
    381 F. 2d 1001
    MISSOURI-ILLINOIS RAILROAD COMPANY v. THE UNITED STATES
    [No. 29-64.
    Decided July 20, 1967]
    
      
      Gerald, J. O^Rourke, Jr., attorney of record, for plaintiff.
    
      E. Alan Moorhouse, with whom was Assistant Attorney General Mitchell Rogovin, for defendant.
    Before CoweN, Chief Judge, Laramore, Dljrfee, Davis, Collins, Shelton and Nichols, Judges.
    
   Pee Curiam :

This case was referred to Trial Commissioner William E. Day with directions to make findings of fact and recommendation for conclusions of law. The commissioner has done so in a report and opinion filed on February 28,1967. On March 30,1967, defendant filed a notice of intent to except which defendant withdrew on June 13,1967. On June 14, 1967, plaintiff filed a motion requesting that the court adopt the commissioner’s findings of fact, opinion and recommended conclusion of law. Since the court agrees with the commissioner’s findings, opinion and recommended conclusion of law, as hereinafter set forth, it hereby grants plaintiff’s motion of June 14, 1967, and adopts the commissioner’s findings, opinion and recommended conclusion of law as the basis for its judgment in this case without oral argument. Plaintiff is, therefore, entitled to recover and judgment is entered for plaintiff in the sum of $2,219.03 together with interest as provided by law.

OPINION OF COMMISSIONER

Day, Commissioner:

This is a suit by the plaintiff for the recovery of income taxes paid to the defendant for the 1957 taxable year. The pretrial conference memorandum shows that the parties agreed: that in 1957, the cars of plaintiff railroad were transported to the Mexican border, at which point the cars were delivered to Mexican railroads; that the Mexican railroads paid rental to the plaintiff for the period during which the cars were in Mexico; that the rental payments (freight car rentals) were subject to a tax imposed by the Eepublic of Mexico, and that this tax was accrued against the plaintiff in 1957 and was paid in that year into the Mexican fisc.

The sole issue remaining for determination is whether the tax referred to above, imposed by the Republic of Mexico is an income tax, excess profits tax, war profits tax, or a tax in lieu thereof, so as to entitle the plaintiff to a foreign tax credit against its United States income tax liability. During the briefing, defendant conceded facts relating to the only other issue in the case, i.e., the possible application of the limitation provisions of section 901 of the Internal Revenue Code of 1954, so this issue is no longer a matter in controversy.

The plaintiff is a common carrier by rail, and operates in interstate commerce within the United States. It filed its federal income tax return for 1957 and timely paid the tax shown thereon to be due (amounting to slightly in excess of a total of 1.1 million dollars).

On the tax return for 1957, the plaintiff claimed the sum of $4,955.18 as a tax credit (under section 901 of the 1954 Internal Revenue Code, as amended) against its 1957 federal income tax liability. The Commissioner of Internal Revenue, upon audit of the plaintiff’s federal income tax return for 1957, disallowed the payments into the Mexican fisc as a credit against the federal income tax otherwise due from the plaintiff for 1957, and instead, allowed this Mexican tax payment (in the amount of $4,622.98) as a deduction from gross income, in arriving at the plaintiff’s taxable income for 1957.

The plaintiff timely filed its claim for refund of this difference. The claim for refund was rejected by the Commissioner and this suit is timely filed.

When freight cars belonging to one railroad are used by another railroad, a daily rental is charged by the owner to the user. This is called the per diem rate. A special per diem rate applied to the rental by Mexican railroads of freight cars while in Mexico, owned by United States railroads. Prior to January 1,1954, the Mexican railroad using a freight car in Mexico, owned by United States or Canadian railroads, paid to such owner the Mexican per diem rate minus a percentage (usually ten percent) which it was required to withhold under the Mexican income tax law. The amount so withheld was turned over by the Mexican railroad to the treasury of Mexico, with the owner of the car receiving proper credit for such amount withheld. At the end of the year, the Mexican firm of attorneys for the United States owner of freight cars, filed a Mexican income tax return on behalf of such owner. The amount of tax on such return was computed under a graduated income tax scale.

