Helvering v. Stockholms Enskilda Bank

Decision Date05 November 1934
Docket NumberNo. 10,10
PartiesHELVERING, Commissioner of Internal Revenue, v. STOCKHOLMS ENSKILDA BANK
CourtU.S. Supreme Court

The Attorney General and Mr. Angus D. MacLean, Asst. Sol. Gen., of Washington, D.C., for petitioner.

Mr. Truman Henson, of New York City, for respondent.

Mr. Justice SUTHERLAND delivered the opinion of the Court.

Respondent, a foreign corporation having no office or place of business within the United States, received, during the year 1927, a refund of income taxes theretofore paid, including interest thereon in the sum of $8,683.91. In 1931, the Commissioner of Internal Revenue assessed against respondent in respect of this interest a deficiency of $1,172.32 upon its tax liability for the year 1927. The Board of Tax Appeals, upon petition for a redetermination, held that there was no deficiency and that the Commissioner was in error in so deciding. 25 B.T.A. 1328. Upon petition for review brought by the Commissioner, the court below sustained the action of the Board. 62 App.D.C. 360, 68 F.(2d) 407.

The case involves a consideration of certain provisions of the Revenue Act of 1926, c. 27, 44 Stat. 9. Section 233(b) of that act (26 USCA § 985(b) provides that, in the case of a foreign corporation, 'gross income' means only gross income from sources within the United States, determined in the manner provided in section 217 (26 USCA § 958) the pertinent provisions of which follow:

'Sec. 217. (a) In the case of a nonresident alien individual, * * * the following items of gross income shall be treated as income from sources within the United States:

'(1) Interest on bonds, notes, or other interest-bearing obligations of residents, corporate or otherwise, not including (A) interest on deposits with persons carrying on the banking business paid to persons not engaged in business within the United States and not having an office or place of business therein. * * *

'(c) The following items of gross income shall be treated as income from sources without the United States:

'(1) Interest other than that derived from sources within the United States as provided in paragraph (1) of subdivision (a). * * *'

The question for determination is whether the interest paid upon the amount of the tax refund falls within the classification 'interest on bonds, notes, or other interest-bearing obligations of residents, corporate or otherwise.' The contention of respondent before the Board of Tax Appeals and in the court below was, as it is here, that such interest payment was not within the reach of the provisions of section 217(a), because (1) it was not interest upon an interest-bearing obligation, and (2) the United States is not a 'resident' within the meaning of the phrase 'residents, corporate or otherwise.'

First. If the words 'interest-bearing obligations' stood alone, there would be no room for doubt as to their inclusive effect. Section 1111, 44 Stat. 115, title 26, U.S.C. App. § 149 (26 USCA § 149) authorizes the commissioner to refund and pay back all taxes illegally or erroneously collected. The decision of the Commissioner that a tax has been illegally or erroneously collected necessarily creates an obligation to make repayment. Section 1116(a) of the Revenue Act of 1926, c. 27, 44 Stat. 9, 119, Title 26, U.S.C. App. § 153 (26 USCA § 153 note), provides that interest at the rate of 6 per centum per annum from the date of the payment of the tax to the date of the allowance of the refund shall be allowed and paid. Obviously, an obligation upon which by express statutory direction interest must be paid is an interest-bearing obligation.

