Plaintiffs, copartners doing business as the Century Finance Company, purchased promissory notes from the holders thereof at a discount and for less than the face amounts of the principal or balances due on such notes, and when and if paid, realized a profit over and above the amounts paid for the notes. Notwithstanding their claim that they were not legally liable for an intangible tax of $2,103.21 for such discounts or profits realized from this source over a period .of 3 years, they paid additional assessments for the disputed amounts, and brought suit for the reсovery of the amounts so paid against the State, the department of revenue and its commissioner. All parties moved for a summary judgment, оnly a question of law being involved. The trial judge rendered judgment in favor of defendants and plaintiffs appeal.
The following part of what we shall term the intangibles tax act, PA 1939, No 301, as amended (CL *250 1948, § 205.131 et seq. [Stat Ann 1950 Rev § 7.556(1) et seq.}), provides:
“See. 1. That when used in this act: * * *
“(b) The term ‘intangible personal property’ means: Moneys on hand or on deposit or in transit, shаres of stock, and other units of interest, in corporations, joint stock companies, and other associations conducted for рrofit (not, however, including the interest of a partner under a partnership agreement) ; securities which constitute a part of an issue of similar securities, such as bonds, certificates of indebtedness, debentures, notes, and certificates of deposit therefor; annuities; accounts and notes receivable, land contracts receivable, real estate and chattel mortgages receivable, conditional sale contracts receivable, and other obligations for the payment of money; equitable interest in any of the forеgoing classes of intangible personal property, including interest of beneficiaries under trusts whether created inter vivos or by will; and any and all othеr credits and evidences of indebtedness; whether such intangible personal property is secured or unsecured. * * *
“(d) The term ‘income’ includеs: (1) Interest received upon intangible personal property; (2) dividends and other distributions, whether in the form of cash or property, to the еxtent that they represent the yield of intangible personal property; and (3) all other earnings or yield of intangible personal property regardless of the name by which des-, ignated: Provided, that for the purpose of computing the tax imposed under this act, the gross incomе, including taxes, charges and other deductions which may be made therefrom, shall be the basis upon which the tax shall be measured. # * *
“(j) The term ‘face value’ means the amount appearing on the face of the instrument or other written record evidencing the intangible personаl property, or in case there is no instrument or other written record, then the amount shall be determined by other evidence satisfactory to the commission, re *251 duced by payments, if any, which have been made .thereon. t ‘
• “Sec.- 2:" * * * For the calendar year 1940, and for each year ..thereafter or portion thereof there, is hereby levied upon each resident or nonresident owner of intangible personal property not hereinafter exempted having a situs within this State, and there shall be collected from such owner an annual specific tax on the privilege of ownership of each item of such рroperty owned by him. Except as hereinafter provided the tax on income-producing intangible personal property shall be 3 per cent, of the income but in no event less than 1/10 of 1 per cent, of the face or par value of each item (or in the case of corporate stock or other evidence of corporate ownership having no par or face value, of thе average per share contribution to capital, surplus and other funds in consideration of which all of the then outstanding shares of stock of the same class of such corporation shall have been issued). Except as hereinafter provided the tax on nonincome-producing intangible personal property shall be 1/10 of 1 per cent, of said face, par or contributed value.”
Under the wording of thе law, does it cover these discounts or profits for which plaintiffs have been obliged to pay the intangible tax? Under authority of section 12 оf the act, the department of revenue adopted rules which would include such discounts as earnings or yield. It needs no citation of authority that under the rule-making power an administrative-board may not extend the scope of a tax statute so as to include a tax on discоunts if the statute does not expressly provide for such tax. It is also a principle of law that the scope of tax laws may not be extended by implication or forced construction.
In re Dodge Bros.,
*252 “In the interpretation of statutes levying taxes, it is the es tablished rule not to extend their provisions, by implication, beyond the cl&ar import of the language used, or to enlarge their operations so as to embrace matters'nоt specifically pointed out. In case of doubt they are construed most strongly against the government, and in favor of the citizen.”
So as tо avoid any question, it should be stated that this case does not involve the discounting of interest-bearing notes, where' the interest in the form of a discount is paid in advance, nor does it cover cases where a form of contract is used in the purchase of accounts receivable for the purpose of covering up the exaction of interest in excess of the rate permitted by law.
Abeloff
v.
Ohio Finance Co.,
The trial court in coming to its conclusions held that the department of revenue in setting up its rules and regulations was justified in defining discounts as bearing рart of earned income. To this we cannot subscribe.
The judgment is reversed and the case remanded to the trial court with directions to еnter a judgment *253 for plaintiffs for the undisputed amount claimed by them and interest from time of payment. A public question being involved, no costs are allowed.