Frank v. United States

• Decision Date: 05 November 1945
• Docket Number: No. 45548.,45548.
• Citation: 62 F. Supp. 860
• Parties: FRANK v. UNITED STATES.
• Court: U.S. Claims Court

62 F. Supp. 860

FRANK v. UNITED STATES.

No. 45548.

Court of Claims.

November 5, 1945.

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Theodore B. Benson, of Washington, D. C., for plaintiff.

John A. Rees, of Washington, D. C., and Samuel O. Clark, Jr., Asst. Atty. Gen. (Fred K. Dyar, of Washington, D. C., on the brief), for defendant.

Before WHALEY, Chief Justice, and LITTLETON, WHITAKER, JONES, and MADDEN, Judges.

LITTLETON, Judge.

Plaintiff is engaged in the business of selling at wholesale and in fabricating or manufacturing cotton goods. Pursuant to the provisions of section 16 of the Agricultural Adjustment Act of May 12, 1933, 7 U.S.C.A. § 616, and the Treasury regulations, plaintiff filed a floor-stocks tax return of the cotton goods on hand on August 1, 1933, and paid the tax of $36,735.16 shown to be due thereon. After the act of May 12, 1933, supra, had been declared invalid in United States v. Butler et al., Receivers, 297 U.S. 1, 56 S.Ct. 312, 80 L.Ed. 477, 102 A.L.R. 914, Congress, in sections 901 to 917, inclusive, Title VII of the Revenue Act of 1936 approved June 22, 1936, 7 U.S.C.A. §§ 644-659, provided for the filing of claims for refund and for the refund of processing taxes and floor-stocks taxes paid upon proper proof, and stated broadly that the taxpayer bore the burden of the tax and did not directly or indirectly pass it on.

The question raised and presented by defendant's plea in bar and plaintiff's answer thereto is whether under Title VII, and more particularly sections 902 and 903 thereof, and the Treasury regulations issued under section 916, plaintiff is entitled in this proceeding to submit evidence in support of and to substantiate its claimed refund, which evidence was not submitted to the Commissioner of Internal Revenue in connection with and in support of refund claim filed with and decided adversely to plaintiff by the Commissioner.

Sections 902 and 903 are as follows:

"Sec. 902. Conditions on Allowance of Refunds.

"No refund shall be made or allowed, in pursuance of court decisions or otherwise, of any amount paid by or collected from any claimant as tax under the Agricultural Adjustment Act, unless the claimant establishes to the satisfaction of the Commissioner in accordance with regulations prescribed by him, with the approval of the Secretary, or to the satisfaction of the trial court, or the Board of Review in cases provided for under section 906, as the case may be —

"(a) That he bore the burden of such amount and has not been relieved thereof nor reimbursed therefor nor shifted such burden, directly or indirectly, (1) through inclusion of such amount by the claimant, or by any person directly or indirectly under his control, or having control over him, or subject to the same common control, in the price of any article with respect to which a tax was imposed under the provisions of such Act, or in the price of any article processed from any commodity with respect to which a tax was imposed under such Act, or in any charge or fee for services or processing; (2) through reduction of the price paid for any such commodity; or (3) in any manner whatsoever; and that no understanding or agreement, written or oral, exists whereby he may be relieved of the burden of such amount, be reimbursed therefor, or may shift the burden thereof; or

"(b) That he has repaid unconditionally such amount to his vendee (1) who bore the burden thereof, (2) who has not been relieved thereof nor reimbursed therefor, nor shifted such burden, directly or indirectly, and (3) who is not entitled to receive any reimbursement therefor from any other source, or to be relieved of such burden in any manner whatsoever.

"Sec. 903. Filing of Claims.

"No refund shall be made or allowed of any amount paid by or collected from any person as tax under the Agricultural Adjustment Act unless, after the enactment of this Act, and prior to July 1, 1937, a claim for refund has been filed by such person in accordance with regulations prescribed by the Commissioner with the approval of the Secretary. All evidence relied upon in support of such claim shall be clearly set forth under oath. The Commissioner is authorized to prescribe by regulations, with the approval of the Secretary, the number of claims which may be filed by any person with respect to the total amount paid by or collected from such person as tax under the Agricultural Adjustment Act, and such regulations may require that claims for refund of processing taxes with respect to any commodity or group of commodities shall cover the entire period during which such person paid such processing taxes."

