88 F.2d 574 | 5th Cir. | 1937
The plaintiff-appellant is a Texas corporation engaged during 1920 and 1921 in the handling of cotton on commission at Houston, Tex. It filed its income tax returns for fiscal year periods January 1 through June 30, 1920, and July 1, 1920, through June 30, 1921, claiming status as a personal service corporation. This claim was disallowed by the Commissioner, who assessed ordinary corporation taxes. The taxpayer asked abatement, reasserting that it was a personal service corporation, but, in the alternative, asked special relief as to the amount of the tax under section 327 of the Revenue Act of 1918 (40 Stat. 1093). The first contention was denied, but the special relief was granted and a partial abatement made of the taxes assessed on each return. The taxes so fixed were paid January 22, 1929, under protest, and a refund being denied, suit for their recovery was brought in the District Court against the collector. His answer set up a want of jurisdiction in the court because of the partial abatement of the taxes under section 327, and a general denial. The case was by stipulation tried by the court without a .jury, and special findings of fact were made. The court held it had jurisdiction, and gave judgment for the collector.
The bill of exceptions flagrantly disregards our rule X, par. 2. The first 16 printed pages, beginning with the morning salutations of court and counsel, consist of colloquy, explanations, and argument which have no place in a bill of exceptions. The next 39 pages present a properly condensed narrative of the testimony. There follow
The District Court has general jurisdiction to entertain and try the complaint of a taxpayer that the collector has compelled him to pay taxes illegally assessed or collected. That the taxpayer by asking special treatment under section 327 of the Revenue Act of 1918 may have waived further contest of the amount assessed is a plea in bar rather than to the jurisdiction. It does not mean that the court cannot inquire, blit that in its inquiry it should find that the plaintiff has no available ground of complaint. An appellate court may disregard error thereabout unless properly brought before it. We are therefore asked to hold that since there is no cross-appeal,the collector cannot attack the ruling on it. What may be done without a cross-appeal was very recently considered in Morley Construction Co. v. Maryland Casualty Co., 57 S.Ct. 325, 81 L.Ed. -, but with special reference to equity decrees. What happened in the present case is that a separate plea was ignored by the court and only the answer considered, as above stated. The court found the facts to be as contended by the answer, but ruled in point of law that the court had jurisdiction. With that ruling we agree. That the special treatment accorded the taxpayer at its request involves a waiver of or estoppel against any further contest was not asserted in the answer nor was that question decided by the court; but if such were the necessary legal consequence, we see no reason why we should not so declare as a good ground for the general judgment rendered for the collector.
We are of opinion that when such special treatment is asked and accorded, the tax thus fixed is as to amount unassailable. The court cannot substitute its judgment for the Commissioner’s in the selection for comparison of other taxpayers similarly circumstanced, nor in determining what would be fair as a result of the comparison. If the Commissioner proceeds according to law, his judgment on these matters is intended to be final. Williamsport Wire Rope Co. v. United States, 277 U.S. 551, 561, 48 S.Ct. 587, 72 L.Ed. 985; Heiner v. Diamond Alkali Co., 288 U.S. 502, 53 S.Ct. 413, 77 L.Ed. 921. He has sometimes exacted agreements which limit further contention. Michigan Iron & Land Co. v. United States (Ct.Cl.) 10 F.Supp. 563, 569. There was no agreement here, but the taxpayer stood stoutly to its contention that it was to be classed under section 200, (40 Stat. 1058) and was not liable at all for the taxes imposed on corporations. It asked that the amount of its tax be specially fixed only if it should be held taxable as a common corporation. It had to go through with assessment, payment, and request for refund in order to get into court on the main question of its liability for corporation taxes, and it was entitled to reserve this question unprejudiced. If it is liable to be taxed as a corporation, the amount of that tax has been finally fixed and is in fact not now questioned. But if it is not thus liable, it may have the court so to adjudge.
The statute defining personal service corporations is quoted in the margin.
Judgment affirmed.
“Sec. 200. That when used in this title — * * *
“The term ‘personal service corporation’ means a corporation whose income is to be ascribed primarily to the activities of the principal owners or stockholders who are themselves regularly engaged in the active conduct of the affairs of the corporation and in which capital (whether invested or borrowed) is not a material income-producing factor; but does not in-dude any foreign corporation, nor any corporation 50 per centum or more of whose gross income consists either (1) of gains, profits or income derived from trading as a principal, or (2) of gains, profits, commissions, or other income, derived from a Government contract or contracts made between April 6, 1917, and November 11, 1918, both dates inclusive.” 40 Stat. 1058,1059.