Inland Products Co. v. Blair
| Decision Date | 09 April 1929 |
| Docket Number | No. 2811.,2811. |
| Citation | 31 F.2d 867 |
| Parties | INLAND PRODUCTS CO. v. BLAIR, Commissioner of Internal Revenue. |
| Court | U.S. Court of Appeals — Fourth Circuit |
John Enrietto, of Washington, D. C. (R. S. Doyle, Charles D. Hamel and Lee I. Park, all of Washington, D. C., on the brief), for petitioner.
Millar E. McGilchrist, Sp. Asst. to Atty. Gen. (Mabel Walker Willebrandt, Asst. Atty. Gen., Sewall Key, Sp. Asst. to Atty. Gen., and C. M. Charest, Gen. Counsel, and Allin H. Pierce, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., on the brief), for respondent.
Before WADDILL and PARKER, Circuit Judges, and McDOWELL, District Judge.
PARKER, Circuit Judge (after stating the facts as above).
There is but one question in the case, and that is whether the government, after returning to a taxpayer money which through mistake he has paid as taxes, may readjust his income tax returns, so as to eliminate the deduction claimed from his gross income on account of such payment. The government contends that it can. The taxpayer controverts this position, and says that the deduction should be allowed to remain as it is, and that the refund should be returned as income for the year in which it is received. Since in this case the tax rate of that year was much lower than the rate of the years for which the deductions are claimed, it is clear that the taxpayer will realize quite a profit from the mistake, if its contention is allowed.
We think, however, that there can be no doubt that the position of the government is correct. The Revenue Acts in force in 1918 and 1919 did not impose the soft drink tax upon sweet cider, and the regulations of the Revenue Department attempting to impose it were void. Monroe Cider, Vinegar & Fruit Co. v. Riordon (C. C. A. 2d) 280 F. 624; Casey v. Sterling Cider Co. (C. C. A. 1st) 294 F. 426. The collector, therefore, had no right to demand, and the taxpayer was not required to pay, any tax upon cider, and the payments in question were not payments of tax, but payments made by mistake to the collector of taxes. It is true that these moneys, having been paid voluntarily by the taxpayer under mistake of law, could not have been recovered back (Fox v. Edwards C. C. A. 2d 287 F. 669); but nevertheless there was a moral obligation upon the government upon discovering the mistake to correct it, and it has made the correction and the taxpayer has accepted the refund. It is elementary that one who seeks to have a mistake corrected must surrender what he has received by reason thereof, and likewise one who accepts the correction of a mistake is estopped to claim a benefit to which he would be entitled if it were not corrected. In this case, the taxpayer, as the result of the payment under mistake, received the deduction from its gross income of the amount so paid. When the mistake was rectified, and it accepted the return of the amount paid, with interest, it ought not to be heard to claim the benefit of the deduction on account of the payment.
The taxpayer insists that we should not consider what happened subsequently to 1918 and 1919 but we think that this is a highly proper subject for consideration. We agree with the contention of the government that the moneys erroneously collected as taxes were not deductible as such from gross income; but, even so, if they had not been returned after having been collected as taxes, the government would...
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