63 Ct. Cl. 475 | Ct. Cl. | 1927
delivered the opinion of the court:
This is a tax case and involves a claim for two alleged overassessments upon plaintiff’s income and excess-profits return for the year 1919. The additional tax exacted was paid under protest, a refund asked and refused, hence no jurisdictional question appears.
The plaintiff is a Pennsylvania corporation, engaged in the hotel business, this suit concerning alone its ownership and operation of the William Penn Hotel in Pittsburgh, Pa. The first item of the suit seeks a judgment for $10,262.25, with interest, and right of recovery is rested upon section 214 (a) (1) of the revenue act of 1918, 40 Stat. 1066, which provides in terms as follows:
“* * * That in computing net income there shall be allowed as deductions:
“(1) All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, * * * ”
“SectioN 214 (a). That in computing net income there shall be allowed as deductions:
*
“(8) A reasonable allowance for the exhaustion, wear and tear of property used in the trade or business, including a reasonable allowance for obsolescence.”
The first item is the result of a situation growing out of a difference between contract rates to supply the plaintiff with heat and light and an increase over and above the contract rates subsequently allowed the corporations furnishing plaintiff with heat and light by the Public Service Commission of Pennsylvania. Plaintiff company in 1914, by express contracts with the Allegheny County Steam Heating Company and the Duquesne Light- Company, obtained from said companies a fixed price for supplying heat and light to it for a period of years. On September 8, 1917, the heating company filed with the public service commission of the State a new tariff, effective October 8, 1917. On May 1, 1918, the light company pursued the same course, its new tariff to become effective May 81, 1918. The new tariffs of both companies increased the rates to be charged the plaintiff over the contract rates stipulated in the contracts of 1914. The heating and light companies billed the plaintiff at the new rates, approved by the commission, and the plaintiff paid the contract rates, the difference amounting for the period involved to $36,650.92. The reason for plaintiff’s withholding payment of the difference between the public-service rate and the contract rate is found in the fact that one H. C. Frick, during the year 1919, had with the same heating and light companies a contract for service similar in terms to plaintiff’s contract with the same companies, and Frick, in August, 1919, lodged a complaint with the public service commission to test the right of the companies to charge and collect a rate in excess of the rates
Article 111 of Regulation 45, among other things, provides :
_ “A person making returns on an accrual basis has the right to deduct all authorized allowances, whether paid in cash or set up as a liability, and it follows that if he does not within any year pay or accrue certain of his expenses, interest, taxes, or other charges, and makes no deduction therefor, he can not deduct from the income of the next or any subsequent year any amounts then paid in liquidation of the previous year’s liabilities.”
The second item is one of fact. The statute allows the deduction and the computation only is involved. In ascertaining a reasonable allowance for exhaustion, wear and tear of property, including obsolescence, the commissioner has promulgated a regulation to which the plaintiff takes no exception. Plaintiff insists that under the regulation it is entitled to 3y2 per cent of the building’s cost, and the commissioner allowed but 2 per cent. We will not discuss the facts. The plaintiff presents witnesses to establish its contention and the defendant offers contradictory testimony. Under the revenue law the commissioner’s duty to first compute the allowance is manifest. Nothing in the testimony of the plaintiff, expert in character, is of such certainty as to warrant us in concluding that an injustice has been done in this particular instance. The defendant meets the issue squarely, and we are not convinced from the record that the commissioner should have allowed more than was allowed. In addition to this, the plaintiff in previous years was content with the 2 per cent deduction allowed by the commissioner, and made no protest. The same objections now interposed were available then. This item of the petition will be dismissed.
Judgment for plaintiff. And it is so ordered.