
    CHARLES LEICH AND COMPANY v. THE UNITED STATES
    [Nos. 367-56 and 419-56.
    Decided March 13, 1964]
    
    
      
      Henry B. Walker, Jr, for plaintiff.
    
      David D. Rosenstein, with whom was Assistant Attorney General Louis F, Oberdorfer, for defendant. Edward S. Smith, Lyle M. Turner, and Philip R. Miller, on the brief.
    Before Jones, Chief Judge, Whitaker, Laramore, Durpee and Davis, Judges.
    
    
      
       Opinion denying plantiff’s motion for rehearing and to amend the judgments was rendered June 12, 1964, post, p. 151.
    
   Laramore, Judge,

delivered the opinion of the court:

These are related actions brought by the same taxpayer. The cases were tried separately, but were consolidated for oral argument since they both arise from the same factual situations. In Case No. 367-56, taxpayer seeks to recover $14,403.14 in interest on amounts of Federal income and excess profits taxes, together with interest thereon, allegedly overpaid in fiscal years ending April 30, 1952 and 1953. The issue involved in this case is whether the amounts remitted were “overpayments” within the meaning of section 3771(a) of the Internal Revenue Code of 1939, so as to entitle taxpayer to interest when these amounts were refunded in 1955.

In Case No. 419-56, taxpayer seeks to recover $47,483.09 as alleged overpayments of Federal income and excess profits taxes for fiscal years ending April 30, 1951, 1952, 1953 and 1954. Taxpayer’s claims are based on two separate claims for refund. First, taxpayer claims that for the fiscal years ending April 30, 1952 and 1953, the Commissioner of Internal Revenue erroneously and illegally disallowed deductions for interest allegedly paid in each of said years in connection with Federal income and excess profits taxes allegedly overpaid in the years 1952 and 1953. Second, taxpayer claims that the Commissioner erroneously and illegally did not allow it to use the “historical method” of computing its invested capital in determining its excess profits credit which denial allegedly resulted in an overpayment of taxes for the years ending April 30, 1951 through 1954. We shall treat each case separately.

A. Oase No. 367-56

The facts in this case have been stipulated; it is the legal conclusion from them which is the subject of controversy. The Commissioner of Internal Revenue determined and assessed a deficiency in taxpayer’s excess profits tax for, the fiscal year ending April 30, 1942. This assessed deficiency, with interest, was duly paid on February 21, 1949. Taxpayer filed a timely claim for refund. On April 3, 1950, as the Commissioner had taken no formal action with respect to this claim, taxpayer instituted a suit for refund in the U.S. District Court for the Southern District of Indiana.

Shortly thereafter, a revenue agent’s report for the taxpayer’s fiscal years 1943-1949, dated June 13,1950, proposed adjustments in taxpayer’s income and excess profits tax for those years. The adjustments proposed would be in conformity with the position taken by the Commissioner in the pending litigation for the year 1942, with respect to the proper computation o.f taxpayer’s invested capital. The net result of the proposed adjustments would have been an overall deficiency of $66,639.80. Taxpayer filed a protest to the proposed adjustments for the years 1943-1949 with the District Director, requesting that the case be forwarded to the technical staff of the Internal Revenue Service. Taxpayer was advised by the Internal Revenue Service that consideration of its protest would be held in abeyance pending the outcome of the litigation involving the suit for refund of 1942 taxes, since the ultimate decision o.f the District Court as to tbe 1942 taxes would be controlling as to virtually all of tlie points on which the proposed deficiencies for 1943 through 1949 were based.

Subsequently, on February 13, 1952, the District Court entered judgment for the Government in the refund suit involving fiscal year 1942. On February 23, 1952, taxpayer filed a motion for a new trial, together with a motion requesting the amendment of the findings of fact and conclusions of law. While these motions were pending, taxpayer on March 15,1952 remitted to the then Collector of Internal Eevenue the sum of $75,000 in respect of the proposed adjustments contained in the Eevenue Agent’s report. Part of the sum remitted consisted of alleged interest on the proposed deficiency, which amount ($14,276.50) taxpayer deducted as interest expense on its Federal income and excess profits tax returns for the fiscal year ended April 30, 1952. On April 10, 1952, taxpayer filed amendments to the above referred motions. On April 2,1953, the District Court denied said motions. On April 30, 1953, taxpayer remitted to the then appropriate Collector of Internal Eevenue the sum of $12,444.13, representing interest allegedly due on the proposed deficiency for years 1943 through 1949. Taxpayer deducted this amount as an interest expense in its income and excess profits tax returns for the fiscal year 1953.

During the period that the issue with respect to year 1942 was being litigated, taxpayer never signed a waiver agreeing to the assessment of all or any part of the proposed deficiency ; no statutory notice of deficiency was ever issued as to all or any part thereof; and no part of the proposed deficiency was assessed by the Commissioner of Internal Eevenue.

