Mississippi Cottonseed Products Co. v. Stone

CourtUnited States State Supreme Court of Mississippi
Citation184 So. 428,184 Miss. 409
Decision Date21 November 1938
Docket Number33401

Suggestion Of Error Overruled January 2, 1939.

(Division B.)


The purpose of income tax law was to tax income earned within state by both domestic and foreign corporations, and to exempt income earned without state where a plant or place of business is maintained in foreign state and the income derived therefrom would not be subject to taxation or was exempt therefrom (Laws 1934, chapter 120, as amended by Laws 1936, chapter 151).


The income of foreign corporation earned outside Mississippi cannot be taxed, but income of domestic corporation wheresoever received, can be taxed by the Legislature (Laws 1934, chapter 120, as amended by Laws 1936, chapter 151).


The income tax law was intended to place domestic and foreign corporations upon a basis of equality (Laws 1934, chapter 120, as amended by Laws 1936, chapter 151).


In construing a statute, a court can ascertain its true meaning by studying it as a whole and, when ascertained, can enforce it, even to the extent of correcting errors in the language used.


In construing statutes, the court must seek to ascertain the legislative intent from the statute as a whole and not from a segregated portion considered apart from the rest of the statute.


A construction placed on statute by administrative department of government will not be adhered to by court, where such construction is clearly erroneous and has not been followed by administrative department for a long time or the administrative department at various times has placed different construction on the statute.


A court can follow a reasonable construction, long used or practiced by administrative officers, in construing tax statute in order to avoid unnecessary hardship upon the taxpayers, but court must reach its own conclusion where it is of the opinion that such construction is not proper.


Under provision of income tax law that income from any loan "by" nonresidents or foreign corporations or citizens of a foreign country should not be included as taxable income, income received by foreign corporation doing business in Mississippi from loans made by corporation principally in the state of Mississippi was taxable; the word "to" being substituted for the word "by" (Laws 1934, chapter 120, section 11, subd. 1(a), amended by Laws 1936, chapter 151).

HON. V. J. STRICKEE, Chancellor.

APPEAL from the chancery court of Hinds county, HON. V. J. STRICKER, Chancellor.

Suit by the Mississippi Cottonseed Products Company against A. H. Stone, chairman, John F. Frierson and another, commissioners, and A. S. Coody, secretary, composing the State Tax Commission, questioning validity of an income tax assessment. From the judgment, the petitioner appeals. Affirmed.


Green, Green & Jackson, of Jackson, for appellant.

Mississippi Cottonseed Products Company, appellant herein, is a foreign corporation, organized under the laws of the state of Delaware, with its principal office in Jackson, from which it conducts its business of operating cottonseed oil mills. The company acquires the requisite cotton seed for its operation in the open markets in the states of Louisiana, Arkansas, Mississippi, Tennessee, Illinois and Missouri (through subsidiaries in the last two states) and converts the cotton seed at its several mills into oil, meal and other products.

In order to successfully carry on its large business the company makes loans to persons who furnish it with cotton seed, such loans being made directly and indirectly in the several states above mentioned, but being principally confined to Mississippi. The company has not adequate capital of its own to purchase at all times sufficient seed to carry on its large business, and is, therefore, compelled to borrow from various creditors in the above-mentioned states and in New York, and sometimes elsewhere (said creditors usually being banks).

The company has always been classified, and filed its income tax return as a foreign corporation. Such tax impositions as have been paid by the company in the past have always been determined by provisions applicable to foreign corporations.

This controversy arose from the attempt of the State Tax Commission to impose on this company a tax on the interest accruing to the company from the various loans above mentioned. Until the present time the company was not required by the regulations of the Tax Commission to file such items as part of its net income, and has never done so, nor has it ever paid a tax on the interest accruing from such notes and indebtedness.

The Tax Commission after protest and a hearing on February 11. 1938, issued an order attempting to back-assess the company with additional taxes for the fiscal year ending June 30, 1937, on these items with interest thereon, under the provisions of Chapter 120, Laws of 1934, Section 11, Paragraph l-a, re-enacted as Chapter 151, Section 11, Laws of 1936.

