
    MAGNOLIA PETROLEUM CO. v. THE UNITED STATES
    
    [No. E-11.
    Decided February 14, 1927]
    
      On the Proofs
    
    
      Internal-revenue tax; payment of interest on refunds; section 1019, revenue act of 1924; interest payments after date of act.— Where the final determination and allowance and payment of interest on a refund of internal-revenue taxes occurs after the passage of the revenue act of 1924, section 1019 thereof governs as to the interest to be allowed and paid.
    
      The Reporter's statement of the case:
    
      Mr. Barry Mohun for the plaintiff. Mr. W. H. Frauds was on the briefs.
    
      Mr. Alexander H. McGormich, with whom was Mr. Assistant Attorney General Herman J. Galloway, for the defendant.
    The court made special findings of fact, as follows:
    I. Plaintiff is a joint-stock association, organized April 24, 1911, in the State of Texas, with its principal office in the city of Dallas, in said State. The following individuals, each of whom is a citizen of the United States, constitute plaintiff’s duly chosen board of trustees: E. R. Brown, R. Waverley Smith, E. E. Plumly, W. C. Proctor, Courte-nay Marshall, F. V. Faulkner, A. C. Ebie, D. C. Stewart, B. H. Stephens, and W. H. Francis. Plaintiff has always rendered its returns under the Federal taxing statutes on a calendar-year basis.
    II. On March 27, 1917, plaintiff filed with the collector of internal revenue at Austin, Tex., its return of income for the calendar year 1916, under the revenue act of 1916, 89 Stat. 756, which return indicated a tax liability of $206,079.86. Plaintiff paid the aforesaid tax to the collector of internal revenue at Austin, Tex., on June 14, 1917.
    On June 15, 1917, plaintiff filed with the aforesaid collector an amended income-tax return for the year 1916, which indicated an additional income tax for said year in the amount of $9,772.86. Thereafter the additional taxes shown by said amended return were the subject of an additional assessment, which was made by the Commissioner of Internal Revenue, of income taxes due by the plaintiff for the year 1916, and said additional income taxes in the amount of $9,772.86 were paid under the aforesaid additional assessment, and pursuant to notice of “ additional assessment,” by plaintiff to the collector of internal revenue at Austin, Tex., on August 7, 1917.
    Thus the total income taxes paid by plaintiff for the year 1916 were in the amount of $215,852.72. Said taxes were not paid under protest.
    III. On June 17, 1918, plaintiff duly filed with the aforesaid collector of internal revenue its second amended income tax return for the year 1916, which indicated that plaintiff had overpaid its income tax for that year in the amount of $30,217.11. The aforesaid second amended return showed changes and adjustments, which resulted in additions to income on account of accrued earnings from some of the oil leases purchased by plaintiff from the McMan Oil Co. as of December 1, 1916, and there were deductions from income shown by said amended return on account of the purchase of the aforesaid leases because of depreciation and depletion both of properties acquired from the McMan Oil Co. and other properties. The said second amended return also contained adjustment of operating expenses, depreciation on property not used directly in the production of oil, and adjustments in respect of loss on sale of bonds below par. The aforesaid second amended return was attached to and made part of a claim for refund of $30,217.11, which claim for refund was duly filed by plaintiff with the Commissioner of Internal Revenue on June 17, 1918.
    IY. On September 20,1920, plaintiff filed with the collector of internal revenue at Dallas, Tex., a third amended return for the year 1916 which indicated plaintiff’s tax liability for said year to be in the amount of $101,287.28. The aforesaid third amended return was attached to and made a part of a refund claim which was filed with the collector of internal revenue at Dallas, Tex., on September 20, 1920, as aforesaid, and was for the refundment of $114,565.44 “ or such greater amount as is legally refundable.”
    Y. On May 18, 1918, plaintiff duly filed with the collector of internal revenue at Austin, Tex., its income and war excess-profits tax returns for the calendar year 1917 under the revenue act of 1916 as amended by the revenue act of 1917, approved October 3, 1917, 40 Stat. 300. Immediately thereafter, because of the settlement by the Bureau of Internal Revenue of the tax liability of plaintiff for the years 1912, 1913, and 1914, and consequent readjustment of invested capital, it became necessary to prepare amended returns for the year 1917 which plaintiff filed with the aforesaid collector of internal revenue on May 27, 1918. The plaintiff’s total tax liability shown by the aforesaid amended returns was $1,966,600.87, which was paid to the collector of internal revenue at Austin, Tex., on June 15, 1918. The payment was made involuntarily, under duress, and in order to avoid distraint proceedings by the collector against plaintiff’s property and the payment of said taxes by plaintiff was accompanied by a written specific protest which set forth in detail the basis of and reasons for such protest. Such protest was in words and figures as follows:
    “ The Magnolia Petroleum Company hereby protests against the payment of income taxes which are alleged to be imposed by the act approved September 8, 1916, as amended by the act approved October 3, 1917, and the war income tax act embodied in said act approved October 3, 1917, and the war excess-profits tax act embodied in said act approved October 3, 1917. The said company protests against the payment of said taxes in the amount of $1,966,600.87, or m any other amount at this time or any other time, and said taxes are paid by the company under protest, involuntarily and under duress, in order to avoid the penalties as prescribed in said acts for nonpayment which the collector of internal revenue for this district states he will enforce against said company in the event payment is not made. The grounds, among others, of such protest and involuntary payment, are that said acts are unconstitutional and void, their terms ambiguous and uncertain; that the Magnolia Petroleum Company is not a corporation, joint-stock company, or association or insurance company within the meaning and intendment of said acts; the regulations which have been attempted to be prescribed under said acts are not authorized thereby and that the method of applying the rates of taxation as is attempted in article 16 and in other articles of said regulations under the war excess-profits tax law is arbitrary and unjust, and without sanction in said act. The said company hereby formally notifies the said collector of internal revenue and the Commissioner of Internal Revenue of its purpose and intention to institute suit or suits against them or either of them or against the United States, as the said company may be advised, for the recovery of said sum or any part thereof, together with interest and all proper costs.
    “ Magnolia Petroleum Company,
    [seal.] “ By E. R. Brown, Vice President.
    
