Railroad Stevedoring Corporation v. Bowers

• Court: U.S. District Court — Southern District of New York
• Writing for the Court: Hon. JACOB TRIEBER, U. S. Dist. , Eastern of Arkansas, sitting by assignment
• Citation: Railroad Stevedoring Corporation v. Bowers, 7 F.2d 781 (S.D. N.Y. 1925)
• Decision Date: 12 October 1925
• Parties: RAILROAD STEVEDORING CORPORATION v. BOWERS, Collector.

7 F.2d 781 (1925)

RAILROAD STEVEDORING CORPORATION v. BOWERS, Collector.

District Court, S. D. New York.

October 12, 1925.

Gilbert & Gilbert, of New York City, for plaintiff.

Emory R. Buckner, U. S. Atty., and S. E. Hall, Asst. U. S. Atty., both of New York City, for defendant.

Before Hon. JACOB TRIEBER, U. S. Dist. Judge, Eastern District of Arkansas, sitting by assignment.

TRIEBER, District Judge (sitting by assignment).

The action is to recover the sum of $9,359.42, paid on an additional excess profits tax assessment made by the Commissioner of Internal Revenue for the year 1917, which was paid under protest by the plaintiff, and $1 interest on the aforesaid additional tax. In the original return, the plaintiff claimed to be subject only to the tax at the rate of 8 per cent. of its net income, pursuant to section 209 of the Revenue Act of October 3, 1917, 40 Stat. 306 (Comp. St. 1918, § 6336 3/8j). This section reads as follows:

"That in the case of a trade or business having no invested capital or not more than a nominal capital there shall be levied, assessed, collected and paid, in addition to the taxes under existing law and under this act, in lieu of the tax imposed by section two hundred and one, a tax equivalent to eight per centum of the net income of such trade or business in excess of the following deductions: In the case of a domestic corporation $3,000, and in the case of a domestic partnership or a citizen or resident of the United States $6,000; in the case of all other trades or business, no deduction."

The Commissioner of Internal Revenue imposed the additional tax in controversy in this action, under section 210 of the Revenue Act (Comp. St. 1918, § 6336 3/8k), on the theory that the invested capital of this company could not be ascertained, and it ought to pay the same percentage of its net income as other corporations were paying on similar income. Section 210 of the Act of 1917 reads as follows:

"Sec. 210. That if the Secretary of the Treasury is unable in any case satisfactorily to determine the invested capital, the amount of the deduction shall be the sum of (1) an amount equal to the same proportion of the net income of the trade or business received during the taxable year as the proportion which the average deduction (determined in the same manner as provided in section two hundred and three, without including the $3,000 or $6,000 therein referred to) for the same calendar year of representative corporations, partnerships, and individuals, engaged in a like or similar trade or business, bears to the total net income of the trade or business received by such corporations, partnerships, and individuals, plus (2) in the case of a domestic corporation $3,000, and in the case of a domestic partnership or a citizen or resident of the United States $6,000.

"For the purpose of this section the proportion between the deduction and the net income in each trade or business shall be determined by the Commissioner of Internal Revenue in accordance with regulations prescribed by him, with the approval of the Secretary of the Treasury. In the case of a corporation or partnership which has fixed its own fiscal year, the proportion to be determined for the calendar year ending during such fiscal year shall be used."

It is unnecessary to set out the regulations made by the Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, as Congress, in section 207 of the Act (Comp. St. 1918, § 6336 3/8h), has defined "invested capital" when employed in the act:

"(a) In the case of a corporation or partnership: (1) Actual cash paid in, (2) the actual cash value of tangible property paid in other than cash, for stock or shares in such corporation or partnership, at the time of such payment (but in case such tangible property was paid in prior to January first, nineteen hundred and fourteen, the actual cash value of such property as of January first, nineteen hundred and fourteen, but in no case to exceed the par value of the original stock or...