The pertinent provisions of Treasury Regulations 96, issued under Title VII, are as follows:

"Art. 202. Facts and evidence in support of claim. — Each claim shall set forth in detail and under oath each ground upon which the refund is claimed. It is incumbent upon the claimant to prepare a true and complete claim and to substantiate by clear and convincing evidence all of the facts necessary to establish his claim to the satisfaction of the Commissioner; failure to do so will result in the disallowance of the claim.

"The provisions of these regulations require that certain specific facts shall be stated in support of any claim for refund. The claimant is privileged to prove those facts in any manner available to him and to submit such evidence to that end as he may desire.

* * * * * *

"Art. 204. Conditions as to tax burden with respect to amount of refund allowable. — A refund may be allowed to the person who paid the tax, only of that amount paid as tax as to which the claimant establishes to the satisfaction of the Commissioner (1) that he bore the burden of such amount and has not been, or may not be, relieved thereof nor reimbursed therefor, and has not shifted such burden, directly or indirectly, through or by any of the means set forth in subsection (a) of section 902 of the Act; or (2) that he has repaid such amount unconditionally to his vendee who bore the burden thereof, as provided in subsection (9) of section 902 of the Act.

* * * * *

"Art. 302. Limitation as to number of claims. — Only one claim shall be filed by any person for refund of floor stocks taxes. The claimant shall include in such claim the total amount of refund claimed with respect to the total amount of all floor stocks taxes paid by him.

* * * * *

"Art. 305. Facts and evidence respecting tax burden. — If the claim involves floor stocks taxes paid with respect to more than one commodity, the facts and evidence as to the amount of tax burden borne with respect to articles made from each such commodity shall be set out separately; e. g., if the claim is for refund of amounts paid as cotton floor stocks tax and as wheat floor stocks tax, the facts and evidence concerning the tax burden with respect to cotton articles shall be set forth separately from the like facts and evidence with respect to wheat articles. (See article 202.)"

Plaintiff insists that under the statute and the regulations the plea in bar should be denied and that plaintiff should be permitted to submit to the court and have considered on its merits such evidence as it may have to offer and submit in support of the claimed refund as stated in the petition. It contends (1) that evidence was, in fact, submitted to the Commissioner of Internal Revenue in support of several, if not all, of the bases of its claim, and (2) that the jurisdiction of this court is not limited to consideration of the same evidence that was submitted to the Commissioner of Internal Revenue.

The defendant contends that the provisions of the applicable statutes and regulations, as well as express instructions printed as part of the refund claim form, intended and required that all facts and evidence which any taxpayer had to submit in support of a claim for refund of floor-stocks tax were to be presented to the Commissioner as part of that claim; that the evidence and facts by which plaintiff seeks to prove its claim from its books, records, audit schedules, invoices, and data showing the prices prevailing both before and after August 1, 1933, and by the testimony of witnesses, are irrelevant and immaterial in that such proof relates to matters and evidence not theretofore presented to the Commissioner of Internal Revenue as required by applicable law and regulations; that, except to the extent shown in the claim for refund filed April 10, 1939, none of this evidence was ever presented or offered to the Commissioner when he was considering the claim for refund, at which time it either was available or could have been more readily obtained than after this suit was filed.

We cannot agree with that part of the contention of defendant which broadly asserts that although a taxpayer has submitted evidence to the Commissioner in support of his claim for refund he may not, under the statute and the regulations concerning the filing of the refund claim, submit other or further evidence in court in a suit upon a rejected claim for refund unless he had submitted that same evidence and the facts sought to be established thereby to the Commissioner of Internal Revenue with and as a part of his claim for refund. Plaintiff says that is the only issue in this case but, as we will attempt to show, we think the important issue in the case is whether plaintiff submitted any evidence to the Commissioner to substantiate its claim for refund.

Neither section 902 nor 903 states specifically that all evidence that can be introduced before the Commissioner in connection with the claim, or in court if the claim is rejected, must be included in the claim for refund and filed with and as a part of the claim. We do not read the regulations as imposing this strict requirement. The Commissioner's action and procedure in this case, as well as certain of the provisions of section 902 and Regulations Art. 202, disclose...