Determining Depreciation. In the returns filed for each of the four years here involved, East Texas had claimed depreciation according to the 'declining balance' method (§ 84-2016(f)(2), Ark.Stats.); and this method 1 allowed a larger amount of depreciation for each of these four years than did the 'straight line' method. The Commissioner insisted that East Texas should have calculated and claimed the said depreciation on the 'straight line' method, being § 84-2016(f)(1), Ark.Stats.; and on this 'straight line' method East Texas would owe a larger tax. 2 As authority for his position, the Commissioner relies on § 84-2003(e), Ark.Stats., which says that utilities and some other corporations (such as East Texas) must use the method of calculating income tax 'according to the standard classification of accounting of the Interstate Commerce Commission.'
Thus the question here posed is whether East Texas is free to calculate and claim depreciation as it desires under § 84-2016(f)(2), Ark.Stats., or whether the State may prescribe--as the Commissioner claims--that depreciation be calculated by East Texas according to the standard classification of accounting of the Interstate Commerce Commission, which latter is the 'straight line' method. We hold that § 84-2003(e), Ark.Stats. is valid as applied to this case, and that East Texas must use the same method in calculating its depreciation on its Arkansas income tax return as is prescribed by the standard classification of accounting of the Interstate Commerce Commission. The pertinent portion of § 84-2003(e), Ark.Stats., as here involved, reads:
'(e) Mode of determining taxable income of utilities. The basis of ascertaining the net income of every corporation engaged in the business of operating a steam or electric railroad, express service, telephone or telegraph business, or other form of public service, when such company is required to keep records according to the standard classification of accounting of the Interstate Commerce Commission, shall be the 'net income's of such corporation as shown by their records kept in accordance with that standard of classification of accounts, * * *'.
The constitutionality of the section, of which the above copied language is a part, was sustained by this Court in Cook v. Kansas City Southern Ry. Co., 212 Ark. 253, 205 S.W.2d 441, and certiorari denied by the Supreme Court of the United States in 333 U.S. 873, 68 S.Ct. 902, 92 L.Ed. 1150. In that case we held that the statute fixing the method of determining taxable income of interstate utilities was not shown to be discriminatory. And in the later case of Commissioner of Revenues v. Transcontinental Bus System, 227 Ark. 811, 301 S.W.2d 569, 571, there was involved the 'direct accounting' method of allocating operating expenses claimed by the bus company as opposed to the statutory formula of miles in Arkansas as compared to total miles of the system. We again sustained the statute, and concluded: 'We accordingly conclude that appellees failed to sustain the burden of proving the statutory formula oppressive and discriminatory, or that they have been deprived of any constitutional right by reason of its application in the instant case.'
Aside from the matter of constitutionality, East Texas argues that § 84-2003(e), Ark.Stats. (which comes to us from § 3 of Act 118 of 1929), has been superseded and amended by § 84-2016(f), which was added to the Income Tax Law by Act 156 of 1957. But we do not agree with East Texas' contention. Act 156 of 1957 is captioned: 'An Act to Amend Section 13(f) of Act 118, Approved March 9, 1929, and for Other Purposes,' which section was concerned with depreciation generally, and did not apply to particular corporations such as those concerned in Section 3(e) of the Act of 1929 (§ 84-2003(e), Ark.Stats.); and that section governs here. If East Texas were a business corporation not engaged as a common carrier and not subject to regulation by the Interstate Commerce Commission and not certificated by the State of Arkansas, then East Texas could claim depreciation under § 84-2016(f), Ark.Stats., that is, under Act No. 156 of 1957. But East Texas is a corporation of a particular status, in that it is a corporation engaged in public service under the control of the Interstate Commerce Commission and required to keep its accounts in accordance with the standard classification of accounts of the Interstate Commerce Commission; so East Texas is governed by the particular language of § 84-2003(e), Ark.Stats. instead of the general language of § 84-2016(f), Ark.Stats.
It was not the intention of the Legislature that the Act 156 of 1957 should amend or supersede Section 3(e) of Act 118 of 1929. Our cases hold with uniform refrain, as stated by Chief Justice Hill in Lawyer v. Carpenter, 80 Ark. 411, 97 S.W. 662, 663:
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