Midvale Company v. United States, 643-53.

• Decision Date: 31 January 1956
• Docket Number: No. 643-53.,643-53.
• Citation: 138 F. Supp. 269,133 Ct. Cl. 881
• Parties: The MIDVALE COMPANY v. The UNITED STATES.
• Court: U.S. Claims Court

138 F. Supp. 269

133 Ct. Cl. 881

The MIDVALE COMPANY v. The UNITED STATES.

No. 643-53.

United States Court of Claims.

January 31, 1956.

Joseph H. Sheppard, Washington, D. C., for plaintiff. J. Marvin Haynes, N. Barr Miller, F. Eberhart Haynes, Oscar L. Tyree and Haynes & Miller, Washington D. C., were on the briefs.

Gilbert E. Andrews, Arlington, Va., with whom was Asst. Atty. Gen. H. Brian Holland, for defendant. Andrew D. Sharpe, Washington, D. C., was on the brief.

Before JONES, Chief Judge, and LITTLETON, WHITAKER, MADDEN and LARAMORE, Judges.

LITTLETON, Judge.

The plaintiff sued to recover $624,922.52, with interest, representing excess profits tax and deficiency interest for the years 1940-1945, inclusive, Midvale Company v. United States, 124 F. Supp. 678, 129 Ct.Cl. 483. The plaintiff contended that the Commissioner of Internal Revenue erroneously computed its excess profits credit under section 711 (b) (1) of the Excess Profits Tax of 1940, as amended, 26 U.S.C. §§ 710-784, note 1946 ed., repealed November 8, 1945, 59 Stat. 568, 26 U.S.C.A. Excess Profits Taxes, page 106, et seq., because the Commissioner erroneously reduced its base period net income by excluding certain amounts received in those years but subsequently repaid to the Government under the Vinson-Trammell Act, 48 Stat. 503, 505, as amended, 34 U.S. C.A. § 496. The plaintiff contended that the income to be used was that shown on the returns for those years, with certain adjustments which did not include an adjustment excluding Vinson Act excessive profits.

This court, in its opinion on October 5, 1954, held that the Vinson Act excessive profits should be excluded from the base period years because section 711(b) (1) required the use of the correct income for the base period years, regardless of what was shown on the return, in the computation of the excess profits credit. We held that the allowance of the tax credit on the money repaid under the Vinson Act automatically and retroactively reduced the income previously reported. In computing this credit the Commissioner determined the amount of taxes paid on the excessive profits in the base period years on the basis of the completed contract method, whereas the plaintiff had reported the income on the percentage of completion method. This was erroneous. In order to ascertain the correct income for the base period years and therefore the proper excess profits credit, judgment was suspended pending the filing of a stipulation showing the correct computation of the plaintiff's income for the base period years, or upon the failure of such stipulation then the case was to be remanded to a commissioner of this court. The case was subsequently remanded.

The commissioner of this court submitted his report with alternative computations. The alternative computations arise as a result of an error made by a revenue agent in the audit made in 1943, in failing to correctly compute the plaintiff's Declared Value Excess Profits (D. V. E. P.) taxes for the base period years. Two revenue agents made audits and reports on plaintiff's claims for refund. In the first report the revenue agent did not exclude the Vinson Act excessive profits and determined plaintiff's D. V. E. P. taxes for the base period years on that basis. In the second report another revenue agent excluded the excessive profits but used substantially the same D. V. E. P....