30 F. Supp. 676 | Ct. Cl. | 1940
on January 8, 1940, delivered the opinion of the court:
The suit arises as the result of the determination by the Commissioner of an overpayment of income and profits tax in favor of plaintiff for 1917 in the amount of $1,285,715.88 and the failure on the part of the Commissioner to make refund or credit of such amount and the interest thereon in a manner satisfactory to plaintiff. More specifically, what is asked is (1) judgment for $314,458.93 of that amount which was withheld by the Comptroller General and applied against an alleged indebtedness to the United States on account of certain transactions not connected with internal revenue taxes, and (2) a greater allowance of interest on the overpayment than that determined and allowed by the Commissioner.
The principal controversy in regard to the computation of interest on the entire overpayment of $1,285,715.88 arises by reason of circumstances connected with the scheduling of that overpayment on July 10, 1928. At and prior to that
Later final determinations were had with respect to 1918, 1919, and 1920, which showed an overpayment for 1918 of $246,917.85, a deficiency for 1919 of $300,515.26, and a deficiency for 1920 of $761,332.49. The correctness of these amounts, as well as plaintiff’s tax liability for 1923, was in controversy at the time the agreement was entered into with
After all of these acts had occurred which are set out in detail in our findings, the Commissioner proceeded with a determination of an interest computation as shown on a schedule dated September 9, 1931, on account of his adjustments of plaintiff’s tax liability for the years 1917, 1918, 1919, 1920, and 1923. As we understand the situation, what the Commissioner did for the purpose of his interest computation was to proceed in the manner in which he would have proceeded if the scheduling of the overpayment for 1917 had awaited final adjustment of the other years then in controversy. In scheduling the overpayment for 1917, as heretofore shown, since the deficiencies for 1919 and 1920 had not been assessed at the time the overpayment for 1917 was scheduled but there was an outstanding original assessment for 1923 against which claims for credit had been filed, the Commissioner applied part of that overpayment in satisfaction of the outstanding original tax for 1923 and re
In view of the circumstances connected with the scheduling of the overpayments for 1917, we find no error in principle in the computation of interest made in that manner. In view of the provisions of the statute requiring the crediting of the overpayments against deficiencies, the only reasonable conclusion from the facts in this case is that but for the agreement which brought about the scheduling of the over-payments, the adjustments for all years would have been made substantially in the manner in which they are now shown as made theoretically for the purpose of interest computation. The agreement serves to explain why the overpayment was scheduled and the refund made when deficiencies were then due from the plaintiff, since express provision is made in the agreement which could protect the Commissioner against an improper interest adjustment. In. other words, the refund was only being made with respect, to the principal of the overpayment, with the interest adjustment for the years 1917, 1918, 1919, and 1920 held in
That when the Commissioner purported to carry out the agreement he credited a part of the 1917 overpayment against an outstanding original assessment for 1923 (a year not mentioned in the agreement) does not alter the situation. That assessment was outstanding and unpaid and there was no alternative for the Commissioner but to satisfy this assessment before he could make a refund sought by plaintiff — the motivating cause of its execution of the agreement. Nor do we think the plaintiff has reason to complain because a portion of the overpayment was withheld by the -Comptroller General, pending the determination of an alleged indebtedness due from plaintiff, since plaintiff was well aware that the indebtedness had been asserted and that amounts otherwise due plaintiff, including a part of an overpayment for 1918 (involved in case No. L-125), had been withheld for the same purpose to the extent of $1,226,014.64. The amount withheld out of the 1917 overpayment, $314,458.93, was the balance of the alleged indebtedness.
As a result of the credit made against the 1923 assessment and the withholding on account of the alleged indebtedness, there remained a balance of only $306,079.77 from the determined overpayment for 1917 to be refunded to plaintiff. It should be noted, however, that when refund was made it was of that principal amount without interest, which showed clearly that, insofar as interest was concerned, the action was tentative or preliminary in character pending a final determination of tax liability for the other years in controversy.
When, however, the Commissioner came to make his final interest computation, many of the things done in making
Much is said in the argument by plaintiff about the failure of the Commissioner to carry out the agreement and by defendant about an attempted repudiation of the agreement through the contentions advanced in this suit. Both arguments are beside the point. The agreement was merely an arrangement through which the Commissioner was enabled to schedule an overpayment in advance of the time it should have been scheduled under the statute, but in which provision was made to protect against an excessive allowance of interest. It was performed by the Commissioner to the extent permitted under the statute. Nor is repudiation an issue in arriving at the correct interest computation, for neither party could change the statutory provisions with reference to credits and interest thereon. The agreement served its purpose when the overpayment was scheduled and refund made to the extent permitted under the statutes, except that, as contemplated by the agreement, an interest computation was later required after the tax liabilities for several years were finally determined.
A detailed discussion of the many items entering into the interest computation would serve no useful purpose and would unduly extend this opinion. Suffice it to say that in general we approve the principles followed by the Commissioner in making the interest computation as set out in our findings of fact. The contention by plaintiff that the Commissioner erred in this computation in that he computed
Adjustment of the computation will, of course, be necessary by reason of our holding that the plaintiff is entitled to judgment for the amount of $314,458.93 withheld by the Comptroller General on August 21, 1928. In his computation, the Commissioner treated that amount and the amount refunded at or about the same time ($306,079.17) as erroneously refunded and charged plaintiff with interest thereon from August 21,1928, until the dates in April and May 1931 when the amount was deemed repaid through credit and cash payment upon a settlement of the accounts for the several years. Such computation was proper insofar as it related to the cash refund, but, since the amount withheld has now been found erroneously withheld, it cannot be said that such withholding constituted payment and that interest should be charged thereon. On the contrary, such amount represents a part of an overpayment for 1917 which has not been refunded to plaintiff and upon which, but for
With respect to other features of the Commissioner’s computation, the parties now appear to be in agreement that, under the method followed by the Commissioner of applying the earliest overpayments against the earliest deficiencies,, the periods for which interest was computed are correct except as to a part of the overpayment for 1919, $245,751.37, which arose by reason of an amortization claim. On this item defendant properly concedes plaintiff’s contention that an informal claim filed November 10, 1921, requires the computation of interest thereon from six months thereafter,, namely, May 10, 1922, as provided by section 1324 (a) of the Revenue Act of 1921 (42 Stat. 227, 316).
Plaintiff is entitled to recover and will be awarded judgment in the sum of $314,458.93, with interest thereon, computed in accordance with section 177 (b) of the Judicial Code, as amended, with the readjustment of the interest heretofore paid or credited, as indicated in this opinion. It is so ordered.