Taxpayer filed its notice of appeal from the judgment of the District Court, and on February 26,1954, the U.S. Court of Appeals for the Seventh Circuit reversed the District Court’s decision. The litigation was concluded a year later when taxpayer obtained a judgment against the United States in the District Court. Subsequently, taxpayer filed claim for refund for $87,444.13, which purportedly represented overpayments of tax for the years 1943-1949, together with interest thereon. Interest on the refund was also demanded. On Marcli 2, 1955, the Internal Revenue Service refunded these amounts; however, no statutory interest was allowed with respect to the alleged “overpayments” in question.

It is this claim for statutory interest which is the subject matter of taxpayer’s petition No. 367-56. Taxpayer’s entitlement to the statutory interest under the provisions of section 3771(a) of the Internal Revenue Code of 1939 depends on whether or not the amounts remitted constituted an a overpayment in respect of any internal revenue tax * * (emphasis added) We believe that the amounts remitted by taxpayer did not constitute payments of tax, consequently taxpayer is not entitled to statutory interest when said amounts were subsequently refunded.

The problem of what constitutes a “payment” of tax within the meaning of the Internal Revenue Code has been the subject matter of extensive litigation, but the courts when confronted with this question have failed to reach uniform results even under similar factual situations. The state of the law with respect to what constitutes a “payment” was thrown into further confusion when Congress, in amending section 3770 of the 1939 Code, added subsection (c) providing that:

(c) Rule Where No Tax Liability. — An amount paid as tax shall not be considered not to constitute an overpayment solely by reason of the fact that there was no tax liability in respect of which such amount was paid, [emphasis added]

The basic factual situation which gives rise to the problem is quite simple. A taxpayer places in the hands of the Commissioner of Internal Revenue an amount of money. The question whether the remittance is a payment of tax or a mere deposit to stop the running of interest is complicated by the widely differing circumstances which prompt taxpayers to take such, action. These surrounding factors are usually determinative of the question whether the remittance is a payment or a deposit.

Before we examine the decided cases in this area, we must point out that what is considered a payment for a specific purpose in the Internal Bevenue Code must also be viewed as such in all of the contexts in which the question of “payment” might arise in the Code. This consistent treatment of the term payment is required by the Supreme Court decision in Rosenman v. United States, 323 U.S. 658, 663 (1945).

It seems clear that a remittance made by a taxpayer of an amount shown in good faith to be due on its tax return or given in response to an assessment of taxes by the Internal Bevenue Service is a payment of tax. Thus, the problem area may be limited to the situation in which a taxpayer makes a remittance of an amount not shown to. be due on its return and which has not been assessed by the Commissioner.

Congress, in enacting section 3770(c), made use of a double negative. This subsection seems to indicate that the fact that there has been no assessment or tax return which sets forth the tax liability should not of itself negate “payment”. There must be other factors present which, taken in conjunction with the fact of no tax liability, have the effect of negating “payment”. In Reading Co. v. United States, 120 Ct. Cl. 223, 231, 98 F. Supp. 598, 599-600 (1951), we said that this subsection was enacted “because some decisions holding that remittances not made incident to a bona fide and orderly discharge of the taxpayers’ actual or reasonably apparent duties had been read by some as meaning that no tax payment resulted if no tax liability actually existed.” In that opinion, we noted that where the taxpayer merely dumped money as taxes on the collector by disorderly remittances taken in conjunction with no tax liability, no payment of tax resulted. See also Moshowitz v. United States, 152 Ct. Cl. 412, 285 F. 2d 451 (1961). Taxpayer contends that a disorderly remittance or a lack thereof is the only factor which need be considered by the court in determining whether a remittance is a payment or a mere deposit. We believe this to be an erroneous oversimplification.

Taxpayer relies in the opinions of this court in Atlantic Oil Producing Co. v. United States, 92 Ct. Cl. 441, 35 F. Supp. 766 (1940); Hanley v. United States, 105 Ct. Cl. 638, 63 F. Supp. 73 (1945); Reading Co. v. United States, 120 Ct. Cl. 223, 98 F. Supp. 598 (1951). In those cases we held that where a taxpayer has made a voluntary remittance based upon a bona fide estimate of tax then due, a payment of tax resulted even though the time of filing the appropriate tax return had been extended. We reasoned that these remittances were made in respect of Internal Revenue taxes then due but the amounts of which had not been ascertained. In none of the above cited cases were there any other “factors” present which might negate payment. These cases are clearly distinguishable from the case at bar. In each of the above cited cases there was a tax due on the due date and taxpayer was offering on due date an amount calculated by him in good faith to be the amount of tax due. The only extension of time granted was the time for filing the return. Taxpayers at all times admitted that they were liable for some tax but the exact amount of which had yet to be calculated. In those cases, there was no reason to give a different treatment to a taxpayer remitting on due date a tax calculated in good faith from that given to a taxpayer making a payment concurrently with a tax return filed on the due date. There taxpayers were not making disorderly remittances nor were they contesting the liability. Cf. United States v. Miller, 315 F. 2d 354 (10th Cir.1963). See Bosemnm v. United States, supra, where taxpayer remitted the amounts under protest and duress and specifically stated that the amounts remitted were only for the purpose of stopping the running of interest. See also Manee v. United States, 97 F. Supp. 993 (S.D. N.Y. 1951), where the executor filed an estate tax return showing no estate tax liability and at the same time sent check stating that it was not payment of tax due but estimated tax liability which, would result if tbe estate was successful in pending litigation.

