White v. Hood Rubber Co., 2338.

• Decision Date: 25 June 1929
• Docket Number: No. 2338.,2338.
• Citation: 33 F.2d 739
• Parties: WHITE, Collector of Internal Revenue, v. HOOD RUBBER CO.
• Court: U.S. Court of Appeals — First Circuit

33 F.2d 739 (1929)

WHITE, Collector of Internal Revenue, v. HOOD RUBBER CO.

No. 2338.

Circuit Court of Appeals, First Circuit.

June 25, 1929.

Wright Matthews, Sp. Atty., Bureau of Internal Revenue, and C. M. Charest, Gen. Counsel, Bureau of Internal Revenue, both of Washington, D. C. (Frederick H. Tarr, U. S. Atty., and J. Duke Smith, Sp. U. S. Atty., both of Boston, Mass., on the brief), for appellant.

Harold C. Haskell, of Watertown, Mass. (Charles C. Gammons, of Boston, Mass., on the brief), for appellee.

Before BINGHAM, Circuit Judge, and MORRIS and BREWSTER, District Judges.

BINGHAM, Circuit Judge.

This is a suit brought by the Hood Rubber Company, appellee, in the federal District Court for Massachusetts, to recover $39,043.99, the amount of an additional income and excess profits tax for the year 1918, which was collected by distraint on December 15, 1926. By stipulation in writing the case was tried before the court without a jury.

The plaintiff, appellee, on March 14, 1919, filed its income and excess profits tax return for the calendar year 1918, in which it estimated its tax at $300,000. This return was made on a form prescribed and furnished by the Treasury Department, known as "Form 1031-T" and designated as a "tentative return." At the time of filing this return the plaintiff paid one-quarter ($75,000) of the tax as shown by its return. And June 16, 1919, upon the demand of the collector, it paid as a second installment of the tax the further sum of $75,000. July 14, 1919, the plaintiff filed a completed, revised, or amended return, showing its total tax for the calendar year 1918 to be $169,772.65, and on December 12, 1919, paid the balance of the tax, $19,772.65, as shown by this completed or amended return. January 26, 1924, while the Revenue Act of 1921 was in force, the plaintiff and the Commissioner of Internal Revenue entered into a written agreement, authorized by section 250(d) of the Revenue Act of 1921 (42 Stat. 264), extending the statutory period of limitation (five years) an additional period of one year, in which to determine, assess, and collect the amount of income and excess profits taxes due under any return made by the plaintiff for the year 1918 under the Revenue Act of 1921, or under prior income and excess profits acts.

Thereafter the Commissioner determined that an additional tax for the year 1918 was due, and on March 18, 1925, after the Revenue Act of 1924 was enacted (43 Stat. 253), assessed an additional tax against the plaintiff, which amounted to $39,043.99, after making certain deductions and allowance of credits. On December 15, 1926, a collection of this tax was had by distraint. A claim for refund was duly filed and rejected, and on January 12, 1928, this suit was brought.

In the District Court it was held that, if the word "return," as used in section 250(d) of the act of 1921, meant the tentative return, the government did not assess the tax in time; but, if it meant the return of July 14, 1919, the assessment was made within the required five years plus the additional year provided for in the waiver agreement. It said, however, that the question need not be decided, for if it be granted that the completed or amended return fixed the time from which to reckon, and the assessment was seasonably made, the tax was not collected either within five or within six years from the filing of the completed return; that the government, having taken advantage of the sixyear period for assessment, could not say that the six-year period for collection was changed by the subsequent act of 1924, which allowed six years after the assessment for collection; that either the agreement of waiver conferred no power on the government to make the assessment later than the statutory period allowed (five years), or the agreement applied to the time fixed for the collection as well as the assessment; that it was to the advantage of both parties that the period of limitation should be extended — of advantage to the government for the reason that, at the time the agreement of waiver was made, the statutory limitation of five years had nearly expired, and of advantage to the plaintiff to know when the tax would become unenforceable, so that it might properly arrange its financial affairs. And, such being the case, the agreement of waiver constituted a binding contract, which Congress did not intend to have affected by the provisions of the act of 1924. Chicago & N. W. R. Co. v. United States, 104 U. S. 680, 26 L. Ed. 891. Having reached this conclusion, the court entered judgment for the plaintiff in the sum of $39,043.99, with interest amounting to $4,568.15, and cost of suit. It is from this judgment that this appeal is taken.

For reasons that will later appear, we do not find it necessary to consider whether the ground upon which the court below reached its conclusion was right or not.

The first question presented is whether the return filed March 14, 1919 is the one from which the five-year period of limitation (fixed by the Revenue Acts of 1918 and 1921 40 Stat. 1057; 42 Stat. 227), as extended by the waiver agreement of January 26, 1924, for one year, under the authority of the act of 1921, or whether the revised or amended return is the one from which the period of limitation is to be reckoned; for, if the former is the one, the additional tax of March 18, 1925, was not seasonably assessed.

There are apparently three cases in which this question has been under consideration in the federal courts. Florsheim Bros. Dry Goods Co., Limited, v. United States, 29 F. (2d) 895, 896 (5th Cir. Ct. of App.), decided December 19, 1928; Rasmussen v. Brownfield-Canty Carpet Co., 31 F.(2d) 89, 91 (9th Cir. Ct. of App.), decided February 11, 1929; and Brandon Corp. v. Jones, Collector, 33 F.(2d) 969, decided March 30, 1929 (Eastern Dist. of So. Car.).

In the first case no discussion of the question was had. All that was said concerning the matter was: "It is suggested in argument that the statutory period of limitations began to run from the date of the tentative return in March of 1919; but we are of opinion that the return meant by the statute was the final or completed return."

In the second case Judge Gilbert pointed out that the Board of Tax Appeals had entertained contrary views, and he took the position that the original or tentative return, and not the completed or amended one, fixed the date for the beginning of the running of the statutes of limitation as outlined in section 250(d) of the act of 1921; but his associates refrained from expressing an opinion upon the question, as the distraint proceedings there in question were barred, whether the period of limitation began to run from the filing of the tentative return or of the completed or amended one.

In the third case the facts and circumstances attending the filing of the so-called tentative return (Form 1031-T, prescribed by the Commissioner of Internal Revenue) were presented and considered, and it was held that the period of limitation began to run from the filing of the original or tentative return, and not from the filing of the completed or amended return. It was there said:

"The Revenue Act for 1918 was enacted on February 24, 1919. Under the act, returns were to be filed by March 15, 1919, and the tax paid in quarterly installments on March 15, June 15, September 15, and December 15, 1919. The law also provided that in case an extension of time for filing the return was granted, the date for payment of the first installment should be correspondingly extended section 250(a). It was evident that many taxpayers would be unable to prepare their returns by March 15. The requirements of the government, however, were such that it was advisable that the first installment should be paid by him by that time. In order to meet this situation, the Commissioner of Internal Revenue issued two rulings, one on February 13, 1919, and the other on February 27, 1919. In the first ruling, it was stated that no general extension of time would be authorized, but that the Commissioner had approved a novel feature of tax collection which would serve for all practical purposes as a possible extension of 45 days for the filing of the return, where the parties were unable to complete and file their returns by March 15. * * * He also announced in that ruling that if a...