Claremont Waste Mfg. Co. v. Commissioner of Int. Rev., 5130.

• Decision Date: 16 November 1956
• Docket Number: No. 5130.,5130.
• Parties: CLAREMONT WASTE MANUFACTURING COMPANY, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
• Court: U.S. Court of Appeals — First Circuit

238 F.2d 741 (1956)

CLAREMONT WASTE MANUFACTURING COMPANY, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.

No. 5130.

United States Court of Appeals First Circuit.

Heard October 2, 1956.

Decided November 16, 1956.

COPYRIGHT MATERIAL OMITTED

Robert Ash, Washington, D. C., with whom Norbert J. Heubusch, Washington, D. C., was on the brief, for petitioner.

Harry Marselli, Atty., Dept. of Justice, Washington, D. C., with whom Charles K. Rice, Asst. Atty. Gen., and Lee A. Jackson, Atty., Dept. of Justice, Washington, D. C., were on the brief, for respondent.

Before MAGRUDER, Chief Judge, and WOODBURY and HARTIGAN, Circuit Judges.

MAGRUDER, Chief Judge.

We have for review on this petition a decision of the Tax Court of the United States entered December 20, 1955, finding that there is an overpayment of petitioner's excess profits tax in the amount of $1887.99 for the taxable year 1941, attributable to the granting in part of an application for abnormality relief under § 722 of the Internal Revenue Code of 1939, as amended, 26 U.S.C.A. Excess Profits Taxes, § 722. The Tax Court thus rejected petitioner's broader claim that the whole amount of the excess profits tax theretofore paid for 1941 constituted a refundable overpayment, because the excess profits tax liability for 1941 was completely wiped out by the carry-back of an unused excess profits credit for 1942 in the amount of $38,524.63. There is no doubt that the taxpayer was at one time entitled to the application of this carry-back by virtue of §§ 710(b) (3) and 710(c) of the Code, as amended retroactively by § 204 of the Revenue Act of 1942, 56 Stat. 900-901, 26 U.S. C.A. Excess Profits Taxes, § 710(b) (3), (c). The question is whether petitioner asserted this carry-back privilege too late — a highly technical matter.

On February 27, 1942, petitioner filed with the Collector of Internal Revenue at Portsmouth, New Hampshire, its excess profits tax return for the calendar year 1941. The return disclosed an excess profits tax due in the amount of $10,386.29 (which sum was paid in full later in 1942). Of course there was at this date no claim of a carry-back of an unused excess profits credit for 1942, ten months of which were yet unexpired.

On September 13, 1943, the Commissioner issued to petitioner a notice of deficiency of excess profits tax for the year 1941 in the sum of $13,138.02. The asserted deficiency resulted from certain adjustments no longer in controversy.

On November 4, 1943, petitioner filed a petition in the Tax Court (Docket No. 3361) for redetermination of this deficiency as asserted by the Commissioner in the notice of September 13, 1943. Though petitioner, at the date of filing this petition in the Tax Court, had long since filed its excess profits tax return for 1942 and had presumably become aware of an unused excess profits credit for that year determined under the normal provisions of law without reference to any possible relief afforded by § 722, petitioner did not, as it might have done in this proceeding (Docket No. 3361), ask the Tax Court to determine not only that there was no deficiency of excess profits tax for 1941, but also that there had been an overpayment for that year because of the application of the carry-back of the unused excess profits credit for 1942. See § 322(d) of the Internal Revenue Code of 1939, 53 Stat. 92, 26 U.S.C.A. § 322(d).

After a hearing on Docket No. 3361, the Tax Court on March 12, 1945, filed its Memorandum Opinion in that case, 4 TCM 301. Thereafter the parties submitted recomputations under Rule 50, 26 U.S.C.A. § 7453, which recomputations were in agreement as to the amount of deficiency in excess profits tax for 1941; and pursuant thereto the Tax Court on April 27, 1945, entered its decision that "there is a deficiency in excess profits tax of $819.78 for the calendar year 1941" — which sum was later paid or satisfied. No petition to the court of appeals for review having been filed within three months, this decision of the Tax Court became "final" on July 27, 1945, as provided in §§ 1140(a) and 1142 of the 1939 Code, 26 U.S.C.A. §§ 1140(a), 1142.