In tbe instant situation, tbe circumstances wbicb followed and prompted taxpayer to make tbe alleged “payments of tax” were entirely different. There is no dispute that tbe Government never made an assessment. Therefore, taxpayer was never required to pay the tax for there was never an obligation imposed by law to pay any tax. The remittances made were entirely voluntary. Thus, the factor of no tax liability was present. Furthermore, it is clear that throughout the entire period taxpayer was contesting the proposed liability. We believe that the factors of “contest,” coupled with the fact of no assessment, are sufficient to negate “payment” in the instant case. Our holding here is not inconsistent with our holdings in the Atlantic Oil, Hanley, and Reading Co. decisions for there the taxpayers did not negate “payment” by simultaneous contest. Here, as was the case in Lewyt Corp v. Commissioner, 215 F. 2d 518, 522-523,

[t]he taxpayer was not entitled to have these remittances treated as a satisfaction of its tax liabilities * * * and at the same time continue to contest such liabilities * * *.
* # * * ^
* * * Here the taxpayer was tendering its check with one hand, and contesting its liability to pay with the other.

Cf. Murphy v. United States, 78 F. Supp. 236 (S.D. Cal. 1948); Richardson v. Smith, 196 F. Supp. 432 (E.D. Pa. 1961), aff’d per curiam 301 F. 2d 305 (3d Cir. 1962).

Taxpayer argues that it was not contesting its liability for the years 1943-1949 in the 1942 suit, therefore the contest factor was not present and his case comes within our holdings in Atlantic Oil, Hanley, and Reading Co. cases, since each tax year must be treated as a separate unit. However, we cannot apply this reasoning to the instant case, since there is no dispute that the issues involved in the District Court for the 1942 tax year would be controlling and determinative as to the issues involved for years 1943 through 1949. Therefore, under the principles laid down in Commissioner v. Sunnen, 333 U.S. 591 (1948), taxpayer would be collaterally estopped from raising the same issues again. Consequently, by the fact that taxpayer was litigating the assessed deficiency for 1942, taxpayer was also contesting its liability for the years 1943 through 1949.

We hold that the remittances made by this taxpayer in 1952 and 1953 were not “overpayments] in respect of any internal revenue tax” but rather were mere deposits in the nature of a cash bond. Consequently, taxpayer is not entitled to statutory interest when they were refunded and his petition in Case No. 367-56 is dismissed.

B. Oase No. h19-56

As stated previously, taxpayer’s claims in this case are based on two separate claims for refund. First, taxpayer asserts that for fiscal years ending April 30, 1952 and 1953, the Commissioner erroneously disallowed deductions for interest allegedly paid in each of said years in connection with Federal income and excess profits taxes allegedly overpaid in the years 1952 and 1953. These are the same remittances which were the subject matter of Case No. 367-56 and which taxpayer claimed to be payments of tax. Taxpayer, in its income and excess profits tax returns for the years in issue, deducted as an interest expense that portion of the remittance which represented interest. The Commissioner disallowed the deduction and assessed a deficiency which was duly paid. Taxpayer filed a timely claim for refund. Six months having elapsed from the filing of said claim with no administrative determination on it, taxpayer brought suit in this court alleging an overpayment of tax resulting from the erroneous disallowance of the interest deduction.

Since in Case No. 367-56 we held that the remittances made by the taxpayer in 1952 and 1953 did not constitute “payments” of tax but were deposits in the nature of cash bonds in order to stop the running of interest, it follows, a fortiori, that the portion of the remittances which represented interest were not “paid” in those years and consequently could not be deducted as an interest expense in those years. Thus this portion of taxpayer’s claim for refund in Case No. 419-56 must be dismissed.

Second, taxpayer claims that the Commissioner erroneously and illegally did not allow it to use the “historical method” of computing its invested capital in determining its excess profits credit for the taxable years 1951 through 1954. Taxpayer claims that this denial resulted in an overpayment by it of taxes for the years in issue.

Taxpayer, on its original excess profits tax returns for the fiscal years ended April 30,1951 through 1954, computed its excess profits tax credit on the income method as was provided by section 435 of the 1939 Code. After the judgment of the TT.S. District Court for the Southern District of Indiana had resolved in taxpayer’s favor the amount of equity invested capital, in June 1955 taxpayer filed amended tax returns for fiscal years ending April 30, 1951 through 1954, using the “historical method” of computing its invested capital in determining its excess profits credit as provided by sections 436, 437, and 458 of the 1939 Code. The claims for refund were denied by the Commissioner and taxpayer has brought suit.

