246 F. 545 | 9th Cir. | 1917
In accordance with the Income Tax Law of October 3, 1913, 38 St. at Large, 166, c. 16, the receivers of the Western Pacific Railroad Company filed a return of the net income of the
“Every corporation, joint-stock company or association, organized for profit and having a capital stock represented by shares, and every insurance company, now or hereafter organized under the lawsi of the United States * * * shall bo subject to pay annually a special excise tax with respect to the carrying on or doing business.”
The omission in section II of the Act of August 5, 1909, of the word “receivers,” opened the way to litigation as to the intent of Congress. One of the principal cases is Pennsylvania Steel Co. v. New York City Railway Co. (C. C.) 176 Fed. 477, where the receivers of the defendant road asked instructions as to what action they should take in tire matter of paying excise taxes. Judge Racombe, in the Circuit Court at New York, held that, as the act contained no provisions as to receivers, Congress did not intend to include bankrupt corporations with no net income, whose properties were being administered by a court, and that if, at the time fixed for making returns, a statement was filed with the proper officers showing that the roads were in the hands of receivers it was sufficient. Upon careful re-examination of the question, Judge Racombe again held that the statute did not authorize the imposition of a tax upon the income realized from the assets of a bankrupt corporation, where the property had been taken over by a court. Pennsylvania Steel Co. v. New York City Ry. Co. (C. C.) 193 Fed. 286. Rater the Circuit Court of Appeals for the Second Circuit, in Pennsylvania Steel Co. et al. v. New York City Railway Co. et al., 198 Fed. 774, 117 C. C. A. 556, affirmed the decisions of Judge Racombe, and held that omission to impose a tax on business done and in-; come received by receivers was not inadvertence, but intentional, and that it could not he held that an act which nowhere mentioned income received by receivers, and yet which in every paragraph dealt with corporations and joint stock companies, actually engaged in business, could be made toi cover the business temporarily undertaken of conserving the property of a corporation in the custody of the court for the benefit of its creditors and the public. The Supreme Court
That the omission in the act of October 3, 1913, to include property held by receivers was intentional, is to some extent further shown by referring to the Income Tax Law of September 8, 1916. By section 10 of the act (39 St. at Large, 765, ch. 463 [Comp. St. 1916, § 6336j]) provision is made for the levy, assessment, and payment -of a tax on tire total net income received in the preceding calendar year from all sources by every corporation, joint-stock company, or association, or insurance company, in the same manner that, under the act of 1913, a tax was imposed on the net income of such associations, corporations, or companies. But, while the act of 1913 omits reference to receivers of corporations, the act of 1916 expressly provides for the inclusion of property held by such receivers, and how receivers shall make returns. Subdivision (C), section 13, part II, Act of 1916, so far as material, is as follows:
“In cases wherein receivers, trustees' in bankruptcy, or assignees are operating the property or business of corporations, * * * subject to tax imposed by tbis title, sucb receivers, trustees, or assignees shall make returns of net income as and for sucb corporations, * * * in the same manner and form as sucb organizations are hereinbefore required to make returns, a¡nd any income tax due on the basis of sucb returns made by receivers', * * * shall be assessed and collected in the same manner as if assessed directly against the organizations of whose businesses or properties they have custody and control.”
We have not overlooked the fact that there are in the law of 1913 certain provisions relating to the imposition of taxes in certain instances where there are receivers. “D” and “E” headings, section II, are to be noticed. “D" provides that guardians, trustees, agents, receivers, and others specified shall make returns of net income for the person “for whom they act subject to this tax,” and that they shall be subject to all provisions of the section which apply to individuals. It would seem that the tax referred to is the tax imposed upon individuals referred to in the headings, and the person subject to the tax is one required to make return, a person (D) of lawful age, except as specially provided, and having a net income of $3,000 or over for the taxable year. The use of the word “receiver,” in heading “E,” has further to do with fiduciaries who are acting under heading “D” by providing that they shall withhold at the source the normal tax imposed on the individual and make the payments as prescribed of the amounts so held out.
Our conclusion is that there are no clear and express words which provide for the imposition of the tax upon property held by receivers appointed by the court, and that, without certainty as to the meaning and scope of language imposing the tax, doubt must be resolved in favor of the receivers. Treat v. White, 181 U. S. 264, 21 Sup. Ct. 611, 45 L. Ed. 853; Eidman v. Martinez, 184 U. S. 578, 22 Sup. Ct. 515, 46 L. Ed. 697.
The order appealed from is affirmed.