    “Attest:
    “W. C. Proctor,
    
      “Assistant Secretary?
    
    Thereafter an error was discovered by plaintiff in the amount of interest received by it in the year 1917, and a second amended return containing a correction of such error and indicating additional tax for that year in the amount of $5,390.17, was filed with the aforesaid collector of internal revenue on January 28, 1919, but plaintiff never received notice of assessment or demand for such additional tax and plaintiff never paid such additional tax under said second amended return.
    VI. On June 12, 1920, plaintiff duly filed with the aforesaid collector of internal revenue claim for the refundment of the aforesaid payment of $1,966,600.87. The reasons given in support of said claim were as follows:
    “ 1. Said Magnolia Petroleum Company is a joint stock association organized by contract and not under any statute.
    “ 2. That the payment of $1,966,600.87 was made involuntarily under duress and accompanied by formal written protest.
    “ 3. Said amount was illegally and erroneously assessed and collected in that the statutes imposing the tax are ambiguous and uncertain in terms and are unconstitutional and void; and further, the regulations which have been attempted to be prescribed under said acts are not authorized thereby, and particularly the method of applying the rates of taxation, as is attempted in article 16 and in other articles of said regulations under Title II of the act approved October 3,1917, is arbitrary and unjust and without sanction under said act.
    “ 4. That the Magnolia Petroleum Company is not a corporation created under the law or laws of the United States or of any State, Territory, or District thereof, within the meaning of the definition of the terms “ domestic ” and “ corporation,” as used in section 200 of the' war excess-profits tax law of October 3, 1917.
    “ 5. Under the terms of Treasury Decision 2956 defining ! discovery5 this company is entitled to a refund of a large part of the aforesaid taxes, the exact amount of which is not known to the company at this time, but the subject is being thoroughly investigated, and as soon as the figures are definitely ascertained a proper showing in respect thereof will be made to the department in accordance with prescribed rules and regulations.”
    VII. Thereafter, to wit, on September 20, 1920, plaintiff filed with the aforesaid collector of internal revenue another refund claim on account of the year 1917 for the sum of $1,005,519.42, “ or such greater amount as is legally refundable.” There were attached to such claim and made a part thereof, third amended income and excess-profits tax returns for the calendar year 1917, which indicated a total income and war excess-profits tax liability on the part of plaintiff for the year 1917 in the amount of $961,081.45.
    YIII. Shortly after plaintiff, on September 20, 1920, filed its aforesaid refund claims for the years 1916 and 1917 of which claims a third amended return for each of such years was made a part, plaintiff, by its proper representatives, actively negotiated with officials of the Bureau of Internal Revenue to secure settlement of its taxes for the years 1916 and 1917 and refunds of overpayments which it had made for said years.
    IX. Plaintiff furnished to the proper representatives of the Bureau of Internal Revenue all necessary facts and data in support of its refund claims theretofore filed for the years 1916 and 1917 and in a manner acceptable to the officials of said bureau and in accordance with its rules and regulations.
