Wickes Corp. v. United States

108 F. Supp. 616 | Ct. Cl. | 1952

Lead Opinion

Madden, Judge,

delivered the opinion of the court:

The plaintiff seeks to recover from the Government excess profits taxes in the amount of $43,610.29 for the year 1944 and of $93,146.01 for the year 1945. The taxes were paid by The United States Graphite Company. That company was later merged into the plaintiff company, which succeeded to its rights to the claims herein asserted. The instant dispute depends upon the proper interpretation and application of the statutes permitting a corporation which built or- expanded its plant or equipment in order to increase wartime production to amortize the cost of such plant or equipment over a short period of years, by deductions from its income for tax purposes. .

Section 23 (t) of the Internal Revenue Code provided, during the years here in question, for the deduction from gross income of “the deduction for amortization' provided in Section 124.” Section 124 is, therefore, the key section in this case. That section, in subsection (a), said that a taxpayer at his election was entitled to a deduction on the basis of the amortization of any emergency facility during a period of sixty months. It referred to paragraph (e) for the definition of an emergency facility. The first sentence of subsection (e) says:

As used in this section, the term “Emergency facility” means any facility, land, building, machinery or equipment, or part thereof, the construction, reconstruction, erection, installation or acquisition of which was completed after December 31, 1939, and with respect to which a certificate under subsection (f) has been made.

Subsection (f) said:

■ In determining, for the purposes of subsection (a) or subsection (h) the adjusted basis of an emergency facility (1) There shall be included only, so much of the amount otherwise constituting such adjusted basis¹ as is properly attributable to such construction, reconstruction, erection, installation or acquisition after December 31, 1939, as either the Secretary of War or the Secretary of the Navy has certified as necessary in the interest of national defense during the emergency period, which certification shall be under such regulations as may be prescribed from time to time by the Secretary of War and the Secretary of the Navy, with the approval of the President.

For brevity, we refer to the plaintiff’s predecessor, The United States Graphite Company, to whose rights the plaintiff has succeeded, as the plaintiff. It was, during the Second World War, engaged in the manufacture of graphitar, which was used by the armed services and the Maritime Commission in the construction of aircraft, ships and other equipment used in the prosecution of the war. In 1943 the Government’s demand for graphitar exceeded the capacity pf the plaintiff’s plant and facilities. Procurement officials encouraged the plaintiff to enlarge its facilities, and the plaintiff, prior to June 27,1943, made plans to do so. It was granted high priorities for the obtaining of the materials, supplies and equipment needed for the enlargement.

On June 27,1943, the plaintiff, in order to obtain the benefits of the rapid amortization provided for in Section 124 of the Internal Revenue Code, applied to the Secretary of War for a “necessity certificate” covering its proposed new factory building. That certificate was granted on October 28, 1943,. and is not here in question. When the building was under way, the plaintiff applied to the War Production Board for preference ratings or priorities to assist it in obtaining the machinery and equipment for the new plant. These applications were made from October 7 to December 10, 1943, and were promptly granted. The machinery and equipment were obtained by the plaintiff and installed in the factory oh various dates between December 28,1943, and December 15, 1944.

By Executive Orders issued in December 1943, and March 1944, the President transferred to the Chairman of the War Production Board the functions which had formerly been exercised by the Secretary of War and the Secretary of the Navy, with regard to the issuance of necessity certificates. On May 29, 1944, the plaintiff duly filed an application for such a certificate covering machinery and. equipment, having a total estimated cost of $255,002.79. To the application was appended a list of the items included. On July 17,1944, the' War Production Board advised the plaintiff by letter that it had been determined that the machinery and equipment listed in the plaintiff’s application were eligible for tax amortization on a 35% basis, provided that the items were to be acquired after the date of the letter. The Board’s letter said that a Certificate of Necessity .would be issued, as of July 17,1944, after the Board had received a schedule in affidavit form stating, with respect to each item, that it had not been acquired before July 17,1944.

