Helvering v. Stockholms Enskilda Bank, 5889.

Decision Date04 December 1933
Docket NumberNo. 5889.,5889.
Citation68 F.2d 407,62 App. DC 360
PartiesHELVERING v. STOCKHOLMS ENSKILDA BANK.
CourtU.S. Court of Appeals — District of Columbia Circuit

G. A. Youngquist, Sewall Key, J. L. Monarch, W.C. Thompson, and C.M. Charest, all of Washington, D. C., for appellant.

Truman Henson, of New York City, for appellee.

Before MARTIN, Chief Justice, and ROBB and GRONER, Associate Justices.

MARTIN, Chief Justice.

An appeal from a decision of the Board of Tax Appeals.

The facts are simple and undisputed. The appellee is a foreign corporation having no office or place of business in the United States. In the year 1927, the United States government paid to the corporation the sum of $8,683.91 as interest on a refund of federal income taxes overpaid by it in a prior year. The interest was paid under the provisions of section 1116 of the Revenue Act of 1926 (26 USCA § 153 note), which provides:

"(a) Upon the allowance of a credit or refund of any internal-revenue tax erroneously * * * collected * * * interest shall be allowed and paid on the amount of such credit or refund at the rate of 6 per centum per annum from the date such tax * * * was paid to the date of the allowance of the refund."

In the year 1927, the Commissioner increased the corporation's income by including therein an amount for the interest upon the refund aforesaid, to wit, $8,683.91, and assessed income tax thereon for that year, thereby determining a deficiency in the sum of $1,173.32, from which determination the taxpayer appealed to the Board of Tax Appeals.

The only question for decision by the Board was whether interest paid by the United States to a nonresident foreign corporation on a refund of federal income taxes in 1927 was a part of its "gross income" from sources within the United States as defined by the Revenue Act of 1926.

Section 233 of the Revenue Act of 1926 (26 USCA § 985 (b) provides as follows:

"(b) 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 section 958."

Section 217 (a) of the Revenue Act of 1926 provides, in part, as follows:

"(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. * * *

"(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)." (26 USCA § 958 (a, c).

The Board of Tax Appeals held that the interest paid by the government upon the refund was not "income from sources within the United States" as defined by section 217, inasmuch as it was not interest accrued upon an obligation of a resident of the United States but upon an obligation of the United States government which is not a "resident" within the intent and meaning of the act. The Board accordingly held that the interest received by the taxpayer was not taxable, and entered a decision of "no deficiency" upon the appeal. From that decision the present appeal was taken.

We think the Board's decision is correct. The amount of interest paid upon the refund to the foreign corporation would be taxable under the statute only in case the payment came within the classification of "interest on bonds, notes, or other interest-bearing obligations of residents, corporate or otherwise. * * *" The obligation, however, upon which interest was paid in this case was not that of a resident, corporate or otherwise, inasmuch as the United States is not a "resident," as that term is used in the taxing statute.

In United States v. Temple, 105 U.S. 97, 99, 26 L. Ed. 967, the court said:

"Our duty is to read the statute according to the natural and obvious import of the language, without resorting to subtle and forced construction for the purpose of either limiting or...

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2 cases
  • Montana Bank v. Casey
    • United States
    • Montana Supreme Court
    • 13 d1 Abril d1 1959
    ...293 U.S. 84, 91, 55 S.Ct. 50, 53, 79 L.Ed. 211 (reversing the holding of the District of Columbia Court of Appeals reported in 62 App.D.C. 360, 68 F.2d 407). There the Supreme Court held that the United States is a resident within the meaning of the words 'residents, corporate or otherwise.......
  • Sisson v. Southern Ry. Co.
    • United States
    • U.S. Court of Appeals — District of Columbia Circuit
    • 4 d1 Dezembro d1 1933

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