Old Lewis Hunter Distillery Co. v. Ky. Tax Com.

• Citation: 302 Ky. 68
• Parties: Old Lewis Hunter Distillery Co. v. Kentucky Tax Commission et al.
• Decision Date: 09 November 1945
• Court: United States State Supreme Court (Kentucky)

Page 68

302 Ky. 68

Old Lewis Hunter Distillery Co. v. Kentucky Tax Commission et al.

Court of Appeals of Kentucky.

November 9, 1945.

1. Statutes. — Words used in a statute must be given their ordinary meaning unless a different intent is set forth in the statute defining the words used.

2. Taxation. — State income tax reports made by distillery on the accrual basis, with exception of one item designated as "storage income" which was reported on cash basis as the account was carried on the books, thereby reporting less than one-third of actual income from that source, was "incomplete", within meaning of statute permitting deficiency assessment to be made at any time where incomplete report is filed. KRS 131.130, 141.210.

Appeal from Franklin Circuit Court.

Oldham Clarke, Mary G. Schwab, and Allen, McElwain, Dinning, Clarke and Ballantine for appellant.

Roy W. House, Assistant Attorney General, for appellees.

Before Colvin P. Rouse, Special Judge.

OPINION OF THE COURT BY JUDGE DAWSON.

Affirming.

This is an appeal from a judgment dismissing a petition for review of an order of the Kentucky Tax Commission which sustained assessments made by the Department of Revenue against the appellant of deficiencies in income taxes for the years 1936, 1937, and 1938.

The sole question presented by this appeal is whether the assessments in question are invalid because not made within the three year period of limitation prescribed by Section 141.210, KRS. It is conceded that the assessments were not made within that period but contended that since the returns filed by appellant for the years in question were incomplete the limitation does not apply. The taxpayer maintains that its returns for the years involved were complete although they were incorrect.

The statute controlling the decision of this case is 141.210, KRS, which reads as follows: "(1) As soon as practicable after each return is received, the Department of Revenue shall examine and audit it. If the amount of tax computed by the department is greater than the amount returned by the taxpayer, the excess shall be assessed by the department within three years from the date the return was originally due or filed, except that in the case of failure to file a return or of a fraudulent or incomplete return the excess may be assessed at any time. A notice of such assessment shall be mailed to the taxpayer."

The taxpayer, during all the years in question, operated a distillery in Harrison County, maintaining its own bonded warehouses. Some of its whiskey sold to others was stored in the warehouses for the customers at a specified rate per barrel per year. The income derived from these storage charges was carried on the taxpayer's books as "storage income." It regularly used the accrual method of accounting in keeping its books except that the item listed as "storage income" was regularly recorded on its books on a cash basis. This item of income was reported for taxation purposes only in the years in which it was actually received, although accruals on this account greatly exceeded the actual amounts paid during the years in question.

In filing its corporate income tax returns for the years involved, the regular forms for reporting income were used. The form includes the question under title "Basis of tax: (3) Is this return made on the basis of cash receipts and disbursements?" Taxpayer answered this question, "No." The question continues as follows: "If not, describe fully what other basis or method was used in computing net income?" To this the taxpayer...