    X. Under date of October 8, 1923, the Commissioner of Internal Revenue advised plaintiff in respect of its refund claims for the years 1916 and 1917 as follows:
    “Tour claims for refund of $30,217.11 and $114,565.44 income tax for 1916 and $1,005,519.42 and $1,966,600.87 income and excess-profits taxes for 1917 have been examined, and the results thereof are shown in the attached schedules.
    “ The claims are based upon additional amounts claimed for depletion and depreciation for the years involved.
    “ The claim for refund of $114,565.44 income taxes for the year 1916 will be allowed for $105,571.95 and rejected for $8,993.49 and the claim for refund of $1,966,600.87 income and excess-profits tax for 1917 will be allowed for $1,131,075.86 and rejected for $835,525.01. The claims for refund of $30,217.11 income taxes for 1916 and $1,005,519.42 income and profits taxes for the year 1917 will be rejected in full.
    “The rejection of the claims in the above amounts will appear officially in the next schedule to be approved by the commissioner.”
    XI. The Commissioner of Internal Revenue upon facts duly furnished him by plaintiff with its refund claims, or separately, and upon facts agreed upon, allowed plaintiff’s refund claims on October 11, 1923, as follows:
    “Year 1916, claim filed September 20, 1920, for $114,-565.44, allowed for $105,571.95.
    “ Tear 1917, claim filed June 12, 1920, for $1,966,600.87, allowed for $1,131,075.86.”
    XII. Thereafter, on November 22, 1923, plaintiff received from the Commissioner of Internal Revenue certificate of overassessment in respect of the year 1916, bearing number 118905, and in the amount of $105,571.95. Such certificate of overassessment is in words and figures as follows:
    
      Teeasuet Department,
    Oeeioe oe Commissioner op Internal- Revenue,
    Income Tax Unit,
    
      Washington.
    
    IT: NR: G-LWM-4.
    Certificate of overassessment.
    Number: 118905.
    Allowed: $105,571.95.
    Rejected: $
    Magnolia Petroleum Company,
    
      Dallas, Texas.
    
    Sirs: An audit of your income-tax returns for 1916, Form 1031, and examination of related claim (if any), indicates that the amount of tax assessed to you for this year was in excess of the amount due:
    Original assessment (April, 1917; page 29, line 10)-$206,079.86
    Additional assessment (June, 1917; page 6, line 20)- 9, 772.86
    Total assessment- 215, 852. 72
    Tax liability- 110,280.77 ’
    Overassessment_ 105,571.95
    The adjustments resulting in the above overassessment are fully outlined in schedules attached to a separate communication to you.
    This overassessment is allowed in connection with the examinations of a claim for refund filed by you within the required time as prescribed by section 3228 of the Revised Statutes as amended by section 1316 of the revenue act of 1921.
    The amount of the overassessment will be applied as follows:
    1. If the tax has not been paid, the amount will be abated by the collector of internal revenue for your district.
    2. If the tax has been paid, the amount of the overpayment will either be credited against the tax due (if any) on income returns of years other than that on which the overpayment was made; or
    3. The balance (if any) of the overpayment is refunded to you by a check of the Treasury Department, forwarded herewith.
    Interest status will be determined as soon as necessary data can be assembled.
    Respectfully,
    J. Gr. Bright,
    