If we stopped at this point it would be clear that the parties had come to the end of the road, so far as concerned the possibility of reopening petitioner's excess profits tax liability for 1941. Section 322(c) of the 1939 Code provided, 53 Stat. 92:

"(c) Effect of Petition to Board. — If the Commissioner has mailed to the taxpayer a notice of deficiency under section 272(a) and if the taxpayer files a petition with the Board of Tax Appeals within the time prescribed in such subsection, no credit or refund in respect of the tax for the taxable year in respect of which the Commissioner has determined the deficiency shall be allowed or made and no suit by the taxpayer for the recovery of any part of such tax shall be instituted in any court except —

"(1) As to overpayments determined by a decision of the Board which has become final; and

"(2) As to any amount collected in excess of an amount computed in accordance with the decision of the Board which has become final; and

"(3) As to any amount collected after the period of limitation upon the beginning of distraint or a proceeding in court for collection has expired; but in any such claim for credit or refund or in any such suit for refund the decision of the Board which has become final, as to whether such period has expired before the notice of deficiency was mailed, shall be conclusive."

As we had occasion to point out in Sweet v. Commissioner, 1 Cir., 1941, 120 F.2d 77, "final" in this connection means final in an absolute and literal sense; at the indicated point of time the tax consequences of the decision by the Tax Court become irrevocably fixed, and the decision must stand as rendered without power in the Tax Court or in any other court to modify it thereafter. There is no doubt that this is what the Congress meant. See the references to the legislative history in Moir v. United States, 1 Cir., 1945, 149 F.2d 455, 458-459.

We do not think that anything else which has happened in this case serves to alter the foregoing conclusion. Nevertheless, for an understanding of the taxpayer's contentions it is necessary to recite certain further developments.

On September 14, 1943, the taxpayer filed with the Commissioner an application for special excess profits tax relief for the year 1941, under the abnormality provisions of § 722. This application had nothing to do with any claim for the reduction of 1941 excess profits tax liability by the application of an unused excess profits credit carry-back for 1942.

On February 3, 1945, while the issues in the earlier case above referred to (Docket No. 3361) were still under consideration by the Tax Court, the Commissioner duly executed an agreement under § 276(b) of the Code, 26 U.S.C.A. § 276 (b), which previously had been executed by a representative of the taxpayer, extending the Statute of Limitations for the year 1941 to June 30, 1946. Further such agreements were executed by the parties extending the final expiration date to June 30, 1949.

On March 3, 1947, the taxpayer filed with the Commissioner a claim for refund of the entire amount of excess profits tax paid for 1941 based on the carry-back of $38,524.63 of unused excess profits credit for 1942. This claim for refund was filed nearly two years after the Tax Court's decision of April 27, 1945 (Docket No. 3361), determining a deficiency for 1941, had become final.

On January 31, 1949, the Commissioner sent a formal notice to the taxpayer, in two parts: (1) The notice informed the taxpayer that its application of September 14, 1943, for abnormality relief under § 722 was granted in part by the allowance of a "constructive average base period net income" in an amount of $85,756.36 for the taxable year 1941, which allowance resulted in an overassessment of excess profits tax for the year 1941 in the sum of $1887.99. (2) The taxpayer was also informed of the disallowance of its related claim for refund, filed on March 3, 1947, based upon the carry-back to 1941 of the unused excess profits credit for 1942.

Thereafter, on April 27, 1949, the taxpayer filed its petition in the Tax Court (Docket No. 22747) upon which the present proceeding is founded. This petition, which sought a redetermination of the Commissioner's rulings contained in his letter of January 31, 1949, above, asserted two errors: (1) That the Commissioner erred in disallowing in part petitioner's claim for abnormality relief under § 722, and (2) that the Commissioner erred in disallowing the taxpayer's claim for refund filed March 3, 1947, in that he failed to carry back to 1941 the unused excess profits credit arising in 1942. Subsequently the Commissioner filed a motion to dismiss the proceeding in so far as it related to the carry-back issue, and the Tax Court on February 19, 1951, issued an order granting this motion on the authority of Mutual Lumber Co. v. Commissioner, 1951, 16 T.C. 370.

In granting the foregoing motion to dismiss, the Tax Court merely adhered to its consistently maintained position that, when it acquires jurisdiction upon a petition filed to review an action by the Commissioner in disallowing in full or in part an application for abnormality relief under § 722, the Tax Court in such a case is limited to a consideration of the specific issues relating to § 722, and has no jurisdiction, at the instance of either party, to broaden the proceeding so as to give consideration to so-called "standard issues" relating generally to alleged deficiencies or overpayments for the taxable year. In Commissioner of Internal Revenue v. Smith Paper, Inc., 1 Cir., 1955, 222 F.2d 126, we suggested that the Tax Court might be wrong in this limited view of its jurisdiction, as several courts of appeals have had occasion to hold; but in the view we took of that case it was unnecessary for us to rule upon...