The requested affidavit was filed by the plaintiff on July 27, 1944. It showed, of course, that some of the facilities had been acquired before July 17, 1944, and that the others had been or would be acquired after that date. On or about July 31,1944, but as of July 17,1944, the Board issued to the plaintiff a necessity certificate stating that the facilities described in the attached Appendix A were “necessary in the interest of national defense during the emergency period, up to 35% of the cost” thereof. The attached Appendix A was the list which the plaintiff had submitted with its affidavit. The items thereon shown to have been received before July 17,1944, were, however, crossed over with Xs made by a red pencil. On April 2, 1946, the Civilian Production Administration, which had, apparently, succeeded to the functions of the War Production Board issued an amendment to the Necessity Certificate, which amendment listed in detail the actual cost of the facilities received before and after July 17,1944. It showed that the cost of those received before that date was $77,195.99, and of those received after that date was $140,031.44. Those figures were correct, and the present controversy concerns only the application of the amortization law to those amounts.

At the request of the plaintiff for a statement' of the reasons for its action, the Civilian Production Administration on August 12,1946, wrote the plaintiff that it was the Administration’s policy, in cases where the facilities to be acquired would be useful in post-war operations, to limit necessity certificates to 35% of the cost of the facilities. The plaintiff had, earlier, been orally advised that the 35% figure had been selected because that was the estimated excess of the cost of the facilities in wartime over what would have been their peacetime cost.

The taxing authorities, in imposing excess profits taxes upon the plaintiff, allowed it to deduct accelerated amortization upon only 35% of the cost of the facilities acquired after July 17, 1944, and no such amortization at all upon those acquired before that date. The plaintiff contends that it should have been allowed to deduct accelerated amortization upon the full cost of both kinds of facilities.

We consider first the facilities acquired after July 17,1944. As to those, War Production Board certified that they were eligible for accelerated amortization for tax purposes under Section 124. The plaintiff says that the Board had no power to put the 35% limit on the amount of the cost of the facilities on which amortization should be computed. We agree with the plaintiff. When Congress took the drastic step of conferring the important tax advantage of rapid amortization upon those private enterprises which would invest their own money in expanding their facilities to increase wartime production, it knew that in some cases the enterprises would have, at the end of the war, facilities still useful but which had been paid for, to a considerable extent, by reductions in income and excess profits taxes. See Hearings before the Senate Committee on Finance on the Second Revenue Act of 1940, 76th Cong. 3d Sess. (1940) 124, 125. Yet Congress provided for their amortization over a period of five years. When the War Production Board attempted to limit to 35% the proportion of the cost which could be so amortized, it was, in effect saying that the actual cost could be amortized, during the first five years, only to the degree which would contemplate its total amortization in about fifteen years. That was a contradiction of the statute. The Board, as we have seen, decided upon the 35% figure because that was its estimate of the excess cost of acquiring the facilities in wartime. But there is no suggestion in the statute or its legislative history that such a consideration had any relevance. The purpose of the statute was to induce private enterprises to acquire facilities for which they would have had no need, except for the pressure of wartime production. According to the Board’s reasoning, if price and wage controls had kept the wartime cost of the facilities down to the peacetime cost, no use whatever would have been made of Section 124. But an enterprise does not spend its money to acquire unneeded facilities, or those which will be needed for only a short time, just because it can acquire them at normal prices.

We think that the Board’s only function was to determine whether or not facilities answered the description of the statute, i. e., were they “necessary in the interest of national defense during the emergency period.” Having so determined, any attempt by the Board to reduce the benefits which Congress granted to the person whose facilities answered the description, was in violation of the statute. The Government suggests that if the Board could not have limited its certificate to 35% of the costs of the facilities, it would, perhaps, not have certified them at all. We have no reason to suppose that the Board, when applied to by the plaintiff for a factual statement as to whether the plaintiff’s facilities were, or were not “necessary in the interest of national defense during the emergency period,” would have said to itself, “If we make a true statement, it will cost the Government X dollars in lost revenue. If it would cost the Government only Y dollars, we would tell the truth. But since it will cost X dollars, we will not tell the truth.”

The Government points to the language of Section 124 (f), hereinbefore quoted which says that there shall be included for rapid amortization purposes “only so much of the amount otherwise constituting such adjusted basis as is properly attributable to such construction * * * or acquisition after December 31, 1939, as either the Secretary of War or the Secretary of the Navy has certified as necessary, etc.” The Government says that this language authorized the certifying authority to certify only a part of the cost of the facilities, in his discretion. We think that this is a misreading of the statute. Subsection (e) (1) of Section 124, in defining the term “emergency facility” gives a somewhat complicated formula for determining the time at which the facility must have been acquired in order to be eligible for accelerated amortization. Apparently December 31, 1939, was the date after which, in any event, the facility must have been acquired in order to be so eligible. But even if acquired after that date, application for a necessity certificate had to be made within six months after its acquisition. And if some of the facility was acquired more than six months before the date of application, and the rest within six months, the latter amount would be eligible. Thus the words “only so much of, etc.” are needed, and have a rational application without construing them as authorizing the certifying authority to contradict the purpose of the statute.