Defendant contends that taxpayer did not make a timely election to use the “historical method” for computing its invested capital. Specifically, defendant asserts that section 437(b) (1) requires a taxpayer, electing to compute its invested capital by the use of the historical method under section 458, to make such an election by attaching a statment to that effect to its return for the tax year in which the election is made. The defendant as an affirmative defense asserts that taxpayer’s claim for refund with respect to the taxable year ending April 30, 1951 was not timely filed. Taxpayer on brief admits that its claim for fiscal year ended April 30, 1951 was not timely filed and is effective only to the extent the refund is due to a carryback of the unused excess profits credit, if any, for the fiscal year ended April 30, 1952. See Internal Revenue Code of 1939, section 322(b) (6).

Thus, the only question remaining before us is whether the taxpayer, by filing amended returns, properly exercised the election provided in section 437 (b) (1) of the Internal Revenue Code of 1939 for years 1952 through 1954. We believe he did.

Under the Excess Profits Tax Act of 1950, 64 Stat. 1137, taxpayers have two possible elections to make in determining their excess profits credit. The first election is provided in section 434(a) of the 1939 Code which allows the excess profits credit for any taxable year to be computed under section 435 or 436 whichever produces a lesser tax. Section 435 sets forth a formula for computing the excess profits credit which is based on the income of the taxpayer. Section 436 provides a formula for computing the excess profits credits which is based upon the normal return on the invested capital of the taxpayer. There is no time limit placed upon the election set forth in section 434, to compute the excess profits credit either under the income method or the invested capital method.- Indeed the language of section 434 requires that the excess profits credit be computed under the method which “results in the lesser tax * * Similar language under the Excess Profits Act of 1940, section 712(a), 54 Stat. 975, 979, was held to offer no choice to the taxpayer and on the contrary required the use of that method which resulted in a lesser tax. Babcock & Wilcox Co. v. Pedrick, 98 F. Supp. 548 (S.D. N.Y. 1951), aff’d 212 F. 2d 645 (2d Cir. 1954).

In using the invested capital method, section 437 (b) (1) gives taxpayer an election in computing the amount of invested capital. One method is the “net assets” approach which views invested capital from the standpoint of the current balance sheet as the difference between total assets and total liabilities. The other, referred to as the “historical method,” ascertains invested capital by tracing it historically since the organization of the corporation, consisting generally of the capital paid into the business plus retained earnings. 7A Mertens, Law of Federal Income Taxation, section 42.194 (Rev. Ed.). Subsection 437(b) (1) prescribes the manner in which the election, as to the method to be used in computing invested capital, is to be made. It provides, in pertinent part, as follows:

Sec. 437. Invested, Capital Credit
* * * * *
(b) Invested Capital.—
(1) Election of taxpayer. — The invested capital for any taxable year shall be the adjusted invested capital determined under paragraph (2), except that if the taxpayer elects in its return for such tamable year to compute its invested capital under the provisions of section 458, the invested capital for such year shall be the historical invested capital determined under section 458. * * * [emphasis added]

Treasury Regulation 130, section 40.437-2 (c), sets forth the manner of making this election and the binding effects of such, as follows:

Sec. 40.437-2. Invested Capital.—
* $ * * $
(c) Election to use historical invested capital. If the taxpayer * * * elects on its return for the taxable year to compute its invested capital under the provisions of section 458, the invested capital of the taxpayer for such year shall tie the historical invested capital determined under section 458. A separate election must be made for each taxable year, and an election once made is irrevocable with respect to the taxable year. A taxpayer making such election may not thereafter compute invested capital for the taxable year under section 437 (b) (2). If the historical method is used on the return in determining the excess profits tax liability, the taxpayer will be deemed to have elected the historical method. A taxpayer which computes its excess profits tax on its return on the basis of a credit other than the invested capital credit may nevertheless elect the historical method for such year, in the event that the invested capital credit should subsequently become significant in the determination of its excess profits tax liability for such year, by attaching to its return for the taxable year a statement electing the historical method, [emphasis added]

The Government attaches special significance to the concluding phrase of the last sentence of this regulation. It argues that this regulation requires that the sole and exclusive means by which ail election to use the “historical method” is made, is by attaching to its original return for the taxable year a statement electing the historical method even if the taxpayer had used the “income method” of computing its excess profits credit. It cites as its sole authority directly on point 7A Mertens, supra, section 42.194. This authority interprets the above regulation as preventing a taxpayer from electing the “historical method” by the use of an amended return even though the return as originally filed employed the “income method” for computing the credit and the taxpayer subsequently desires to adopt the “invested capital” method. The Government’s interpretation of the regulation and statute is entirely premised on the meaning which it attaches to the words “to its return for the taxable year.” The Government takes the word “return” and gives it the meaning of “first return” and thus it argues that an election cannot be effectuated by an amended return. We cannot subscribe to such a narrow interpretation of the statute and regulation. Neither the statute nor the regulation speak in terms of “first return.” Indeed, a timely amended return has been held to be a “first return” under a statute requiring taxpayer to make an election in its first reimrn. Haggar Co. v. Helvering, 308 U.S. 389, 395 (1940). See also J. E. Riley Investment Co. v. United States, 311 U.S. 55, 58 (1940). Consequently, we must hold that taxpayer by filing timely amended returns electing to compute its excess profits tax credit by the use of the invested capital method, can validly elect to use the “historical method” to determine its invested capital for those years in which taxpayer timely filed amended returns, i.e., 1952,1953,1954.

