
    CONSOLIDATED PAPER CO. v. THE UNITED STATES
    [No. L-477.
    Decided May 31, 1932.
    Motion for new trial overruled December 5, 1932]
    
      Mr. Jesse I. Miller for the plaintiff.
    
      Mr. Assistant Attorney General Charles B. Rugg for the-defendant.- Messrs. Charles R. Pollard and H. C. Clark were on the brief.
   Littleton, Judge,

delivered the opinion:

Upon the facts in this case with reference to the organization of the plaintiff and the acquisition by it of the assets, through the consolidation of the Boehme & Rauch Company and the Monroe Binder Board Company, we are of opinion that the plaintiff is the proper party to prosecute this suit, and that the maintenance of the suit by the plaintiff is not prohibited by section 3477 of the Revised Statutes. The facts show that the plaintiff acquired the assets and assumed the liabilities of the Rauch Company and the Binder Board Company, as the result of a consolidation. Although certain assets of the consolidated companies, including claims of the nature here involved, had been eliminated from the inventory values used as the basis for issuing preferred stock, the common stock of the plaintiff bore an endorsement to the effect that such assets, if and when realized, should be distributed solely among the holders of its common stock issued in exchange for stock of the company which had owned such assets. The common stock certificates of the plaintiff each bore an additional endorsement showing whether the same was issued in exchange for stock of the Rauch Company or the Binder Company. The plaintiff is therefore the owner of the claim and if there should be recovery it will be credited to the so-called “ Boehme & Rauch account,” and if there should eventually be a net credit in that account, the amount thereof will be disbursed as a special dividend to the then holders of the plaintiffs stock issued in exchange for the Boehme & Rauch stock. The right to participate in any recovery in this case depends therefore upon the ownership of the stock of the plaintiff and has no connection with the original owner of Boehme & Rauch stock, as such. We think this question is controlled by the decisions in Seaboard Air Line Railway v. United States, 256 U. S. 655, and Kingan & Co. v. United States, 44 Fed. (2d) 447.

The plaintiff contends with reference to the last question that the credit of overpayments for 1914 to 1919, inclusive, against the tax of $103,347.78 for 1920 was allowed by the commissioner October 31, 1927, on which date the collection of the 1920 tax was barred; that the commissioner’s first allowance on October 12, 1926, was canceled and was therefore void and of no effect as a collection of the 1920 tax.

The defendant insists that since the credit in this case was allowed after the enactment of the revenue act of 1926, the signing of the schedule of overassessments on September 20, 1926, constituted the allowance of the credit within the meaning of section 1116 of the revenue act of 1926 rather than the signing of the schedule of refunds and credits, Form 7805-A, and that since none of the entries made on the schedule of overassessment on this form was erased or deleted, there is no merit in the claim of the plaintiff that there was no allowance of credit until the commissioner signed a supplemental schedule of refunds and credits on October 31, 1927. The claim of the defendant is predicated upon the language of subdivision (b) (2) of section 1116, which provides that the term “ date of the allowance of the refund ” means, in any case, the first date on which the commissioner signs the schedule of overassessments in respect thereof.

We are of opinion that the position taken by the defendant on this point is correct. Prior to the enactment of the revenue act of 1926 it was held in Girard Trust Co. v. United States, 270 U. S. 163, that a refund or credit was allowed when the commissioner approved the schedule of refunds and credits prepared and forwarded to him by the collector of internal revenue after the collector had made appropriate entries in the schedules of overassessments theretofore signed by the commissioner and transmitted to the collector. That case arose under section 1324 (a) of the revenue act of 1921, which provided that upon the allowance of a claim for refund or credit, interest should be paid under certain circumstances. Section 1019 of the revenue act of 1924 provided that upon the allowance of a refund or credit, interest should be paid thereon to the date of the allowance. Section 1116 of the revenue act of 1926, however, provided that upon the allowance of a credit or refund, interest should be paid in the case of a refund to the date of the allowance, and in the case of a credit to the due date of the amount against which the credit is taken, but if the amount against which the credit is taken is an' additional assessment then to the date of the additional assessment. The reason for making the change with reference to the payment of interest upon an overpayment credited against a tax due for another year and the allowance of interest on an overpayment to be refunded was that the taxpayer should receive interest on an overpayment only during the time that he was not indebted to the Government for a like amount. Riverside & Dan River Cotton Mills v. United States, 69 C. Cls. 70, 37 Fed. (2d) 965. The language of section 1116 is that “ upon the allowance of a credit or refund * * * interest shall be * * * paid on the amount of such credit or refund * * * from the date such tax * * * was paid to the date of the allowance of the refund, or in the case of a credit, to the due date of the amount against which the credit is taken, but if the amount against which the credit is taken is an additional assessment * * * then to the date of the assessment of that amount.”