On December 31,1953, a new Mexican income tax law was published which became effective the next day (January 1, 1954).

The full text of the decree is not in evidence. Plaintiff’s exhibit 13 is a notarial certificate of a duly certified notary public in Mexico City, in the Spanish language, containing those provisions of such law regarded by the plaintiff as pertinent to the issues here to be determined. (Exhibit 14 is a copy of an English translation thereof.) Apparently, the defendant has considered that all pertinent provisions are included, because no other exhibit as to the language of the Mexican income tax law was offered by that party.

Article 1 provides that income tax is payable on the revenue derived from capital, work, or the combinations of both. Under Article 2, income is to be considered as all kinds of proceeds, profits, gains, rentals, interest * * * and in a general way all amounts received in cash, securities in kind or in credits which increase the possessions of a taxpayer. It is further stated that the taxable income is determined in each schedule. Under Schedule 1, Commerce, those who carry out acts of commerce are obligated to pay the tax. The basis (Article 26th) of the tax in this schedule is the difference between the income received by the taxpayer during a period and the deductions authorized by law. Article 28th under Schedule 1, Commerce, provides:

Article 28th. — When because of the nature and the characteristics of the operations carried out by the taxpayers it is not possible, by ordinary procedures, to determine with exactness the taxable income, the Department of the Treasury may enter into agreements for the determination of the tax base.

Pursuant to the above-quoted provision, an agreement was entered into between the tax authorities of the Mexican Government, certain Mexican railways and the United States and Canadian railroad companies which regularly delivered freight cars to the Mexican border for carriage in Mexico by Mexican railroads. A full translation of the agreement is contained in finding 19. The substance of the agreement is: that the rental charges of the United States and Canadian firms sending their freight cars into Mexico were subject to the payment of income tax; that the payment of the tax by such United States and Canadian railroads was to be accomplished by withholding from the total accrued rentals the difference between the Mexican per diem car rental rate and the basic per diem car rental rate; that the Mexican railroads were authorized and compelled to withhold the tax involved, were to pay the amounts withheld to the Mexican Government, and pay the accrued balance (the basic per diem rental) to the United States and Canadian railroads.

One small Mexican railroad, not a party to the tax agreement referred to above, also rented freight cars from the plaintiff. In the absence of any tax agreement otherwise providing for the withholding of and payment of the Mexican income tax, the tax on the income derived from the rental of such freight cars was ten percent of the gross rental. Since the full amount of the tax credit claimed for the rental of freight cars to this nonsignatory Mexican railroad is only $1.58 of the $4,622.98 claimed by the plaintiff as a tax credit on its 1957 United States tax return, this will be regarded as de minimus and will not be further considered.

For 1957, the plaintiff reported to the Mexican Government in its tax return filed March 24,1958, per diem rentals from Mexican sources (identifying each source) totaling $15,295.45, of which $4,622.98 had been withheld by the various Mexican railroads so identified. The Mexican railroads, which were parties to the tax agreement referred to above, were required by the Mexican law to pay the amounts withheld by them to the Mexican treasury, and the amounts so withheld were so paid.

The defendant now contests the fact of payment, but having formally stipulated to such fact, defendant will not be heard to contest it, since a stipulation is tantamount to proof.

Much of the defendant’s argument is devoted to the disposition by the Mexican Government of the proceeds of the tax which plaintiff paid. This does not appear to be helpful to a determination of the real question here — Is the tax imposed by Mexico on the rental of freight cars an income tax, or a tax in lieu of an income tax?