It is clear that taxpayer can shift from the “income method” to the “invested capital method” or from the latter to the former at any time up to the expiration of the period of limitations for the years involved. Indeed he is entitled to use whichever method results in a lesser tax. Internal Eevenue Code of 1939, section 434(a). As stated above, this language under the prior act has been held to be mandatory. Babcock & Wilcox Co. v. Pedrick, supra. However, it appears that such a shift is not permitted within the invested capital method, since once taxpayer elects to use the “historical method” he is bound by the election and cannot use the “net assets” approach. This is required by section 437 (b) (1) and Treasury Begulation 130, supra. However, it appears that a shift from the “net assets” approach to the historical method would be permissible under the statute and regulation since the only irrevocable election mentioned is with respect to the “historical method.”

It would be anomalous indeed if taxpayer could shift within the “invested capital method” from the “net assets” approach to the “historical method” but could not, under the Government’s interpretation, elect to use the “historical method” when shifting from the “income method” to the “invested capital” method unless it elected to use the “historical method” to compute its invested capital on its original return. Moreover, if the taxpayer follows this procedure, it could never use the “net assets” approach to compute its invested capital since an election to use the “historical method” woud be irrevocable.

The regulation clearly contemplates that a taxpayer using the “income method” may in the future be able to shift to the “invested capital” method and elect to use the “historical method” in computing its invested capital if the invested capital credit should subsequently become significant. This is exactly the situation with which we are confronted. Taxpayer’s amount of equity invested capital for the years 1942 to 1949 was in dispute. As stated above, the “historical method” of computing invested capital ascertains invested capital by tracing it historically since the organization of the corporation. After the litigation which determined taxpayer’s invested equity was concluded, the invested capital credit became significant in the determination o.f its excess profits tax liability for those years not barred by the statute of limitations.

Consequently, to construe the statute and regulation as requiring an election “on the first paper filed as a return, as distinguished from the paper containing a timely amendment, which, when filed is commonly known as the return for the year for which it is filed, is to defeat” a statutory right to an election, by giving a too narrow construction of the statute “in violation of the most elementary principles of statutory construction.” Haggar Co. v. Helvering, supra at 396. [emphasis added]

Therefore, it is the opinion of the court that plaintiff is entitled to recover on this portion of Case No. 419-56, and the amount of recovery will be determined pursuant to Rule 38 (c).

FINDINGS OF FACT

The court, haying considered the evidence, the report of Trial Commissioner William E. Day, and the briefs and argument of counsel, makes findings of fact as follows:

1. The plaintiff is, and at all times hereinafter mentioned was, a corporation, duly organized and existing under the laws of the State of Indiana with its principal office and place of business at Evansville, Indiana, engaged in the business of selling, at wholesale, drugs, supplies, and related products.

2. The plaintiff’s claim is founded on the Internal Revenue Code of 1939, as amended, particularly sections 3770 and 3771.

3. On July 15, 1942, plaintiff filed its Federal income, excess profits and declared value excess profits tax returns for the fiscal year ended April 30, 1942. The tax liabilities reflected thereon were duly paid.

4. Subsequently, the Commissioner of Internal Revenue determined and assessed a deficiency in plaintiff’s excess profits tax for the same fiscal year in the amount of $3,208.72, plus interest thereon of $1,229.86. This assessed deficiency, with interest, was duly paid on February 21, 1949.

5. On May 31, 1949, plaintiff filed a claim for refund of the amount set forth in finding 4. The Commissioner took no formal action in respect of this claim. Accordingly, on April 3, 1950, plaintiff commenced an action, Civil No. 439, in the United States District Court for the Southern District of Indiana, Evansville Division, to recover the amounts set forth in finding 4. The issue in the suit concerned the computation of plaintiff’s invested capital under section 718 of the Internal Revenue Code of 1939 and, more particularly, the effect thereon of an earlier transaction in which plaintiff acquired and retired certain shares of its own stock.

6.In a report dated June 13, 1950, an examining officer of the Internal Revenue Service proposed the following adjustments to plaintiff’s tax liabilities for the periods indicated :

INCOME TAX
For Year Ending Deficiency Overassessment
4/30/43- $18, 877. 35
4/30/44_ 20, 769. 89
4/30/45- 15, 440. 34
4/30/46_ 10, 880. 23
4/30/47_ 25. 30
4/30/48- 342. 18
4/30/49_$160.30
$160. 30 $66, 335. 29
DECLAHED VALUE EXCESS PBOFITS TAX
For Year Ending Deficiency Overassessment
4/30/45_ $10. 16
4/30/46--- 102. 16
$112. 32
EXCESS PROFITS TAX
For Year Ending Deficiency Overassessmeni
4/30/43__ $36, 255. 57 0
4/30/44_ 40, 907.45 0
4/30/45___ 39, 552. 91 0
4/30/46_ 16,211. 18 0
$132, 927. 11 0

7. The proposed deficiencies set forth in finding 6 resulted principally from the same issue as that described in finding 5, in connection with the fiscal year ended April 30, 1942.