As to the facilities acquired before July 17,1944, the problem is somewhat different. It will be remembered that the plaintiff applied for its certificate of necessity on all of its facilities on May 29,1944. The earliest date at which it had acquired any of the facilities was December 28,1943, so that its application was within six months of the acquisition. On July 17,1944, the Board wrote the plaintiff that it had made a determination that all the facilities were necessary in the interest of national defense, provided the date of their acquisition was subsequent to the date of the letter. The Board requested the information, in affidavit form, hereinbefore described, and, having received it, issued its certificate, attaching the entire list, but having crossed out the items which were acquired before July 17,1944.

The Government points to Section 124 (f) (1) which says that one gets accelerated amortization upon facilities which either the Secretary of War or the Secretary of the Navy has certified as necessary in the interest of national defense. It says that as to the facilities acquired before July 17,1944, no certificate was issued, and that’s the end of it. No certificate, no amortization. Since the Board’s letter of July 17 stated that all the facilities listed were necessary, and since the plaintiff’s application for its certificate was filed within the six months statutory period, the question arises, of course, why the Board refused to issue the certificate upon at least the 85% basis.

On March 22, 1944, the Board, with the approval of the President, issued the following regulation (8 Fed. Reg. 2492, March 4,1944):

Section 4. Application must be filed and determination made before construction is begum, or date of acquisition. The construction, reconstruction, erection, installation, or acquisition of a facility will not be deemed necessary within the terms of these regulations unless a determination of necessity is made by the certifying authority prior to the beginning of the construction, reconstruction, erection, installation, or date of acquisition. ■

The plaintiff contends that the regulation is invalid. When Section 124 was originally enacted, in the Second Revenue Act of 1940, approved October 8, 1940, subsection (f) (3) provided that a certificate of necessity would be ineffective unless obtained before the facility was acquired. By Joint Resolution, approved January 31, 1941, subsection (f) (3) was amended to provide that certificates of necessity would be valid if applications for them were made within sixty days after the acquisition of the facility. Again, in October 1941, by House Joint Resolution 235, Public Law 285, 77th Cong., 1st Sess., Ch. 464, Congress again amended subsection (f) (3) and enlarged the period within which application for a certificate might be filed from sixty days to six months after the acquisition of the facility. [55 Stat. 755.]

Congress having specifically and repeatedly dealt with the question of when applications might be. filed, and having each time enlarged the period, we think that the regulation quoted above, which in effect discarded the amendments made by Congress and put into effect the requirements of the original statute, was invalid. We think, therefore, that the plaintiff having applied within six months for its certificate, it was the duty of the certifying officer to determine the fact as to whether the facilities were necessary in the interest of national defense, and to certify or refuse to certify accordingly. The Chairman of the Board did determine that the facilities were necessary, and issued the letter of July 17 so saying. He then refused to issue the formal certificate solely because of the regulation which we have said above was invalid. He having put his mind upon the question of fact, which we think was his only function under the statute, and having answered that question in favor of the plaintiff,.it was his duty to issue the certificate, and we feel certain that he would have done so but for the invalid regulation. His refusal, therefore, amounted in law, though not in fact, to an arbitrary refusal to perform his statutory duty. We have no reason to suppose that the enormous tax benefits which Congress, wisely or not, sought to confer by the enactment of Section 124 were to be bestowed or withheld at the arbitrary will of the executive. Equity regards that as done which ought to have been done. We do not have here the problem of deciding, contrary to the decision of the official in which the statute lodged the power of decision, that the facilities in question were necessary. He decided that they were.. We merely append the proper legal consequences to his decision by disregarding the invalid regulation which prevented him from putting his factual decision in legal form. We conclude, therefore, that the -facilities acquired by the plaintiff before July 17,1944, were eligible for accelerated amortization, and that the plaintiff is entitled to that amortization.