The point is made, however, that the word 'obligations,' as it occurs in another part of the act, has been given a narrower construction, and that this is persuasive of the restricted meaning contended for here. That much may be conceded, since 'there is a natural presumption that identical words used in different parts of the same act are intended to have the same meaning.' Atlantic Cleaners & Dyers v. United States, 286 U.S. 427, 433, 52 S.Ct. 607, 609, 76 L.Ed. 1204. But, since most words admit of different shades of meaning, susceptible of being expanded or abridged to conform to the sense in which they are used, the presumption readily yields to the controlling force of the circumstance that the words, though in the same act, are found in such dissimilar connections as to warrant the conclusion that they were employed in the different parts of the act with different intent. Id. The comparison sought to be made is between the words in section 213(b)(4) of the act, 26 USCA § 954(b)(4), and the same words in section 217(a), 26 USCA § 958(a). The former provides that the term 'gross income,' among other things, does not include interest upon 'obligations of the United States.' It is clear from a consideration of the entire section and of the subject-matter that the purpose of Congress, in thus excluding from gross income interest upon such obligations, was to aid the borrowing power of the federal government by making its interest-bearing bonds more attractive to investors. American Viscose Corp. v. Com'r of Int. Rev. (C.C.A.) 56 F.(2d) 1033. Compare United States Trust Co. of New York v. Anderson (C.C.A.) 65 F.(2d) 575, 577, 578, 89 A.L.R. 994. The scope of the word 'obligations' as there employed must be narrowed accordingly, and not extended to include interest upon indebtedness not incurred under the borrowing power, as the court in the Viscose Case properly held. But the use of the words 'interest on * * * interest-bearing obligations' in section 217(a) is for a different purpose; namely, to produce revenue, not to encourage loans in aid of the borrowing power. The intent of Congress, therefore, in the one case, is fulfilled by giving the phrase a construction within the narrow purposes of section 213(b)(4); and, in the other case, by a construction, if the phrase fairly admits of it, which will effect the obviously different statutory aim of section 217(a).

Atlantic Cleaners & Dyers v. United States, supra, was a suit brought to enjoin appellants from continuing an alleged conspiracy in restraint of trade and commerce in cleaning, dyeing, and otherwise renovating clothes contrary to section 3 of the Sherman Anti-Trust Act (15 USCA § 3). The defense was that appellants were engaged solely in the performance of labor and service in cleaning dyeing, and renovating wearing apparel, etc., and that this did not constitute 'trade' within the meaning of the act. The argument was that, since the words 'trade or commerce' in section 1 of the act (15 USCA § 1), which dealt with interstate commerce, must be construed not to include a business such as that carried on by appellant, the identical words used in section 3 dealing with restraint of trade or commerce within the District of Columbia should be given the same interpretation. Considering the subject-matter of the act, and the scope of the legislative power exercised in the one case as compared with that exercised in the other, we held otherwise. In arriving at the conclusion that the word 'trade' as used in section 3 was to be given a broader interpretation than the same word as used in section 1, we considered the history leading up to and accompanying the passage of the Sherman Act, the mischief to be remedied, and other circumstances, and held that Congress intended to exercise all the power it possessed; and, since the scope of its power in dealing with the District was more extensive than when dealing with interstate commerce, we gave to the word 'trade' its full meaning under section 3, unaffected by the narrower meaning which it might have under section 1. The considerations invoked in that case are equally applicable here.

But it is said that the phrase in question must be restricted in accordance with the rule of ejusdem generis. The point is not without merit. The phrase reads 'in terest on bonds, notes, or other interest-bearing obligations.' If the rule invoked be held controlling, it would follow that the general words 'other interest-bearing obligations' must be assimilated to the particular words 'notes and bonds,' and restricted to obligations of the same kind. But, while the rule is a well-established and useful one, it is, like other canons of statutory construction, only an aid to the ascertainment of the true meaning of the statute. It is neither final nor exclusive. To ascertain the meaning of the words of a statute, they may be submitted to the test of all appropriate canons of statutory construction, of which the rule of ejusdem generis is only one. If, upon a consideration of the context and the objects sought to be attained and of the act as a whole, it adequately appears that the general words were not used in the restricted sense suggested by the rule, we must give effect to the conclusion afforded by the wider view in order that the will of the Legislature shall not fail.

The general object of this act is to put money into the federal treasury; and there is manifest in the reach of its many provisions an intention on the part of Congress to bring about a generous attainment of that object by imposing a tax upon pretty much every sort of income subject to the federal power. Plainly, the payment in question constitutes income derived from a source within the United States; and the natural aim of Congress would be to reach it. In Irwin v. Gavit, 268 U.S. 161, 166, 45 S.Ct. 475, 476, 69 L.Ed. 897, this court, rejecting the contention that certain payments there involved did not constitute income, said: 'If these payments properly may be called income by the common understanding of that word and the statute has failed to hit them it has missed so much of the general purpose that it expresses at the start. Congress intended to use its power to the full extent. Eisner v. Macomber, 252 U.S. 189, 203, 40 S.Ct. 189, 64 L.Ed. 521, 9 A.L.R....

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