The State Tax Commission having continuously since the original enactment of this ambiguous act with its contradictory and irreconcilable provisions, placed a departmental construction (as evidenced by its printed regulations) upon it to the effect that such items were not taxable income of foreign corporations, and the act having been several times re-enacted by the Legislature, such construction will prevail as this court will not disturb it except for cogent reasons, there being no showing that such construction is incorrect.

The first appearance of an act containing provisions similar to those under which the Tax Commission now seeks to hold the company liable for the interest on such loans is Section 15) subdivision l-a, Chapter 132, Laws of Mississippi, 1924, which is substantially the present act.

This same act has been re-enacted by the Legislature of the State of Mississippi as Section 5037, Mississippi Code of 1930, and as Chapter 120, Laws of 1934, Section 11, Paragraph l-a, and finally as Chapter 151, Section 11, Laws of 1936.

The Tax Commission which has been entrusted with the enforcement of this act by the Legislature since it first became effective has uniformly, since 1924, construed this ambiguous act with its contradictory terms as excluding such items from the taxable income payable by foreign corporations. Since that time this corporation has paid no tax on such items pursuant to the instructions in the printed regulations of the commission.

We maintain that since the State Tax Commission has continuously and consistently, through its printed regulations, declared such items non-taxable since 1924, that this departmental construction should prevail, and that the court will not disturb it except for unusual reasons) none of which appear in the present case.

Sutherland on Statutory Construction (2. Ed.), sec. 474; 59 C. J., page 1064; 25 R. C. L. 1043; R. C. L. Perm. Sup., page 5644; Gully v. Jackson International Co., 165 Miss. 103, 145 So. 905; White v. Miller; 160 Miss. 734, 133 So. 146; Robinson v. Texas Oil Co., 163 Miss. 574, 106 So. 451; Briscoe v. Buzbee, 163 Miss. 574, 143 So. 407; State v. Morris, 164 Miss. 158, 144 So. 374; Masonite v. Lochridge, 163 Miss. 797, 141 So. 760; Miller v. Y. & M. V. R. Co., 132 So. 597, 160 Miss. 603; Miss. Cottonseed Products Co. v. Shelton, 81 F.2d169; L. H. Conrad Furniture Co. v. Miss. State Tax Commission, 133 So. 652, 160 Miss. 186; Mississippi Digest, Key No. 219, Statutes.

The re-enactment of a statute, after it has been construed by officers charged with its enforcement, without materially altering the part construed, impliedly adopts the construction, unless plainly erroneous, and such construction is, therefore, binding on the courts.

73 L.Ed. 322.

With due deference to the State Tax Commission and to opposing counsel the instant case is a clear-cut example of a familiar principle of statutory construction that the re-enactment of a statute after it has been uniformly construed by officers charged with its enforcement without material alteration of the part construed, is an implied adoption by the Legislature, and such construction is, therefore, binding on the courts.

73 L.Ed. 322, Annotation.

The second provision of the statute holding such items not taxable, being inconsistent with, and flatly contradictory of the first provision, will prevail since it is the latest expression of the Legislature's will, and will not be disturbed by the courts.

Gibbon v. Brittenum, 56 Miss. 232; Sutherland on Statutory Construction (2 Ed.), sec. 349; Swift & Co. v. Sones, 107 So. 881, 142 Miss. 660.

The second provision of the act which holds these interest-bearing items (loans, notes, etc.) not within the taxable income of a foreign corporation Should prevail, being the latest and best expression of the Legislature's will.

J. A. Lauderdale, Assistant Attorney-General, for appellee.

The question for determination is: Does Section 11 of Chapter 120, Laws of 1934, as amended by Section 3 of Chapter 151, Laws of 1936, require a foreign corporation doing business in this state to include as taxable income derived from sources within this State interest received by it from money loaned in this State.

Section 11 (1) (a) requires a foreign corporation to include income derived from interest "on bonds, notes, or other interest bearing obligations of residents, corporate or otherwise." The second provision in paragraph (a) does not exempt a foreign corporation from the payment of income tax on income derived from interest on bonds, notes, or other interest bearing...

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