In the absence of the tax agreement discussed earlier, the plaintiff would have been required by the terms of the Mexican income tax law for the year in suit (1957) to pay an income tax on the taxable profit under Schedule 1, Commerce, arising from the rental of its freight cars while in Mexico. This taxable profit is measured by Article 26 of Schedule 1, as the difference between the income received during the period and the deductions authorized by law. We are told by evidence in the record (by way of the expert testimony of a qualified Mexican lawyer) that those deductions are generally similar to deductions permitted under the United States income tax law. While reporting difficulties might have arisen, it appears beyond question that had the plaintiff refused to sign the tax agreement which it did sign, plaintiff would have been required to pay an income tax to Mexico on profit it earned there in renting freight cars. Having paid an income tax there, plaintiff would have been entitled to deduct the amount paid in Mexico as a foreign income tax paid creditable against the amount due for United States income tax for the period involved. Because it was considered difficult to determine on the one hand, and verify on the other, the taxable net income of the railroads renting cars to Mexican railroads, the plaintiff and other railroads in the United States and Canada agreed in writing with the Government of Mexico and Mexican railroads to a substitute method of paying the tax due such Government from the plaintiff and other railroads on account of the rental of their freight cars while in Mexico to Mexican railroads. The plaintiff paid, pursuant to that agreement, the tax found to be due to the Government of Mexico on account of such car rental for the year 1957. It follows then, that such tax paid to Mexico was either an income tax or a tax in lieu of a tax upon income, and therefore, creditable under section 901 of the Internal Eevenue Code of 1954.

The court has recently considered this issue in a series of cases involving Canadian premiums taxes paid by United States life insurance companies. See Prudential Insurance Company of America v. United States, 162 Ct. Cl. 55, 319 F. 2d 161 (1963); Prudential Insurance Company of America v. United States, 167 Ct. Cl. 598, 337 F. 2d 651 (1964) and The Equitable Life Assurance Society of the United States v. United States, 177 Ct. Cl. 55, 366 F. 2d 967 (1966). In all of the above cases, a similar result obtained.

The plaintiff is, therefore, entitled to deduct the full amount of tax paid to the Mexican Government on account of the rental (in 1957) of its freight cars in Mexico, as a credit against United States income tax otherwise payable for that year.

FINDINGS of Fact

1. The Missouri-Illinois Railroad Company (hereinafter referred to as “the plaintiff”) is a corporation organized and existing under the laws of the State of Missouri with its offices located at 210 North Thirteenth Street, St. Louis, Missouri.

2. The plaintiff is, and at all times here pertinent was, engaged in the business of operating as a common carrier by rail in interstate commerce subject to the jurisdiction of the Interstate Commerce Commission (hereinafter referred to as “ICC”).

3. The plaintiff has uniformly filed its federal income tax returns in conformity with the method upon which its corporate books of account were kept, i.e., on the basis of the calendar year ending December 31, and pursuant to the accrual method of accounting.

4. The plaintiff at all times pertinent, including but not limited to the tax year 1957, has kept its corporate books of account in accordance with the rules and regulations prescribed by the ICC.

5. The plaintiff timely filed its federal income tax return for 1957 with the United States District Director of Internal Revenue, St. Louis, Missouri, and paid the tax shown by such return to be due for the year 1957 in the following amounts and on or about the dates indicated:

Year 1951
Date of payment: Amount paid
September 15, 1957_ $129,600.00
December 15, 1957- 129, 600.00
March 15,1958_ 445, 000. 00
June 15,1958_ 405,845.11
Total_ 1,110, 045.11

Of the total foregoing tax paid for 1957, only $4,423.83 has ever been refunded to the plaintiff by the Secretary of the Treasury or his delegate.

6. During the year 1957 certain rolling stock owned by the plaintiff had been operated by Mexican railroads over lines located within the Republic of Mexico and from such operation and use the plaintiff received rental payments. These rental payments were subject to a tax imposed by the Republic of Mexico upon such amounts earned in that country, which tax was accrued against the plaintiff in 1957 and was paid in the same year into the Mexican fisc.

7. On the plaintiff’s United States income tax return for 1957, the sum of $4,955.18 was claimed (under section 901 of the 1954 Internal Revenue Code, as amended) as a tax credit against the 1957 federal income tax liability. Such credit was equal to the tax accrued against and paid by the plaintiff in 1957, into the Mexican fisc, on the rolling stock rentals derived during 1957 from sources within Mexico, and said gross rentals were reported in the plaintiff’s United States taxable income, undiminished by any Mexican charges or taxes.