      Deputy Commissioner.
    
    By S. Alexander,
    
      Head, of Division.
    
    
      Schedule number: 7264.
    District: 2d Texas.
    Amount abated: $
    Amount credited: $
    Year:
    Account number: 6/176/20 4/17/29/10.
    Amount refunded: $105,571.95.
    Instructions executed, Oct. 30, 1923.
    Geo. C. HopeiNs,
    
      Collector Int. Rev.
    
    The above certificate of overassessment was accompanied by Treasury warrant payable to the order of plaintiff by which $105,571.95 on account of income taxes for the year 1916 were refunded to plaintiff.
    XIII. On November 22, 1923, claimant received from the Commissioner of Internal Revenue certificate of overassessment in respect of the year 1917, bearing No. 16,366, and in the amount of $1,131,075.86. Such certificate of over-assessment is in words and figures as follows:
    Oeeice op Commissioner op
    Internal Revenue,
    Income Tax Unit,
    Treasury Department,
    
      Washington.
    
    IT: NR: G-LWM-4.
    Certificate of overassessment.
    Number: 16366.
    Allowed: $1,131,075.86.
    Rejected: $
    Magnolia Petroleum Company, Dallas, Texas.
    
    Sirs: An audit of your income-tax return for 1917, Forms 1031 and 1103 and examination of related claims (if any), indicates that the amount of tax assessed to you for this year was in excess of the amount due:
    Original assessment (May, 1917, page 625, line 2)_$1,966,600.87
    Tax liability_ 835,525.01
    Over-assessment- 1,131,075. 86
    The adjustments resulting in the above overassessment are fully explained in schedules attached to a separate communication to you.
    This overassessment is allowed in connection with the examination of a claim for refund filed by you within the required time as prescribed by section 3228 of the Revised Statutes as amended by section 1316 of the revenue act of 1921.
    The amount of the overassessment will be applied as follows:
    1. If the tax has not been paid, the amount will be abated by the collector of internal revenue for your district.
    2. If the tax has been paid, the amount of the overpayment will either be credited against the tax due (if any) on income returns of years other than that on which the overpayment was made; or
    3. The balance (if any) of the overpayment is refunded to you by check of the Treasury Department forwarded herewith.
    Interest status will be determined as soon as necessary data can be assembled.
    Respectfully,
    J. G. BRIGHT,
    
      Deputy Commissioner.
    
    By S. Alexander,
    
      Head of Division.
    
    Schedule number: 7264.
    District: 2d Texas.
    Amount abated: $
    Amount credited: $
    Year:
    Account number: 5/18/625/2.
    Amount refunded: $1,131,075.86.
    Instructions executed, Oct. 30, 1923.
    Geo. C. Hopkins,
    Collector, Int. Rev.
    
