United States v. Factors Finance Co

• Citation: 53 S.Ct. 287,288 U.S. 89,77 L.Ed. 633
• Decision Date: 09 January 1933
• Docket Number: No. 141,141
• Parties: UNITED STATES v. FACTORS & FINANCE CO
• Court: U.S. Supreme Court

288 U.S. 89

53 S.Ct. 287

77 L.Ed. 633

UNITED STATES

v FACTORS & FINANCE CO.

No. 141.

Argued Dec. 8, 1932.

Decided Jan. 9, 1933.

Mr. Chas. B.

Rugg, Asst. Atty. Gen for the United states.

Mr. J. Gilmer Korner, Jr., of Washington, D.C., for respondent.

Mr. Justice CARDOZO delivered the opinion of the Court.

The suit is by a taxpayer to recover $19,995.44, with interest, an overpayment of income and profits tax. Here, as in other cases decided at this session, the judgment stands or falls according to our determination of the time within which a notice of a claim for refund is subject to amendment.

On June 15, 1918, respondent, a corporation, filed an income and profits tax return for the calendar year ending December 31, 1917, and made payment of the tax in accordance therewith. The amount of the payment was $177,338.72. In May, 1920, the Commissioner made an assessment of an additional tax for 1917 in the sum of $267.32, which was paid by the respondent on June 29, 1920. In August, 1920, the Commissioner made another assessment of an additional tax for the same year in the sum of $25,327.91. On account of this additional tax, respondent on October 4, 1920, made a payment of $9,388.57, and in the same month filed a claim for the abatement of $15,933.34, the amount of the unpaid balance. In connection with this claim for abatement, the Commissioner made an order on May 6, 1921, for a full examination of the affairs of the taxpayer by an agent of the Bureau of Internal Revenue. Such an examination was made, and a report by the examiner was filed with his superior.

In February, 1923, the audit by the Commissioner was still incomplete, and the amount of the assessment not finally determined. The taxpayer was fearful, so it seems, that the time might go by within which claims for overpayments were due under the law. To forestall any default, it lodged with the Commissioner on February 27, 1923, a claim for $177,606.04 in terms of sweeping generality. It stated in so doing that there had been at that time no final audit of its return or assessment of the tax, and that the purpose of the notice was to save the taxpayer's rights under the applicable statutes 'and to permit the Commissioner to refund to deponent any excess paid over taxes actually found to be due.' There was no statement in this notice as to the grounds of the claim that the payments were excessive. No such statement was made until July 17, 1925, when there was filed with the Commissioner an amended claim for refund, setting forth grounds in detail. In this amended claim the taxpayer explains the reasons why a special assessment should be made in accordance with section 210 of the Revenue Act of 1917 (chapter 63, 40 Stat. 300, 307), permitting that procedure where the amount of the tax cannot otherwise be determined with accuracy or justice. A copy of that section is quoted in the margin.¹

In the interval between February, 1923, and July, 1925, there had been action by the Commissioner upon the claim for abatement which had been filed by the taxpayer in October, 1920. A claim for abatement, unlike a claim for refund, has relation to a tax assessed, but still unpaid. Rock Island A. & L.R.R. Co. v. United States, 254 U.S. 141, 41 S.Ct. 55, 65 L.Ed. 188. The Commissioner declined to abate the whole amount of $15,933.34 withheld by the taxpayer, but did declare an overassessment of $3,293.89, leaving a balance of $12,639.45, with interest, then determined to be due. This balance the taxpayer discharged by payment to the collector in November, 1923.

The claim for abatement had thus been disposed of, but no action had yet been taken upon the claim for refund. The Commissioner permitted this to slumber, without deciding or considering it, till after the filing of the amendment in July, 1925. Upon receipt of that amendment, or soon afterwards, he proceeded to a consideration of the claim upon the merits. There were hearings and rehearings at which the taxpayer gave evidence in support of its claim that its payments had been excessive and that there was need of a special assessment to arrive at a computation consistent with equity and justice. The Commissioner decided the merits of the controversy in favor of the taxpayer. He held that a case had been made out for a special assessment in accordance with section 210 of the Revenue Act of 1917. He held, after computing the tax accordingly, that there had been an overpayment of taxes in the sum of $32,634.89. He held, however, that the notice of claim of February 27, 1923, was defective for failure to state the grounds of the taxpayer's objections; that the notice of July 17, 1925, was without avail as an amendment in respect of overpayments made in 1918 and 1920, since as to these it was too late; that it was good as an original claim for the refund of the overpayment made in November, 1923 and hence that, of the total overpayments of $32,634.89, there should be a refund of $12,639.45, the 1923 installment, with $3,028.24, interest paid thereon, and that, as to the residue of the overpayments, $19,995.44, a refund should be refused. A very different case would be here if the Commissioner had ruled that no adequate reason for a special assessment had been established, and had refused relief upon that ground. We do not say that a justiciable controversy would then have arisen for a court. Williamsport Wire Rope Co. v. United States, 277 U.S. 551, 562, 48 S.Ct. 587, 72 L.Ed. 985; United States v. Henry Prentiss & Co., 288 U.S. 73, 53 S.Ct. 283, 77 L.Ed. 626, decided herewith. What he did was to find that there was need for a special method, that the application of such a method would reduce the tax by a stated sum, but that, because of defects in the form of the claimant's notice, there could be relief only in part. For the amount thus disallowed, the taxpayer brought suit in the Court of Claims, which overruled the action of the Commissioner and gave judgment accordingly. 56 F.(2d) 902, 73 Ct.Cl. 707. A writ of certiorari brings the case here. 287 U.S. 582, 53 S.Ct. 16, 77 L.Ed. —-.

We are holding in United States v. Memphis Oil Co., 288 U.S. 62, 53 S.Ct. 278, 77 L.Ed. 619, that a general claim for refund, not specifying grounds, is subject to amendment until final rejection irrespective of a limitation running in the interval. We are holding in United States v. Henry Prentiss Co., Inc., 288 U.S. 73, 53 S.Ct. 283, 77 L.Ed. 626, that under the Revenue Act of 1918 (40 Stat. 1057) a claim specifying as the sole ground for relief the necessity for a special assessment by reason of anomalous conditions prevailing in the claimant's business may not be turned by amendment into one for the revision of an assessment by increasing the value of real estate included in invested capital. The present case falls midway, or near to that, between the other two. Here the taxpayer did not specify and ground in the claim first presented, but offered an amendment afterwards setting forth the reasons why the assessment should be special.

The case is a close one, giving fair opportunity for argument either way, but we think the better reasons uphold the privilege of amendment.

1. The conclusion favorable to the...