8. The Commissioner of Internal. Revenue, upon audit of the plaintiff’s federal income tax return for 1957, disallowed the payments into the Mexican fisc as a credit against the United States income tax otherwise owed by the plaintiff for 1957. Instead, the Commissioner allowed this tax (in the amount of $4,622.98) as a deduction from gross income in arriving at the plaintiff’s taxable income for 1957. The snm of $4,955.18 was accrued by the plaintiff in its accounts for 1957 as the amount of Mexican tax paid. However, the actual Mexican tax paid was $4,622.98. The foreign tax allowed as a deduction was reduced to the latter amount by the Commissioner of Internal Revenue, upon audit of the plaintiffs 1957 income tax return.

9. An appropriate claim for refund (on form 843) was timely filed by the plaintiff on or about April 5, 1963, with the United States District Director of Internal Revenue, St. Louis, Missouri.

10. This suit is timely brought, i.e., more than six months after the timely filing of the refund claim, and within two years of the date of mailing by the Commissioner of his statutory notice of the claim’s rej ection.

11. The plaintiff did not have any railroad or other operations in Mexico in 1957.

12. In the past the practice had been for a Mexican railroad which used a car of United States or Canadian ownership to pay to the car owner the Mexican per diem rate minus a percentage of that rate (usually ten percent) which it was required to withhold under the Mexican income tax law. The amount withheld by the Mexican railroad was turned over to the Mexican treasury, and the United States or Canadian car owner received credit for the tax payment. At the end of the taxable year, Messrs. Basham, Range & Correa filed a Mexican income tax return on behalf of the car owner, and the car owner paid the difference between the amount withheld by the Mexican railroad and the full amount for which it was liable under the graduated income tax scale.

13. On December 31, 1953, a new Mexican federal income tax law was published which took effect on January 1, 1954.

. 14. This Mexican statute, entitled “Ley del Impuesto Sobre la Renta” (which in English is “Income Tax Law”), was applicable to the rentals earned by the plaintiff in Mexico in 1957.

15. Schedule VI of this Mexican statute (entitled “Imposition of Capital”), in part imposes a tax on income derived from:

XIV. — Rentals, prizes, royalties and retributions of all kinds which are received as owners or holders of personal property or of rolling stock from the persons to whom they grant the use or exploitation of the same without transferring the ownership thereof.

Under Article 129th, the lessor of rolling stock is entitled to certain deductions. However, paragraph XIV provides that those taxpayers to which paragraph III of Article 6th refers, who receive income for any of the reasons set forth in paragraph XIV, shall pay the tax in Schedule I. The plaintiff is a taxpayer within paragraph III of Article 6th. Schedule I provides in Article 26th that the basis of the tax in said schedule shall be the taxable profit, which is the difference between the income received by the taxpayer during a period and the deductions authorized by the law. Article 28th of Schedule I provides that when because of the nature and characteristics of the operations carried out by the taxpayer it is not possible, by ordinary procedures, to determine with exactness the taxable income, the department of the treasury may enter into agreements for the determination of the tax base.

16. Under Schedule I of the Mexican statute, deductions are permitted which are very similar to deductions in the United States statute.

17. The Mexican treasury department considered that it was difficult to determine the taxable income of the foreign companies leasing rolling stock into Mexico and to check and verify the expenses and taxable income of these companies. Therefore, the Mexican Government decided to enter into agreements, under Article 28 of the income tax law, for the payment of the tax.