Substantially the same questions involved in the instant case were presented to the United States District Court for the District of Columbia in The United States Graphite Co. v. Secretary of Commerce, 71 F. Supp. 944. That was a suit by the plaintiff’s predecessor, the Graphite Company, to compel the issuing authority to issue the certificates of necessity which would have entitled that company to the tax deductions which the plaintiff claims here. The District Court, Judge Pine sitting, denied relief. The United States Court of Appeals affirmed, 176 F. 2d 868, upon the opinion of Judge Pine. Judge Wilbur K. Miller of the Court of Appeals dissented, in an opinion with which we agree. The Supreme Court denied certiorari. 339 U. S. 904. The Government does not claim that that litigation made the dispute a res adjudicata. In the circumstances we are, naturally, skeptical of the correctness of our conclusions.

The plaintiff is entitled to recover. Entry of judgment will be suspended to await the filing by the parties of a stipulation showing the amount due the plaintiff, according to bur findings and opinion.

It is so ordered.

IIowelu, Judge; Whitaker, Judge; and LittletoN, Judge, concur.

1 The parties are agreed that the “adjusted basis” of the property here in question tras its cost.

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Dissenting Opinion

Jokes, Chief Judge,

dissenting in part.

I agree that plaintiff should recover but the amount should be limited to 35 percent of the cost of the facilities.

I think the provision of Section 124 (f) (1) of the Internal Eevenue Code which is as follows:

(1) There shall be included only so much of the amount otherwise constituting such adjusted basis as is properly attributable to such * * * acquisition after December 31,1939, as either the Secretary of War or the Secretary of the Navy has certified as necessary in the interest of national defense during the emergency period, which certification shall be under such regulations as may be prescribed from time to time by the Secretary of War and the Secretary of the Navy, with the approval of the President. * * *

clearly authorized the executive officials to limit the amount of the amortization. United States Graphite Co. v. Harriman, 71 Fed Supp. 944. United States Graphite Co. v. Sawyer, 176 F. 2d 868 (certiorari denied).

The court makes findings of fact, based upon the facts as stipulated by the parties, the briefs and argument of counsel, as follows:

1. The Wickes Corporation is a corporation organized and existing under the laws of the State of Michigan, with its principal office at Saginaw, Michigan. It sues for recovery of excess profits taxes paid for the calendar years 1944 and 1945 in the respective amounts of $73,358.62 and $93,146.01, paid by The United States Graphite Company, also a corporation organized under the laws of Michigan but now dissolved. In December 1947, The United States Graphite Company, Wickes Brothers, and The Wickes Boiler Co., all Michigan corporations, were merged into The Wickes Corporation, plaintiff herein. The merger was a non-taxable reorganization, and the business formerly carried on by The United States Graphite Company is now carried on as a division of plaintiff.

2. On May 15, 1945, The United States Graphite Company filed its completed tax returns for 1944 disclosing income tax liability of $84,258.94 and excess profits tax liability of $298,317.00, which amounts were paid to the Collector of Internal Revenue at Detroit, Michigan, in quarterly installments. An excess profits tax deficiency in the amount of $16,088.24 was duly assessed and was paid on September 30, 1947, together with interest thereon of $2,286.99. A refund in the amount of $2,084.60 was made on September 21,1950.

.3. On October 15,1946, The United States Graphite Company filed a claim for refund of excess profits taxes paid for 1944 in the amount of $73,358.62. On September 2, 1948, a second claim for refund was filed in the amount of $43,610.29 and, on June 15, 1950, a third claim for refund of excess profits taxes was filed for the year 1944 for the amount of $56,563.02. The claims were based on plaintiff’s alleged right to amortization on an amount of $168,216.83 of emergency war facilities which had been denied by the Commissioner. Aside from the adjustment of $2,084.60 above referred to, the first two claims were rejected on September 21,1950, and the third claim was rejected on January 23, 1951. No adjustment was made with respect to the amortization claimed.

4. On September 13, 1946, Tlie United States Graphite Company filed its returns for the calendar year 1945 disclosing income tax liability of $84,071.43 and excess profits tax liability of $53,992.05, which amounts were paid in quarterly installments within the year 1946. In September, 1947, additional excess profits taxes were assessed and paid in the amount of $85,000, plus interest of $7,859.58. In July, 1950, a further additional assessment of excess profits taxes of $2,702.28, plus interest of $695.30 was made, and was paid by credit. On June 15,1950, a claim for refund of 1945 excess profits taxes was filed in the amount of $93,146.01, on the same basis as the claims filed for 1944. The 1945 claim was rejected on January 23,1951. . . - . ...