8. On September 14, 1950, plaintiff filed a protest to the adjustments proposed in the Revenue Agent’s report, dated June 13,1950, referred to in finding 6.

9. By a letter dated September 19,1950, a photostatic copy of which is attached to the stipulation of facts filed herein, identified as exhibit C, and incorporated herein by reference, plaintiff was advised by the Internal Revenue Service that consideration of and action on its protest, filed September 14, 1950, would be held in abeyance pending disposition of the suit described in finding 5, inasmuch as the suit presented the same issue as that involved in the tax years covered by the protest.

10. On February 13,1952, the United States District Court for the Southern District of Indiana entered judgment for the defendant in Civil No. 439.

11. On March 15, 1952, following the adverse decision of the District Court, plaintiff remitted to the then appropriate Collector of Internal Eevenue the sum of $75,000 in respect of the proposed deficiencies set forth in finding 6.

12. On April 30,1953, plaintiff remitted to the then appropriate Collector of Internal Eevenue in the amount of $12,444.13 in respect to said proposed deficiencies.

13. The judicial history of the 1942 litigation during the period following the decision of the District Court on February 13,1952, was as follows:

a. On February 23, 1952, ten days after the adverse decision, the plaintiff filed a Motion for Amendment of Findings of Fact, Conclusions of Law and Judgment. That same day the plaintiff filed a Motion for Eehearing and New Trial.

b. On April 10, 1952, the plaintiff filed an Amended Motion for Eehearing and New Trial and also an Amended Motion for Amendment of Findings of Fact, Conclusions of Law and Judgment.

c. For April 2,1953, the following docket entry appears:

The Court having considered the plaintiff’s Amended Motion for Eehearing and New Trial and Amended Motion for Amendment of Findings of Fact, Conclusions of Law and Judgment, together with briefs and oral arguments in support thereof, and being fully advised in the premises now overrules said Motions.

d. On May 29, 1953, Notice of Appeal was filed by the plaintiff.

14. On February 26, 1954, the Court of Appeals for the Seventh Circuit reversed the judgment of the United States District Court for the Southern District of Indiana, referred to in finding 10.

15. As to the net deficiency of $66,639.80 proposed in the Eevenue Agent’s Eeport of June 13, 1950, as referred to in finding 6 above, plaintiff never signed a waiver agreeing to tbe assessment of all or any part thereof; no statutory notice was ever issued as to all or any part thereof and no part of such proposed deficiency was assessed by the Commissioner of Internal Revenue.

16. Plaintiff, on November 24, 1954, filed a claim for refund for $87,444.13, which was allocated as $60,723.50 principal and $26,720.63 interest thereon, as overpayments for the years 1943 through 1949, together with interest thereon.

17. On February 25, 1955, plaintiff obtained a judgment against the United States in the United States District Court for the Southern District of Indiana under an amended order on mandate from the Court of Appeals for the Seventh Circuit.

18. By two checks dated March 2, 1955, plaintiff was refunded $72,937.87 and $12,444.13, both sums without interest. The check for $72,937.87 represented a refund, without interest, of the amount paid in of $75,000' made March 15, 1952, as referred to in finding 11, less a net deficiency, not here in controversy, of $2,062.43. The check for $12,444.13 represented a refund, without interest, of the amount paid in made on April 30, 1953, as referred to in finding 12.

19. On its Federal income and excess profits tax returns for the fiscal year ended April 30, 1952, plaintiff deducted the sum of $14,276.50 as interest expense. This deduction was claimed in relation to the $75,000 paid by the plaintiff, as referred to in finding 11.

20. On its Federal income and excess profits tax returns for the fiscal year ended April 30, 1953, plaintiff deducted the sum of $12,444.13 as interest expense. This deduction was claimed in relation to the $12,444.13 paid by the plaintiff as referred to in finding 12.

21. On its Federal income tax return for the fiscal period ended April 30,1955, plaintiff reported the sum of $26,720.63 as interest income. This sum was so reported in connection with the refunds made to plaintiff on March 2, 1955, as referred to in finding 18.

22. On April 15,1955, plaintiff was furnished an Internal Revenue Agent’s report of examination, dated April 4,1955, proposing a deficiency of $12,103.73 for the fiscal year ending April 30, 1952, due to the disallowance of the deduction for interest paid during said year in tbe amount of $14,276.50, as set out in finding 19.

23. Said Internal Eevenue Agent’s report, referred to in finding 21, also proposed a deficiency of $8,184.86 for the fiscal year ending April 80, 1953, due to the disallowance of the deduction of interest paid during said year in the amount of $12,444.13, as set out in finding 20.