Subdivision (b) (2) of this section provides that “ As used in this section the term ‘ date of the allowance of the refund ’ means, in the case of any income, war-profits, or excess-j>rofits tax, the first date on which the commissioner signs the schedule of overassessments in respect thereof.” Subdivision (b) of this section also provides that “ This section shall be applicable to any refund paid, and to any credit taken, on or after the date of the enactment of this act, even though such refund or credit was allowed prior to such date.”

The plaintiff contends that the definition of “ the date of the allowance of the refund ” is specifically limited to that term as used in section 1116 for the purpose of determining the last interest date in the case of a refund and that a different date is prescribed in the case of a credit; that the section plainly lays down a rule for the computation of interest and does not, in any sense, change the situation as to when a refund is allowed or a credit taken, as a matter of substantive law.

We think, however, that Congress intended by subdivision (b) (2) of section 1116 to fix the date of the allowance of an overpayment in the case of any income, war-profits, or excess-profits tax, whether the amount allowed was to be refunded or credited, and, in so doing, it definitely fixed the date of such allowance as the first date on which the commissioner signs the schedule of overassessments in respect thereof. In defining the term “ date of allowance of the refund,” Congress was construing the word refund in the broad sense of an overpayment rather than in the technical sense of a repayment to the taxpayer by check of an overpayment, where the taxpayer was not indebted for a tax for any other year, or the repayment by check of the excess of overpayment credited. This construction is supported by Report No. 52 of the Senate Committee on Finance, 69th Congress, 1st session, and Conference Report No. 356, page 56, 69th Congress, 1st session, in which it was stated that “ In the case of refunds, interest is allowed ‘ to the date of the allowance of the refund.’ In practice, the commissioner first signs a schedule of overassessments, which is sent to the collector in order to determine whether the overpayment should Toe credited or refunded. The committee amendment proposes to fix as the date on which a refund is allowed the date on which the commissioner signs the schedule of over assessments.” (Italics supplied.)

The language of subdivision (a) of section 1116, considered as a whole, seems clearly to indicate that there should be no distinction between the date of allowance of a credit and the date of allowance of a refund. The committee reports, explaining the intention and purpose of subdivision (b) (2) of section 1116, support this interpretation. In reality, the allowance of a credit is the allowance of a refund. In either case that which is allowed is an overpayment. When a credit is allowed there is technically and legally the allowance of a refund, but, instead of paying the same by check, the amount thereof is applied in satisfaction of a tax due the Government by the particular taxpayer for another year or period. In actual practice, refunds and credits are allowed by the commissioner on the same schedule and in the same manner, and the procedure in both cases is the same.

In this case the commissioner signed the schedule of over-assessment September 20,1926, and the amount of $103,347.78 thereof, which had been paid, was applied by the collector on October 1, 1926, to the satisfaction of the outstanding tax indebtedness of $114,753.38 of the plaintiff on the original return for 1920. The credit was therefore allowed September 20, 1926. As stated in United States v. Swift & Co., 282 U. S. 468, “ This construction of the act brings about uniformity in administration, as it makes the allowance of credits and refunds simultaneous.” The proviso contained in the first deficiency act, approved .February 28, 1927, hereinbefore quoted, required the report to the Congressional Joint Committee on Internal Revenue Taxation only with respect to “ any claim allowed ” by the commissioner, and, in order to make such report, it was not necessary for the commissioner to cancel his allowance of the overpayment to be credited or repaid by check.

Plaintiff urges that this court held in Atlas Powder Co. v. United States, 69 C. Cls. 558, 40 Fed. (2d) 136, that a credit is allowed within the meaning of section 1116 of the revenue act of 1926 when the commissioner signs the schedule of refunds and credits. The question in that case was whether the credit ivas taken on the date the commissioner signed the schedule of overassessments or the date on which he signed the schedule of refunds and credits, or the date on which he mailed to the taxpayer the certificate of overassessment. Both the schedule of overassessments and the schedule of refunds and credits involved in that case were signed and approved by the commissioner prior to the enactment oí the revenue act of 1926. That case is not, therefore, authority for the contention made by the plaintiff in this case.

In view of our conclusion that the credit was allowed under section 1116 of the revenue act of 1926 when the commissioner signed the schedule of overassessments on September 20, 1926, it is not necessary to discuss the claim of the plaintiff that a credit is allowed under the 1926 act when the commissioner signs the schedule of refunds and credits, and that the relisting of the overpayments and credits, which first appeared on the schedule of refunds and credits duly signed by the commissioner within the period of limitation within which the tax for 1920 could be legally collected, on a supplemental schedule which the commissioner signed October 31, 1927, had the effect of making that date the date of the allowance of the credit.