■ 5. In determining the federal tax liability of The.United States Graphite Company for the calendar years .1944 and 1945, the Commissioner of Internal Revenue refused allowance of claimed deductions in the respective. amounts of $63,710.46 and $104,506.37 for amortization of the cost of certain war facilities.

6. During the Second World War,. The United States Graphite Company, among other things, was engaged.in the manufacture of certain graphite products known as graphi-tar. Such products were used as á substitute for metals' which were scarce at that time. They were used by the Navy. Department, the War Department, and the Maritime Com? mission in ships of various kinds, aircraft, landing craft, motor equipment, and other types of equipment .which, were used directly in the prosecution of the.war.

7. In 1943 the aircraft program became extremely critical with the result that the demand for graphitar and other manufactured graphite products, as to which The United States Graphite Company was the principal source .of supply, began to exceed the capacity of the company’s plant.. At the same time, the Army Air Forces began experiments in conjunction with said company which resulted in certain graphitar parts being specified in Army Air Forces airplane fuel pumps. . . . -

8. Because of tbe critical supply situation with respect to graphitar and other graphite products procurement officers of the Government encouraged The United States Graphite Company to increase its facilities. The company then made plans for increasing the capacity of its existing plant and was granted the highest priorities in materials, supplies and equipment by Government procurement agencies to enable it to complete its plant expansion.

9. In connection with its plant expansion The United States Graphite Company, on June 27, 1943, filed with the duly authorized certifying authority, an application for a necessity certificate with respect to a factory building. On October 28, 1943 the Secretary of War, as the certifying authority, issued- Necessity Certificate #WD-N-23477, certifying that the entire additional building was a facility necessary in the interest of national defense. The certificate reads as follows:

WAR DEPARTMENT

Necessity-Certificate

To the Commissioner of Internal Eevenüe:

Pursuant to Section 124 of the Internal Revenue Code, particularly subsection (f) thereof, and in response to the application filed by-

The United States Graphite Company

1621 Holland Avenue, Saginaw, Michigan

It is hereby certified that the facilities described in the attached Appendix A (consisting of two pages and two blueprints) are necessary in the interest of national defense during the emergency period, up to 100% of the cost attributable to the construction, reconstruction, erection, installation or acquisition thereof, and that the application for this Certificate was filed on June 27, 1943.

By direction of the Under Secretary of War:

/s/ George H. Foster

Colonel, Signal Corps

Chief, Tax Amortization

The War Production Board, which, at that time, administered the allocation of controlled materials, assigned the factory building project a high preference rating of AA-3.

10. When construction of the additional plant building of The United States Graphite Company was sufficiently advanced so that space was becoming available for machinery and equipment, the company applied to the War Production Board for preference ratings covering machinery and equipment to be used in the building under the priorities system administered by that Board. Applications for priority assistance were made on various dates between October 7,1943, and December 10,1943, and were granted preference ratings of AA-3 by said Board between the dates of October 21, 1943, and December 16, 1943. Thereafter, the aforesaid machinery and equipment covered by the preference rating certificates were received and/or installed by the company on various dates between December 28, 1943, and December 15, 1944, in the factory building covered by Necessity Certificate WD-N-23477. A preference rating certificate is not equivalent to a certificate of necessity, and the granting of such a certificate does not entitle an applicant to the issuance of a certificate of necessity.

11. By Executive Orders Nos. 9406 and 9429 dated December 17, 1943, and March 2, 1944, respectively, the President of the United States, pursuant to Title I of the First War Powers Act of 1941, transferred the prior functions and duties of the Secretary of War and the Secretary of Navy, with respect to the issuance of necessity certificates, to the Chairman of the War Production Board. After December 17, 1943, all applications for necessity certificates, with immaterial exceptions, were required to be filed with and passed upon by the Chairman of the War Production Board.

12. On May 29, 1944, The United States Graphite Company filed with the Chairman of the War Production Board an application for a certificate of necessity under Section 124 of the Internal Revenue Code for machinery and equipment having a total estimated cost of $255,002.79. A descriptive list of such machinery and equipment was included in the application as Appendix A.

13. By letter dated July 17, 1944, the War Production Board notified The United States Graphite Company as follows:

Gentlemen:

A determination has been made, pursuant to the Regulations prescribed by the Chairman of the War Production Board, that the facilities listed in the attached Appendix A are eligible for tax amortization on a 35% basis provided:

1. The date of beginning of construction, reconstruction, erection, installation or the date of acquisition of such facilities is subsequent to the date of this letter.

