218 F. 600 | 1st Cir. | 1914
The facts in this case were agreed, and are fully stated in the opinion below (210 Fed. 933).
The Massachusetts statutes provided, in substance, that all shares of stock in banks within the state should be assessed to the owner, whether resident or nonresident, in the municipality wherein the bank was located; that persons appearing from the books at a stated time to be owners should be deemed the owners of the shares; that every bank should pay the tax so assessed, or be liable for it, with 12 per cent, interest; that the shares should be subject to the tax paid by the bank; and that the bank should have a lien for such payment upon the shares and all the shareholders’ rights and property in the corporate property. There were other provisions requiring the taxes thus collected from the bank to be credited by the state tax commissioner to the respective municipalities wherein the shareholders resided, and making any claims to exemption in respect thereof by a shareholder, if valid, recoverable from the municipality to which he belonged.
The Corporation Tax Law permits the deduction from gross income of certain payments of other kinds made within the year by the corporation. All these, however, as they are described in that statute, are payments by the corporation in diminution of its corporate income as such, being payments to discharge liabilities incurred solely on its own account, and not to discharge liabilities for which others would be ultimately responsible. But the payment which the laws of Massachusetts require a bank to make as above is of taxes plainly not assessed upon it or its property; and besides giving it a lien for the amount paid upon the shares in respect of which the taxes are assessed, the
We fully agree with the District Court that the Corporation Tax Daw, in permitting the deduction of “taxes imposed” from the gross income of a corporation, must be understood to mean taxes imposed upon the corporation. We cannot so interpret the language as to make it include taxes imposed upon the shareholders as above, even though the corporation is required to make the payment on their behalf.
There, is no claim that the deductions made by the bank in its returns for 1909, 1910, and 1911 were dishonestly made. That they were honest is undisputed, although, as we hold, they were incorrect. They were not fraudulent, though false in the sense of being incorrect; nor were they false in any other sense. They have not been so treated by the Commissioner, who, in making his additional assessments, did not add the penalties directed by the act in case of returns fraudulently false.
The Commissioner’s discovery of the facts regarding these deductions was made within, three years after March 1, 1910, the year wherein the first of the three returns, afterward found erroneous, namely, that for 1909, was due, and his assessment of the amount of the deductions was made March 1, 1913. In the case of “false or fraudulent” returns, the fifth subdivision of section 38 of the act gives the Commissioner power “upon the discovery thereof, at any time within three years after said return is due,” to make an additional assessment. We agree with the District Court that this language does not prevent the making of the assessment after, if the discovery has been within, the three years, and that in any case March 1, 1913, was within the three years.
_ It is true that “false or fraudulent” is used but four times in all the Corporation Tax Law, and may be taken on each of the other three occasions to mean “false and fraudulent.” The first instance is in the fifth subdivision of section 38, where the language is:
“And in ease of any return made with false or fraudulent intent, he [the Commissioner] shall add one hundred per centum of such tax.”
The next instance is later in the same subdivision, and occurs in the clause with which we are immediately concerned, providing that assessments are to be made and the several corporations notified on or before June 1st in each successive year, and payment made on or before June 30th “except in cases of refusal or neglect to make such return, and in cases of false or fraudulent returns,” in which cases the Commissioner is to make the additional assessment upon discovery within three years.-
The remaining two instances are both in the eighth subdivision, which provides a penalty if any corporation subject to the act shall refuse or neglect to make a timely return, “or shall make a false or fraudulent return,” and also makes guilty of a punishable ipisdemean- or any person authorized to make, render, or sign any return, who makes “any false or fraudulent return, with intent to defeat or evade the assessment required,” etc.
Where, as in the first of the above instances, “false or fraudulent” is used to describe an intent, it is clear that a false intent must necessarily be a fraudulent intent. Where, as in the last two instances, “false or fraudulent” occurs in provisions imposing a penalty or creating an offense, “false” must mean willfully and intentionally false, because of the presumption against a construction which would subject an honest mistake to a penalty, and still more against a construction which would punish such a mistake as a misdemeanor. Rut, within the clause whose meaning is to be determined, there is nothing which necessarily requires “false or fraudulent” to mean exactly what it means as used in the different connections above considered. The purpose of this clause is only to prescribe the Commissioner’s powers and duties when he discovers a return which needs correction. If “false” by itself often means fraudulently false, it is also often used to mean no ,more than “incorrect,” and the cases in which circumstances indicate the former meaning as the proper one cannot be said to have any decisive predominance over those wherein the other is plainly required.
In the fourth subdivision, and in so much of the fifth as precedes the words now in question, the Commissioner’s duties are prescribed in the cases of “incorrect” returns, failure to make any returns, and returns made with “false or fraudulent intent.” The provisions im
The judgment of the District Court is therefore affirmed, and the defendant in error recovers his costs of appeal.