United States Pipe and Foundry Co. v. United States, 510-52.

• Decision Date: 09 October 1957
• Docket Number: No. 510-52.,510-52.
• Citation: 140 Ct. Cl. 132,155 F. Supp. 231
• Parties: UNITED STATES PIPE AND FOUNDRY CO. v. The UNITED STATES.
• Court: U.S. Claims Court

155 F. Supp. 231

140 Ct. Cl. 132

UNITED STATES PIPE AND FOUNDRY CO. v. The UNITED STATES.

No. 510-52.

United States Court of Claims.

October 9, 1957.

H. Cecil Kilpatrick, Washington, D. C., for plaintiff. Kilpatrick, Ballard & Beasley, Washington, D. C., and White, Bradley, Arant, All & Rose, Birmingham, Ala., were on the brief.

Herbert S. Fessenden, Washington, D. C., with whom was Asst. Atty. Gen. Charles K. Rice, for the defendant. James P. Garland, Washington, D. C., was on the brief.

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

LITTLETON, Judge.

The plaintiff sues to recover from the defendant interest alleged to be due it on overpayments of income and excess profits taxes for 1941 and 1942 in the amount of $22,341.01. Defendant in its brief and on oral argument concedes that $10,223.38 of the amount sought is properly payable to plaintiff. We, therefore, will omit any reference to this portion of the claim.

The facts necessary to a determination respecting the validity of the claim for the remaining interest of $12,117.63 which relates only to 1941, are briefly as follows:

On June 7, 1944, the taxpayer filed claims for the refund of the full amount of excess profits taxes paid for 1941 and 1942 on the ground that it had an excess profits credit carryback for the year 1943 in the amount of $709,149.71, which was more than sufficient to result in a refund of the entire 1941 and 1942 excess profits taxes paid. As a result of a subsequent audit by the Internal Revenue Service of these and other years, it was found that the taxpayer had a similar carryback for the year 1942 also, in the amount of $78,833.55. The Commissioner, on the theory that this 1942 carryback should be applied to 1941 before the 1943 carryback could be applied, determined that the 1942 carryback entitled the taxpayer to a refund or credit of $43,412.94 of the 1941 excess profits tax it had paid, and that the 1943 carryback entitled the taxpayer to a refund or credit of the balance of such 1941 excess profits tax paid. The Commissioner allowed no interest whatever on the $43,412.94 refund attributable to the 1942 carryback, on the ground that no claim for refund of that amount as required by section 3771(e) of the 1939 Internal Revenue Code had been filed. The only issue now before the court is whether plaintiff is entitled to interest on this portion of the refund.

Section 3771(e) in pertinent part provides as follows:

"If the Commissioner determines that any part of an overpayment is attributable * * * to the inclusion in computing the unused excess profits credit adjustment for the taxable year of any part of the unused excess profits credit for a succeeding taxable year, no interest shall be allowed or paid with respect to such part of the overpayment for any period before the filing of a claim for credit or refund of such part of the overpayment or the filing of a petition with the Tax Court, whichever is earlier; * * *", 26 U.S.C.A. § 3771(e).

Section 710(c) (1) provides:

"The unused excess profits credit adjustment for any taxable year shall be the aggregate of the unused excess profits credit carry-overs and unused excess profits carry-backs to such taxable year." 26 U.S.C.A. Excess Profits Taxes, § 710(c)(1).

Plaintiff argues that since its claim for refund based on the 1943 carryback alone was sufficient to refund all 1941 excess profits taxes paid notwithstanding the 1942 carryback, later determined and about which plaintiff did not know at the time, a valid claim for refund was made within the scope of section 3771 (e) and it is thus entitled to interest.

We feel the facts and law of the case sustain the plaintiff's position and we so hold.

The defendant, however, argues that before interest can be paid upon a refund or credit of a tax overpayment attributable to the carryback of an unused excess profits credit for a succeeding year it is necessary for the plaintiff to file a claim for refund grounded upon a request for that specific carryback, in this case the 1942 carryback upon which year plaintiff did not specifically ground its claim, notwithstanding that the plaintiff made claim specifically for the identical refund of excess profits tax for 1941 and based its claim on a carryback for another year (1943) which it proved at that time it had and which carryback was legally sufficient to refund all the tax paid for 1941. We do not think that defendant's position is a correct interpretation of the statute as it is written. Nor has defendant pointed to any legislative history which would indicate that Congress intended or desired such a result. See section 710(c) (1) which must be read along with section 3771(e).

While there are apparently no cases which specifically construe section 3771(e) in this respect, the parties have cited several cases which should be considered in reaching a decision. Those cases, however, deal generally with whether a valid claim for refund had been made pursuant to section 322 of the 1939 Internal Revenue Code, 26 U. S.C.A. § 322, or whether certain of the Commissioner's regulations promulgated under section 322 had been waived by him, rather than whether a valid claim for refund had been made pursuant to section 3771(e) which would entitle the claimant to interest on a subsequent refund or credit. Especially noteworthy among these cases are those which deal with waiver by the Commissioner of his regulations. Those regulations relating to specific refunds under section 322 require each ground upon which a refund is claimed to be set forth in detail and, as well, require that the claim contain facts sufficient to apprise the Commissioner of the exact basis thereof, Regs. 111, sec. 29.322-3. The claim here in question specifically stated the ground, i. e., a refund based on a carryback whether aggregate or not. The cases hold that where the Commissioner determines and applies newly discovered or different grounds in computing the actual tax liability for the year put in question by the claimant's claim for refund, or, to state it differently, if the Commissioner considered the claim on its merits notwithstanding its form, he waives his regulations as to specificity, is precluded from thereafter denying the refund because the claim was incompatible with his regulations, and must pay any additional amount reflected by his computations. Wilmington Gasoline Corporation v. Commissioner, 1956, 27 T.C. 500; Martin Weiner Corp. v. Commissioner, 1956, 26 T.C. 128. See also Angelus Milling Co. v. Commissioner, 1945, 325 U.S. 293, 65 S.Ct. 1162, 89 L.Ed. 1619, in which the Court denied, because of lack of proof, petitioner's assertion that the Commissioner waived his regulations, but recognized that consideration of a claim for refund on its merits waives defects in form; United States v. Felt & Tarrant Manufacturing Co., 1931, 283 U.S. 269, 51 S.Ct. 376, 75 L.Ed. 1025, in which the Court held that a defective claim for refund will not supply a basis for a suit against the Government when there has been neither waiver by the Commissioner nor proper amendment by the taxpayer; Tucker v. Alexander, 1927, 275 U.S. 228, 48 S.Ct. 45, 72 L.Ed. 253, involving waiver of Commissioner's regulations by stipulation of the parties.

On the basis of these cases the Commissioner in the case before us must be conclusively deemed to have waived his regulation as to specification of the 1942 carryback as a ground for refund since h...