2. Appropriate priority assistance, if necessary, has been obtained in connection with such facilities.

A Certificate of Necessity will be issued as of this date after receipt by this office of a schedule in affidavit form stating:

1. With respect to each facility, that construction, reconstruction, erection or installation had not begun nor had the facility been acquired as of the date of this letter.

2. With respect to each facility, the priority rating obtained, the type of priority application upon which it was obtained (for example, PD-1A, PD-3A, WPB-617), the serial number of the rating, and the agency (division or branch) which issued it.

A suggested form of schedule is enclosed.

Pending your receipt of such Certificate you may accept this letter as a determination of necessity made by the Chairman of the War Production Board under Article (4) of the amended Regulations dated December 17, 1943, governing the issuance of Necessity Certificates. Therefore, construction, reconstruction, erection or installation, or acquisition of facilities under proper priority authorization may begin after the date of this letter without prejudice to your tax amortization rights.

The Appendix A referred to in said letter was the list of items of machinery and equipment included in Appendix A of the application filed by said Company under date of May 29, 1944.

14. The United States Graphite Company, on July 27, 1944, filed with the War Production Board the affidavit requested in the Board’s letter of predetermination, dated July 17,1944. The affidavit showed that- of all the facilities having a total cost of $255,002.79, facilities costing a total of $181,907.79 had been acquired prior to July 17,1944, and that facilities costing a total of $78,095 had been acquired after July 17,1944. The affidavit included a list of facilities which were precisely the same items included in Appendix A of the application filed by the company and Appendix A of the notice of predetermination under date of July 17, 1944.

15. As of July 17,1944, The United States Graphite Company was issued Necessity Certificate #NC-5787, stating as follows:

It is heRebt certified that the facilities described in the attached Appendix A (consisting of 9 pages) are necessary in the interest of national defense during the emergency period, up to 35% of the cost attributable to the construction, reconstruction, erection, installation or acquisition thereof, and that the application for this Certificate was filed on May 29,1944.

A photostat copy of the Necessity Certificate and Appendix A referred to therein is attached to the petition filed in this case as Exhibit 2 and is hereby made a part hereof.

16. The Appendix A attached to the Necessity Certificate (Exhibit 2 of the petition) was Exhibit A of the affidavit filed by The United States Graphite Company on July 27, 1944, except that the items listed thereon as received by the company before July 17,1944, were crossed over in the form of an “X” by means- of red pencil. As a result, of the total of nine pages attached to the said Necessity Certificate, all of the items listed on pages 2, 3, 5, and 7 were marked over in the manner described, - and part of the items listed on pages 1, 6, and 9 were so marked over.

17. On April 2,1946, the Civilian Production Administration issued an amendment to Necessity Certificate #NC-5787, containing corrected descriptions or costs of the emergency facilities certified by the Certificate and within the scope of the original certification. Attached to the amendment to the Necessity Certificate was a statement listing in detail the actual cost of machinery received before and after July 17, 1944. The division of the actual cost of the machinery and equipment received before and after July 17,1944, as shown by the said statement is as follows:

Received before July 17, 1944- $77,195.99

Received after July 17,1944- 140,031.44

Total_$217,227.43

The company’s application for a Necessity Certificate showed an estimated cost of $255,002.79. The statement of detailed costs of $217,227.43, which was. attached to the amendment to the Necessity Certificate, is based on actual costs, and shows the actual dates of acquisition.

18. The United States Graphite Company, on August 9, 1946, addressed a letter to the Administrator of the Civilian Production Administration, Tax Amortization Branch, which reads as follows:

■ Under date of August 1, 1944, you issued Necessity Certificate No. NC-5787 to the company. This certificate granted certification up to 35 per cent of the cost of certain of the facilities listed in its application.

At a conference which the undersigned, Mr. W. C. Magathan, Mr. John McCullough and Mr. E. C. Schrems held with your Mr. Thomas under date of March 7, 1946, we were advised that only 35 per cent of the cost of the facilities was included in the certificate, for the reason that we had not shown that such facilities had no post war use, and that under these circumstances only the excess war costs, which had been determined to be 35 per cent, were subject to certification under the policy which had been adopted.

As other applicants have been, notified in writing as to your policy in respect to certifying only excess war costs, will you please confirm by letter the above statement.