18. On December 31, 1954, an agreement was executed by representatives of United States and Canadian railroads, of the Government of Mexico and of the Government-owned railways of Mexico, with respect to the payment of the tax on the income received by the United States and Canadian railroads from Mexican railroads. This agreement recited that certain United States and Canadian railroads (including the plaintiff herein) received income from sources located in the [Republic of Mexico from the rental of rolling stock to the National Eailways of Mexico and the Mexican Eailway, which income was held to be subject to the Mexican income tax law. The agreement thereafter provided that the income received from tbe rental of rolling stock while in the Republic of Mexico, by the United States and Canadian railroads which do not operate in Mexico through agencies or branches, was subject to payment of Mexican income tax under Schedule VI of the income tax law; that the Mexican railways were authorized and obligated to retain the tax for which the United States and Canadian railroads were liable, and to account to the Mexican treasury for the amount so retained; that the amounts retained shall be equal to the tax due; that the payment of the amounts so retained, to the Mexican Government, would be in full satisfaction of the obligations of the United States and Canadian railroads for Mexican income taxes on the rolling stock rentals; that each United States and Canadian railroad was obligated to file an income tax return setting forth all income from the Mexican railroads for the rental of rolling stock and the total Mexican income tax due thereon, and that the department of the treasury and public credit of the Republic of Mexico agreed that the retention of the difference between the basic per diem rate and the Mexican per diem rate would fully satisfy the obligations of each of the United States and Canadian railroads for Mexican income taxes on rolling stock rentals. A similar agreement was executed July 18, 1955, covering rentals received from some of the privately owned railroads in Mexico. These privately owned lines constitute a very small part of the railroads in Mexico, with the main railroads being agencies of the Mexican Government. The plaintiff filed the required Mexican income tax for 1957.

19. The agreement was executed by representatives of United States and Canadian railroads, the Government of Mexico and the National Railways of Mexico and Mexican Railway, relating to the manner of payment of the income tax obligations of the United States and Canadian railroads (including the plaintiff). Its signatories were W. T. Faricy, President of the American Association of Railroads (on behalf of American and Canadian railroads), the Minister of Finance and Public Credit (on behalf of the Government of Mexico) and the General Manager (on behalf of the National Railways of Mexico and Mexican Railway, which were Government-owned). Faricy signed the agreement on October 6,1954, and the Mexican officials signed it on December 31,1954. A correct translation of the full text of the agreement, omitting the declarations as to its execution and signatures, is as follows:

AGREEMENT reached on one part by the Ministry of Finance and Public Credit, represented by the Minister himself Lie. Antonio Carillo Flores, the American and Canadian Railroads mentioned in enclosure “A”, represented by Mr. W. T. Faricy,— President of the Association of American Railroads, and the — National Railways of Mexico and Mexican Railway, represented by the General Manager, Li-cenciado Roberto Amoros, with a view to outline the basis to determine and withhold the income tax payments derived from revenues received through rental of — American and Canadian rolling stock while in the Republic of Mexico.
STATEMENT
Some American and Canadian Railroads receive revenues from sources located in the Republic of Mexico through renting of rolling stock to the National Railways of Mexico and Mexican Railway, said revenue now sub j ect to the Income Tax Law in Mexico.
The Code of Rules on Per-Diem of Freight is outlined in — Circular No. T-225, its supplements and reissues, published by the Association of American Railroads. This Code, in Rule 1, establishes the rate for the use of freight cars which is to be paid for each natural day, and in the future these rates will be called “Per-Diem Basic Rates”. Note No. 1 of Rule 1 establishes the per-diem rate for the use of freight cars of American and Canadian ownership while in the Republic of Mexico. This rate, in the future, will be called “Mexican Per-Diem Rate”, which is higher than the basic Per-Diem rate, which difference consists of the amount of the Mexican Income Tax due through revenues for account of rental of rolling stock, which the owners need to pay to the Mexican Government.
Article 201 of the Law decrees the obligation to withhold and pay the accrued tax to persons making payments to subjects of- — -the tax located abroad from revenues that are taxable under said Law.
With authority provided for in Article 28 of the Income Tax Law and with a view to comply with the tax payment accrued through the rental of rolling stock, this Agreement is reached with the — following provisions:
CLAUSES:
1. The revenue received by American and Canadian Eailroads not operating in Mexico through agencies or branches derived from rental of rolling stock while in the Eepublic of Mexico, is subject to the payment of income tax, as per Item VI.
2. The National Eailways of Mexico and Mexican Eailway, with authority provided for in Article 201 of the Income Tax Law, are — compelled to withhold the tax accrued by the American and Canadian-Eailroads on payments derived from rental of rolling stock while in the Eepublic of Mexico. The withholding is to be made on the total of the tax accrued and, therefore, the American and Canadian Eailroads are exempt from the obligation decreed in Article 169 of- — Eulings of the Income Tax Law, which in essence is the payment of the tax through the cancellation of stamps on receipts issued to — the National Eailways of Mexico and Mexican Eail-way for taxes derived from the rental of rolling stock while in the Eepublic of Mexico.
3. The National Eailways of Mexico and Mexican Eailway agree to pay without discounts to each of the American and Canadian Eailroads listed on enclosure “A” signed by each party and included in this — Agreement, the basic Per-Diem rate in effect at the time it is due, to retain the difference between the basic Per-Diem rate and the Mexican Per-Diem rate, and to pay the amounts withheld to the Mexican Government as the total obligations of the American and Canadian Eail-roads, in accordance with the Income Tax Law of Mexico regarding the rental of rolling stock.
4. The American and Canadian Eailroads are to file with the Ministry of Finance and Public Credit during the month of January of each year a declaration of Income Tax earned the previous year, wherein all of the revenues received by the Mexican Eailroads through the rental of rolling stock are to be mentioned and the total of the tax due on same.
5. It is agreed that the declarations of Income Tax filed individually by the American and Canadian Eail-roads listed on enclosure “A”, will include a statement of the total of the taxes mentioned as earned and withheld by the National Railways of Mexico and Mexican Railway, in accordance with Articles 201 and 28 of the Income Tax Law of Mexico. It is also agreed that the revenue for the rental of rolling stock mentioned in said declarations will be computed at the basis of the Mexican Per-Diem rate.
6. The Ministry of Finance and Public Credit of the Republic of Mexico agrees that the withholding of the difference between the Basic Per-Diem rate and the Mexican Per-Diem rate mentioned in — Clause 3, will cover completely all obligations of each of the American and Canadian Railroads listed on enclosure “A” of the Income Tax Law of Mexico on rental of rolling stock. The Ministry agrees, in addition, to furnish to each of the American and Canadian Railroads through a receipt or other form, a statement certifying said obligations.
7. The Ministry of Finance and Public credit will grant the National Railways of Mexico and the Mexican Railway for as long as — this obligation of payment of tax on rental of rolling stock exists, a subsidy equal to the amount of taxes withheld.
8. It is expressly agreed that in the case when some of the American or Canadian Railroads forming part of this agreement withdraw from same, said railroad or railroads will have the right to do it through advance notice in writing, stating its determination, 60-days in advance, to the Association of American Railroads, the Ministry of Finance and Public Credit of the Republic of Mexico and — the National Railways of Mexico and Mexican Railway, with the understanding that this will not destroy the other portions of this agreement, which will continue in effect.
9. It is expressly agreed that the Agreement will have a retroactive character to January 1954, in view of the fact that negotiations between all parties took place from that — date when actually the Agreement was put into effect.
^ iji %

20. On July 18, 1955, a similar agreement was signed by Faricy on behalf of the United States and Canadian railroads and the Minister of Finance and Public Credit of Mexico relating to the manner of payment of the Mexican income tax on the income received from the lease of rolling stock to four privately owned Mexican railway firms.

21. On March 24, 1958, the plaintiff filed the required Mexican income tax return for 1957.

22. The rate for the use of freight cars in effect in the United States for 1957 was $2.75 per car per day (hereinafter referred to as the basic per diem rate) and the rate in effect in Mexico was $3.40 for the month of January and $3.95 for the balance of 1957 (hereinafter referred to as the Mexican per diem rate).

23. For 1957, the plaintiff reported to the Government of Mexico gross per diem rentals from Mexican sources totaling $15,295.45, of which $4,622.98 had been withheld by the Mexican railroads as tax, and the net remaining balance remitted to the plaintiff.

