Commissioner of Internal Rev. v. Chicago Portrait Co., 4434.

• Decision Date: 11 June 1931
• Docket Number: No. 4434.,4434.
• Citation: 50 F.2d 683
• Parties: COMMISSIONER OF INTERNAL REVENUE v. CHICAGO PORTRAIT CO.
• Court: U.S. Court of Appeals — Seventh Circuit

50 F.2d 683 (1931)

COMMISSIONER OF INTERNAL REVENUE v. CHICAGO PORTRAIT CO.

No. 4434.

Circuit Court of Appeals, Seventh Circuit.

June 11, 1931.

G. A. Youngquist, Asst. Atty. Gen., Sewall Key and A. H. Conner, Sp. Assts. to Atty. Gen., and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, and Dean P. Kimball, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., for petitioner.

Albert L. Hopkins, Arnold R. Baar, and Herman T. Reiling, all of Chicago, Ill., for respondents.

Before ALSCHULER, EVANS, and SPARKS, Circuit Judges.

ALSCHULER, Circuit Judge.

Review is sought of a ruling of the Board of Tax Appeals which sustained respondent's contention that it was entitled to deduct from its federal income tax for the year 1923, the amount of an income tax for that year which it was required to pay upon its business done in New South Wales. 16 B. T. A. 1129.

Respondent company is an Illinois corporation, and in the year in question owned 51 per cent. of the voting stock of a subsidiary corporation of New South Wales. For that year the Commissioner credited upon the income tax here returned income taxes of the subsidiary corporation levied by, and paid to, the commonwealth of Australia and the Dominion of New Zealand, but refused to credit thereon any part of the income taxes paid by it to New South Wales.

The question involved is whether New South Wales comes within the designation "any foreign country," as employed in section 238 of the Revenue Act of 1921 (42 Stat. 258), the applicable part of which is: "Sec. 238 (a) That in the case of a domestic corporation the tax imposed by this title, plus the war-profits and excess-profits taxes, if any, shall be credited with the amount of any income, war-profits, and excess-profits taxes paid during the same taxable year to any foreign country, or to any possession of the United States. * * *"

New South Wales has been a British possession ever since Captain Cook visited it in 1770. Responsible government was conferred upon it in 1855, with a "legislative counsel" appointed by the crown and an "elective legislative assembly." It was entirely separate and distinct from the other Australian colonies of Great Britain.

In 1900 the commonwealth of Australia came into existence through a pact, to which New South Wales was a party, which adopted a Constitution delegating certain designated powers to the government of the commonwealth. In respect to other matters the constituent parties remained as they were before, each carrying on its own government, very much as with the states of the United States.

This grant of powers to the commonwealth left New South Wales none the less a self-governing colony. It had and has the power to levy taxes. Income taxes were levied by it before it entered the commonwealth, and have been ever since, under its sovereign authority to levy such taxes.

The word "country" cannot be given a hard and fast definition, applicable alike to every situation in which it is employed. Petitioner places much reliance upon the manner of its use in the case of Stairs v. Peaslee, 18 How. 521,...