19. On August 12, 1946, Sidney T. Thomas, Chief of the Tax Amortization Branch of the Civilian Production Administration, addressed a letter to The United States Graphite Company as follows:

This Necessity Certificate was issued to your Company for 35 per cent of the cost of the eligible facilities. The certificate was in accordance with the War Production Board policy where the facilities sought to be certified were of such a nature as to be presumably useful in postwar operations. The War Production Board did not undertake to forecast that the facilities would be useful to the then owner, but merely that they were of a type which would be normally adapted to peacetime production.

This policy, as enunciated above, has been adhered to in acting upon hundreds of comparable wartime plant expansions.

20. The certification of the machinery and equipment in this case was made pursuant to the established policy of the War Production Board which, after December 17,1943, was vested, by the executive orders above referred to, with the functions of the Secretary of War and the Secretary of Navy. This policy limited amortization to excess war cost (estimated at 85%) in the case of facilities having presumptive post-war utility, which was found by the Board to be true of the facilities herein involved. ■

21. The basis for the War Production Board’s refusal to grant a certificate of necessity as to the $77,195.99 of facilities acquired by The United States Graphite Company prior to July 17,1944, was that the company should have obtained the War Production Board’s approval thereof prior to the purchase of the facilities.

22. In the federal income tax returns-filed by The United States Graphite Company for the years 1944 and 1945, it elected to and did amortize the entire cost of the said machinery and equipment. By letter dated December 19, 1945, filed with the Commissioner of Internal Bevenue, the company elected to terminate the amortization period on September 27,1945, with respect to all emergency facilities.

23. The claims for refund filed by The United States Graphite Company for 1944 and 1945 claimed that the company was entitled to amortize, under Section 124 of the Internal Kevenue Code, the entire cost of all of the emergency facilities (machinery and equipment) acquired prior to July 17, 1944, and that it was also entitled to amortize the entire cost of the emergency facilities (machinery and equipment) acquired on or after July 17,1944. The claims further stated, with respect to the machinery acquired prior to July 17, 1944, that the Commissioner had erroneously failed to allow any part of the cost for amortization purposes, and that in respect to the machinery and equipment acquired after July 17,1944, he had erroneously allowed amortization on only 35 percent of the cost thereof, and had erroneously disallowed amortization on 65 percent of the cost.

24. Two of the claims for refund for 1944 were rejected on September 21, 1950, and the third claim for that year was rejected on January 23,1951. The claim for refund for 1945 was rejected on January 23,1951.

25. The War Production Board, under executive order, was succeeded by John D. Small, Administrator of the Civilian Production Administration. He in turn was succeeded, under executive order, by Philip B. Fleming, Temporary Controls Administrator. In turn he was succeeded, under executive order, by William Averell Harriman, as Secretary of Commerce, and finally Charles Sawyer, the Secretary of Commerce.

26. There is incorporated herein and made a part hereof, by reference, the record in the case of The United States Graphite Company, Plaintiff, v. William Averill Harriman, Secretary of Commerce, Civil Action No. 36695 in the District Court of the United States for the District of Columbia, which includes (a) the complaint, with exhibits attached thereto, requesting an order directing the defendant to perform certain ministerial duties; (b) defendant’s motion to dismiss the complaint, together with the affidavit of Sidney T. Thomas, Chief of the Tax Amortization Branch of the Civilian Production Administration, with exhibits attached to the affidavit; (c) the motion of defendant for summary judgment; (d) the opinion of Justice David A. Pine; (e) the order entered by Justice Pine on June 27, 1947, and (f) the notice of appeal by The United States Graphite Company on September 19, 1947. There is also incorporated herein, by reference, the record in the aforesaid proceeding in the United States Court of Appeals for the District of Columbia Circuit, No. 9680, which includes the per curiam opinion by Justices Edgerton and Clark, affirming the opinion of Justice Pine, and the dissenting opinion of Justice Wilbur K. Miller. Under date of January 9, 1950, The United States Graphite Company applied for a writ of certiorari, which was denied by the United States Supreme Court on February 20, 1950. The transcript of record in that proceeding, No. 532 in the Supreme Court, is also incorporated herein and made a part hereof by reference.

Upon tbe foregoing findings of fact, which are made a part of the judgment herein, the court concludes that as a matter of law the plaintiff is entitled to recover.

The entry of judgment is suspended to await the filing of a stipulation of the parties showing the amount due to which the plaintiff is entitled.

[Judgment for plaintiff entered March 3, 1953, for $45,394.67 and $98,507.25 with interest.]