24. By a letter dated July 19, 1955, the Commissioner determined that plaintiff owed deficiencies of $12,103.73 and $8,134.86 for the fiscal years ending April 30,1952, and April 30, 1953, respectively. These deficiencies were duly assessed and plaintiff, during the months of October, November, and December 1955, paid the Collector of Internal Eevenue the aggregate sum of $23,733.16, representing the deficiency of $12,103.73 for the fiscal year ending April 30, 1952, together with $2,381.23 of interest thereon, making a total of $14,484.96, and the deficiency of $8,134.86, for the fiscal year ending April 30, 1953, together with $1,113.34 of interest thereon, making a total of $9,248.20.

25. On October 3, 1956, plaintiff filed claims for refund, Form 843, for the fiscal years ending April 30, 1952, and April 30, 1953, in the amounts of $14,484.96 and $9,248.20, respectively, for the overpayments set out in finding 23. These claims are distinct and separate from the claims referred to in finding 35, below, and involved the issue of whether plaintiff was entitled to deductions in said years for interest expenses in the amounts of $14,276.50 and $12,444.13, respectively, as set out in findings 19 and 20.

26. More than 6 months elapsed between the filing of the claims for refund mentioned in finding 25 and the filing of plaintiff’s amended petition herein.

27. On July 16,1951, plaintiff filed its Federal income tax return, Form 1120, together with Schedule EP, Computation of Corporation Excess Profits Tax, for the fiscal year ending April 30, 1951, with the Collector of Internal Eevenue for the District of Indiana. On that return, plaintiff reported as follows:

Net income_$163,459.27
Excess profits credit computed under income method as shown on Schedule EP_ $98, 581.29
Income tax- $66, 780. 81
Excess profits tax_ 15,699.73
Total Tax_ $82,480.54

Subsequently, on March 17,1952, plaintiff filed an amended income tax return and Schedule EP, reporting thereon as follows:

Net income_$160, 707.90
Excess profits credit computed under income method as shown on Schedule EP- $99,331.55
Income tax_ $66,227.94
Excess profits tax- 14, 824.79
Total Tax_ $81, 052.73

28. On July 15,1952, plaintiff filed its Federal income tax return, Form 1120, together with Schedule EP, Computation of Corporation Excess Profits Tax, for the fiscal year ending April 30, 1952, with the Collector of Internal Revenue for the District of Indiana. On that return, plaintiff reported as follows:

Net income_$115, 893.57
Excess profits credit computed under income method as shown on Schedule EP_$103, 851.26
Income tax_ $54,422. 90
Excess profits tax- 3, 521.14
Total Tax_ $57,944.04

29. On July 15,1953, plaintiff filed its Federal income tax return, Form 1120, together with Schedule EP, Computation of Corporation Excess Profits Tax, for the fiscal year ending April 30, 1953, with the Collector of Internal Revenue for the District of Indiana. On that return plaintiff reported as follows:

Net income_$130, 655.15
Excess profits credit computed under income method as shown on Schedule EP_ $98,472. 82
Income tax_ $62,051.29
Excess profits tax_ 9,451.07
Total Tax_ $71,502.36

30. On July 15,1954, plaintiff filed its Federal income tax return, Form 1120, together with Schedule EP, Computation of Corporation Excess Profits Tax, for the fiscal year ending April 30, 1954, with the Director of Internal Revenue for the District of Indiana. On that return, plaintiff reported as follows:

Net income-$132,738.69
Excess profits credit computed under income method as shown on Schedule EP_$100,494. 32
Income tax_ $62, 663. 59
Excess profits tax_ 6, 348. 38
Total Tax_ $69, 011. 97

Subsequently, on September 9, 1954, plaintiff filed an amended income tax return and Schedule EP, reporting thereon as follows:

Net income_$129, 218. 57
Excess profits credit computed under income method as shown on Schedule EP_$100, 494.32
Income tax- $61, 376.12
Excess profits tax_ 5, 639. 53
Total Tax_ $67,015.65

31. At the time the plaintiff filed said returns, as set out in findings 28,29, and 30, for the fiscal years ending April 30, 1952,1953, and 1954, the amount of its equity invested capital was in controversy and an adverse decision on that very question had been rendered by the United States District Court for the Southern District of Indiana on February 13, 1952. Because of said controversy and said adverse decision, the plaintiff could not properly determine its excess profits credit by use of the historical method for said years, as provided in section 458 of the Internal Revenue Code of 1939, as amended.

32. Not until after the reversal of the judgment of the United States District Court for the Southern District of Indiana by the Court of Appeals for the Seventh Circuit on February 26,1954, and the subsequent judgment obtained by the plaintiff against the United States in the United States District Court for the Southern District of Indiana under an amended order on mandate from tbe Court of Appeals for the Seventh Circuit on February 25, 1955, could the plaintiff properly determine its excess profits credit by use of the historical method for the years ending April 30, 1952, 1953, and 1954.