24. The tax withheld by the Mexican railroads which were parties to the tax agreements was computed, in accordance with such agreements, as the difference between the basic per diem rate and the Mexican per diem rate. In the case of railroads not parties to the agreements, the tax was ten percent of the gross rental.

25. In the absence of any tax agreements, specific provisions of the Mexican income tax statute provided for the withholding of ten percent of the gross rentals. In such instances, while the rental income would also be taxed under Schedule I of the Mexican income tax law, deductions would be permitted (such as salaries, overhead, depreciation and professional services).

26. At least one Mexican railroad, which was not a party to either of the tax agreements, leased cars of the plaintiff during 1957. This Mexican railroad withheld tax from the gross rentals earned by the plaintiff, in accordance with the law, and such withholding was reported by the plaintiff as tax in its Mexican income tax return for 1957.

27. The Mexican railroads which were not parties to the tax agreements were obligated to pay the amount of the tax withheld from the gross rentals earned, directly to the Mexican treasury department.

28. The Mexican income tax law does not provide for a subsidy to the Mexican railroads, but this law does hold those obligated to withhold amounts as tax, liable at all times jointly with the taxpayer for payment of the tax.

29. The plaintiff’s gross operating revenues for 1957 were $5,962,689, and its taxable income as determined on audit by the Commissioner of Internal Revenue was $2,139,833, the latter amount including the gross Mexican per diem of $15,295.45, but with the allowance of the Mexican tax of $4,622.98 as a deduction.

30. At pretrial the parties agreed that one of the issues to be tried was: If the tax is a creditable tax, how much of such tax paid by the plaintiff may be taken as a foreign tax credit, applying the limitations of section 904 of the Internal Revenue Code? This involves a determination of the amount of expenses incurred by the plaintiff attributable to •the earning of its Mexican income. The plaintiff at trial, adduced much proof on this issue, including expert testimony. The defendant, in its objections to and comments on plaintiff’s proposed findings of fact, now concedes that the plaintiff had sufficient taxable income from Mexican sources to receive the full credit without limitation. In view of this concession, no findings will be made as to this issue.

31. The tax imposed by the Mexican income tax law upon the per diem freight rentals earned by the plaintiff while its freight cars were in Mexico, and which tax was withheld by the Mexican railroads for the account of the Mexican treasury, is a foreign income tax within the meaning of the United States Internal Revenue Code.

32. The plaintiff has, accordingly, overpaid its income taxes by the difference between the allowance of the Mexican income tax paid as a foreign tax credit and the allowance of such tax as a deduction from gross income. Plaintiff is, therefore, entitled to judgment for this difference (in the amount of $2,219.03) from the date of payment, with interest according to law.

CONCLUSION or 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 entitled to recover on the foreign tax credit issue, and it is therefore adjudged and ordered that the plaintiff recover of 'and from the United States the sum of two thousand two hundred nineteen dollars and three cents ($2,219.03) together with interest as provided by law. 
      
      The opinion, findings of fact, and recommended conclusion of law are submitted under the order of reference and Enle 57(a).
     
      
       Freight cars.
     
      
      
         Although the amount of $4,955.18 was accrued In Its account, the actual tax paid Mexico was $4,622.98.
     
      
       Insofar as pertinent, this was the rental rate charged in the United States by united States railroads to other United States railroads.
     
      
       This is reflected by plaintiff’s exhibit 5, the plaintiff’s informational Mexican tax return for 1957.
     
      
       The defendant now disputes the facts contained in this finding, although in response to pretrial order #1, it admitted (in response to plaintiff’s statement of non-controverted facts) the truth of plaintiff’s statement in words practically identical with this finding. In addition, the pretrial conference memorandum sets forth certain agreed facts, paragraph 6 of which is substantially identical to this finding. The defendant has, therefore, stipulated at pretrial the truth of the facts contained in this finding, has not asked to be relieved of such stipulation and is bound by it.
     
      
      A firm of attorneys in Mexico City.
     
      
      Referred to in the forepart of the preceding finding.
     
      
      This obviously means “United States.”
     
      
       Three page list of railroads, including plaintiff, not quoted here.
     