Consolidated Coppermines Corporation v. United States

• Decision Date: 07 February 1962
• Docket Number: No. 498-52.,498-52.
• Citation: 296 F.2d 743
• Parties: CONSOLIDATED COPPERMINES CORPORATION v. UNITED STATES.
• Court: U.S. Claims Court

296 F.2d 743 (1961)

CONSOLIDATED COPPERMINES CORPORATION v. UNITED STATES.

No. 498-52.

United States Court of Claims.

December 6, 1961.

As Amended February 7, 1962.

I. Herman Sher, New York City, for plaintiff.

Joel N. Simon, Silver Spring, Md., with whom was Asst. Atty. Gen., Louis F. Oberdorfer, for defendant. James P. Garland, Philip R. Miller, and Cynthia Holcomb, Washington, D. C., were on the brief.

WHITAKER, Judge.

Plaintiff sues for additional interest on a refund made it for an overpayment of taxes for 1941. The Commissioner of Internal Revenue refused to pay the interest claimed because he said that, in order to be entitled to the refund, it was necessary to carry back to the year 1941 a part of the 1943 excess profits credit, and that interest on a refund resulting from a carry-back of an excess profits credit is payable only from the date the claim for refund is filed, and, hence, plaintiff is not entitled to the additional interest claimed.

Plaintiff says, if the Commissioner of Internal Revenue had allowed it to carry over the entire unused excess profits credit to which it was entitled for 1940, it would have been unnecessary to carry back any of its unused credit for 1943, and, since there is no limitation on the payment of interest on a refund occasioned by the carrying forward of an unusued credit from a prior year, it is entitled to the additional interest claimed.

It is agreed that if plaintiff is entitled to carry forward its entire unused excess profits credit from 1940, it is entitled to the additional interest claimed.

Plaintiff is entitled to an additional carry-over from 1940 and to a carry-back from 1942 larger than that claimed in its claim for refund, if at all, because the Commissioner of Internal Revenue, in the course of his examination of plaintiff's returns for 1942 and 1943, discovered that plaintiff was entitled to compute its depletion allowance on cost rather than March 1, 1913, value.

When plaintiff made its income and excess profits tax returns for 1941 it claimed a carry-over of its unused excess profits credit from 1940. Then, when it developed that it had sustained a loss in 1942, it filed a claim for refund for 1941, asserting as its sole ground the right to carry back its unused excess profits credit for 1942.

In order to pass on this claim, plaintiff says it was necessary for the Commissioner of Internal Revenue to determine first, how much excess profits credit plaintiff was entitled to for 1942, and, second, how much of the credit it was necessary to carry back. To determine the first question, plaintiff's net income for 1942 had to be recomputed. This involved a determination of the proper basis for computing depletion. Also, to determine the second question, the amount of plaintiff's carry-over from 1940 had to be determined. This also involved a computation of its income for this year, which, in turn, involved the proper basis for computing its depletion.

So that plaintiff's claim that it was entitled to a carry-back of unused excess profits credit for 1942 set in motion an investigation which naturally would have disclosed plaintiff's right to a depletion allowance based on cost, instead of on March 1, 1913, value.

Before the Commissioner of Internal Revenue had acted on plaintiff's claim for refund based on a carry-back of its unused excess profits credit for 1942, the Commissioner of Internal Revenue entered upon an investigation of plaintiff's 1942 and 1943 tax liability. This investigation and the investigation necessary for action on the claim for refund were interrelated, because the claim for refund was grounded upon a claim of right to carry back to 1941 plaintiff's unused excess profits credit for 1942, and the amount of this unused excess profits credit depended upon a proper computation of its income and invested capital for 1942.

In the course of the investigation of the 1942 tax liability, which, as stated, affected plaintiff's right to the refund claimed, it was discovered that plaintiff was entitled to compute its depletion on cost rather than March 1, 1913, value, and this was allowed.

This, of course, affected plaintiff's rights under its claim for refund. It meant that plaintiff had a larger unused excess profits credit for 1942, which it might carry back to 1941. Since, in order to determine how much of this credit plaintiff had to carry back to 1941 to extinguish its tax liability for that year, it was necessary to determine the amount plaintiff could carry over from 1940, the Commissioner of Internal Revenue had to recompute plaintiff's tax liability for this year, using the new basis for computing depletion.

When plaintiff's 1940 tax liability was recomputed it was discovered that it was entitled to a carry-over to 1941 of an unused excess profits credit of some $220,000, instead of some $86,000, as the revenue agent had originally computed it. This made unnecessary the carry-back to 1941 of the entire unused excess profits credit for 1942, and, hence, it was unnecessary to carry back any credit from 1943.

Plaintiff says that its claim for refund of 1941 excess profits tax, based on a claim of right to deduct from its 1941 excess profits net income an unused excess profits credit from 1942 set in motion the investigations that led to the discovery of its right to compute its depletion on cost. Since this discovery was made within the statutory period, plaintiff says it was entitled to amend its claim of a carry-back of its unused excess profits credit for 1942 by asserting the right to have it computed using cost as the basis of the depletion allowance. In order...