33.After the judgment of February 25, 1955, of the United States District Court for the Southern District of Indiana had resolved in plaintiff’s favor the amount of equity invested capital, on June 16, 1955, plaintiff filed an amended income tax return for the fiscal year ending April 30, 1952, and Schedule EP, reporting thereon as follows:

Net income_$115, 577. 54
Excess profits credit computed under tlie historical invested capital method as shown on Schedule EP_$126, 611. 26
Income tax_ $54,258. 57
Excess profits tax_ 0
Total Tax_ $54,258. 57

34.After the judgment of February 25, 1955, of the United States District Court for the Southern District of Indiana had resolved in plaintiff’s favor the amount of equity invested capital, on June 16,1955, plaintiff filed an amended income tax return for the fiscal year ending April 30, 1953, and Schedule EP, reporting thereon as follows:

Net income_$130,036. 61
Excess profits credit computed under the historical invested capital method as shown on Schedule EP_$128, 973. 78
Income tax_ $61, 729. 65
Excess profits tax_ 576. 26
Total Tax- $62,305.91

35.After the judgment of February 25, 1955, of the United States District Court for the Southern District of Indiana had resolved in plaintiff’s favor the amount of equity invested capital, on June 16, 1955, plaintiff filed a second amended income tax return for the fiscal year ending April 30, 1954, and Schedule EP, reporting thereon as follows:

Net income_$129, 218. 57
Excess profits credit computed under the historical invested capital method as shown on Schedule EP_$131,182.24
Income tax_ $61,376.12
Excess profits tax- 0
Total Tax_ $61,376.12

36.Plaintiff filed claims for refund, Form 843, for each of the fiscal years ending April 30,1951, through April 30,1954, as follows:

Tear Date Amount Filed. Claimed
1951_ 4/30/55 $5,228.48
1952 _ 6/16/55 3,685.47
1953 _ 6/16/55 9,196.45
1954 _ 6/16/55 5,639.53

Each of these claims is distinct and separate from the claims referred to in finding 25, and involves the issue of whether plaintiff could compute its invested capital credit under section 458 of the Internal Eevenue Code of 1939, as amended. Moreover, the claims for refund filed for the years 1952 and 1953 included certain amounts resulting from additional property tax deduction which are not dependent upon the computation of invested capital credit.

37. On November 21, 1955, the Commissioner of Internal Kevenue formally disallowed plaintiff’s refund claims for the fiscal years ending April 30,1952, April 30, 1953, and April 30, 1954.

38. On April 12,1956, the Commissioner of Internal Eev-enue formally disallowed plaintiff’s refund claim for the fiscal year ending April 30,1951.

CONCLUSION OF LAW

Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that plaintiff is not entitled to recover in Case No. 367-56, and the petition is, therefore, dismissed.

In Case No. 419-56, plaintiff is not entitled to recover on the first claim therein. Plaintiff is entitled to recover on the second claim, and the amount of recovery will be determined pursuant to Eule 38 (c) of the Eules of this court.

In. accordance with the opinion of the court and a memorandum report of the commissioner as to the amount due thereunder, it was ordered on January 18, 1965, that judgment be entered for plaintiff for $20,924.98, together with statutory interest as provided by law. 
      
       Section 3771(a) of the Internal Revenue Code of 1939, provides that “[i]nterest shall be allowed and paid upon any overpayment in respect of any internal revenue tax at the rate of 6 per centum per annum.”
     
      
       By two checks dated March 2, 1955, taxpayer was refunded $72,937.87 and $12,444.13, both sums without interest. The check for $72,937.87 represented a refund of the amounts ($75,000) remitted in March 15, 1952, less a net deficiency, not here in controversy, of $2,062.43. The check for $12,444.13 represented a refund of the amount remitted on April 30, 1953.
     
      
       Compare Atlantic Oil Producing Co. v. United States, 92 Ct. Cl. 441, 35 F. Supp. 766 (1940) with Busser v. United States, 130 F. 2d 537 (3rd Cir. 1942).
     
      
       Current Tax Payment Act of 1943, 57 Stat. 126, 140.
     
      
       For a more narrow construction of the statutory enactment see Murphy v. United States, 78 F. Supp. 236 (S.D. Cal. 1948) where the court stated that Congress intended that section 3770,(c) only applied to situations where taxpayer in good faith overpaid his taxes in its tax return, or the Commissioner made an erroneous assessment. See also Manee v. United States, 97 F. Supp. 993 (S.B. N.Y. 1951).
     
      
       A contrary result under similar facts was readied in Busser v. United States, 130 F. 2d 537 (3d Cir. 1942); Moses v. United States, 28 F. Supp. 817 (S.D. N.Y. 1939). These holdings seem to be based on the false premise that no tax was due at the time the remittances were made.
     
      
      
         This method permits the taxpayer to take 'the average of its income as adjusted during the base periods (1946-1949) and to apply that amount as 'a credit in order to determine the amount of excessive profits subject to taxation under the Excess Profits Tax Act of 1950, 64 Stat. 1137.
     
      
       Section 434(a) provides as follows:
      Sec. 434. Ewoess Profits Credit. — allowance.
      (a) Domestic Corporations. — In the ease of a domestic corporation, the excess profits credit for any taxable year shall be an amount computed under section 435 or section 436, whichever amount results in the lesser taw under this subehapter for the taxable year for which the fax under this subehapter ie being computed, [emphasis added]
     
      
       Contra, P-H, Excess Profits Tax under Internal Revenue Codte of 1939, par. 45,776.
     