. The petition is dismissed. It is so ordered.

Whaley, Judge; Williams, Judge; GbeeN, Judge; and Booth, GMef Justice, concur.

ON MOTION EOR A NEW TRIAL

Littleton, Judge,

delivered the opinion of the court:

Plaintiff makes a motion for a new trial and insists that the conclusion of the court in this case that the credit was allowed by the commissioner under section 1116 of the revenue act of 1926 when he signed the first schedule of over-assessment is contrary to the decisions in United States v. Swift & Company, 282 U. S. 468; United States v. Boston Buick Co., 282 U. S. 476; Pottstown Iron Co. v. United States, 282 U. S. 479; and Atlas Powder Co. v. United States, 69 C. Cls. 558, 40 Fed. (2d) 136; it is also insisted that, in view of section 1104 of the revenue act of 1932, the credit in this case was not allowed within the meaning of section 1116 of the revenue act of 1926 until the commissioner finally approved the schedule of refunds and credits.

The court considered the cases cited and the provision of the revenue act of 1932 referred to, and concluded that they had no controlling effect upon the question presented in the instant case. Particular stress is laid upon the statement by this court in Atlas Powder Co. v. United States, supra, that “ a credit is taken within the meaning of section 1019 of the revenue act of 1924 and section 1116 of the revenue act of 1926 when it has finally been made effective, and this does not occur until the Commissioner of Internal Revenue has finally determined that there has been an overpayment, which can be credited, and has approved the schedules certified to him by the collector of internal revenue.” This statement must be viewed in the light of the question involved in that case in which the commissioner had signed both the schedule of overassessments and the schedule of refunds and credits prior to the enactment of section 1116 of the revenue act of 1926. The certificates of overassess-ments, however, were not mailed to the plaintiff until after the effective date of the 1926 act.

The Government contended that the credit was taken within the meaning of the 1926 act when the certificates of overassessments were mailed to the taxpayer, and the plaintiff contended that the credit had been accomplished under the revenue act of 1924 and that the credit had been taken when the collector made the entries on his books pursuant to the schedule of overassessment. Both parties in that case contended that the date on which a credit was “ taken ” was a date other than the date on which the commissioner signed the schedule of overassessments or the schedule of refunds and credits.

In addition to the statement above quoted upon which the plaintiff relies, this court pointed out that both the plaintiff and the Government were mistaken in the positions taken and that “ the law takes the credit when the commissioner has jserformed the act necessary to make the credit effective under the statute, and, in the absence of any statutory provision to the contrary, the credit is taken and is made effective when the commissioner finally acts by approving the schedule certified to him by the collector.” In the Atlas Powder Company case the court did not intend to hold, and it is clear that the opinion in that case did not hold and is not authority for the proposition that where the commissioner signs both the schedule of over assessments and the schedule of refunds and credits after the effective date of the revenue act of 1926, the credit is allowed and taken when he signs the second schedule.

Section 1104 of the revenue act of 1932 provides that “ Where the commissioner has (before or after the enactment of this act) signed a schedule of overassessments in respect of any internal revenue tax imposed by this act or any prior revenue act, the date on which he first signed such schedule (if after May 28, 1928) shall be considered as the date of allowance of refund or credit in respect of such tax.” We think this section was not a legislative construction of the revenue act of 1926 that a refund or credit, under section 1116 of that act, should be considered as allowed on the date on which the commissioner signed the schedule of refunds and credits as was the case under section 1019 of the revenue act of 1924. After the enactment of the revenue act of 1928 the Treasury Department changed its practice and no longer used a schedule of refunds and credits and the only schedule prepared and signed by the commissioner was the schedule of overassessments. Section 1104 of the 1932 act was not intended to change the rule with reference to the date of allowance of a refund or credit provided by section 1116 of the 1926 act or to construe that section, as providing that the approval of the schedule of refunds and credits should be the date of the allowance. The revenue act of 1926 had not been so construed either by the Treasury Department or by the courts, and the provision in the 1932 act was only intended, as stated in Committee Report No. 1492, 72nd Congress, 1st session, page 28, to make “ it clear that credits or refunds are to be considered as allowed on the date on which the commissioner first signed the schedule of overassessments, provided the schedule was signed after May 28, 1928.”

The motion for a new trial is overruled. ■

Whaley, Judge; Williams, Judge; Geeen, Judge; and Booth, Chief Justice, concur.  