    The above certificate of overassessment was accompanied by Treasury warrant payable to the order of plaintiff by which $1,131,075.86 on account of income and excess-profits taxes for the year 1917 were refunded to plaintiff.
    XIV. The two aforesaid certificates of overassessment for the years 1916 and 1917 were accompanied by Treasury warrant payable to the order of the plaintiff in the sum of $1,236,647.81, which represented refundment of income taxes for the year 1916 in the amount of $105,571.95 andj of income and excess-profits taxes for the year 1917 in the amount of $1,131,075.86.
    Thereafter, to wit, under date of January 18, 1924, the Commissioner of Internal Revenue wrote to plaintiff’s counsel in. respect of interest on tbe aforesaid refundments as follows:
    “Reference is made to your personal request for the allowance of interest on amounts refunded to the above-named taxpayer for the years 1916 and 1917.
    “ Bureau records show that certificate of overassessment No. 118905 was issued in the amount of $105,571.95 for 1916 and certificate of overassessment No. 16366 was issued in the amount of $1,131,075.86 for 1917 and both of such amounts were listed and allowed as refunds on Schedule IT: A 7264.
    “ Section 1324 (a) of the revenue act of 1921 authorizes the payment of interest on amounts refunded only upon the allowance of refund or credit claims. It is, therefore, held that if a refund is made subsequent to the filing of a refund claim that part of the overassessment which is based upon the ground or basis of the claim constitutes an allowance of the claim in that amount (upon which interest is payable), but that interest is not allowable upon any amount allowed other than on the basis of the claim, the latter amount being-allowed under the general authority of section 252 of the revenue act, without reference to a claim having been filed.
    “ Examination discloses that allowances of claims were made as follows:
    
      1916 taxable year
    
    Amount of overassessment allowed upon the basis of the second amended return and claim dated June 6, 1918 (filed June IS, 1918), for the refund of $30,217.11_ $22,360.22
    Amount of overassessment allowed upon the basis of the third amended return and claim dated July 12, 1920 (filed September 20, 1920), for the refund of $114,666.44_ 82, 853. 32
    Amount of overassessment allowed upon the basis of points not raised in elaims_ 368. 41
    Total overassessment for 1916_ 105, 571. 95
    
      1917 taxable year
    
    No part of the overassessment was allowed on the basis of claim dated June 9, 1920, for the refund of $1,996,600.87.
    Amount of overassessment allowed upon the basis of third amended return for claim dated July 12, 1920 (filed October 26,1920), for the refund of $1,005, 519.42. 105, 556.34
    Amount of overassessment attributable to points not raised in claims- 1, 025, 519. 52
    Total overassessment for 1917_ 1,131,075. 86
    
      It therefore appears that interest is allowable as follows :
    On $22,360.22 from December 18, 1918 (six months after the claim was filed) to October 11, 1923 (the date of allowance of the claim)_ $6,457.20
    On $82,853. 32 from March 20, 1921 (six months after the claim was filed), to October 11, 1923_ 12, 714.01
    Total interest dne on refund for 1916_ 19,171.21
    On $105,556.34 from April 26, 1921 (six months after the claim was filed), to October 11, 1923 (the date of allowance)_ 15, 565. 94
    Total interest due on refunds for 1916 and 1917__ 34, 737.15
    “ If you take exception to the ruling made herein, or a review is desired, you may, within thirty days from the date of this letter, file an appeal, with a brief or memorandum in support thereof.”
    XY. Under date of February 9, 1924, the Commissioner of Internal Revenue addressed a communication to plaintiff through its counsel as follows:
    “ Reference is made to bureau letter dated January 18, 1924, upon the subject of interest payable under section 1324(a) of the revenue act of 1921 to the above-named taxpayer on refunds of overpayments of taxes for the years 1916 and 1917.
    “ In connection with your subsequent verbal statement to the effect that a larger amount of interest is payable than indicated in said letter, for the reason that in your opinion the taxes were paid under protest, you are informed that the returns filed for the year 1916 do not indicate that a protest of any character was submitted in connection with the payment for that year. The receipts heretofore filed with the bureau by the taxpayer for payments of $206,-079.86 and $9,772.86 showing the ‘ paid” stamp of the collector dated June'14, 1917, and August 7, 1917, respectively, do not bear any notation to the effect that these payments were made under protest.
    “ With respect to the year 1917, the receipt heretofore filed with the bureau by the taxpayer for the payment of $1,966,-600.87 showing the ‘ paid ’ stamp of the collector dated June 29, 1918, contains a rubber-stamp impression ‘paid under protest.’ The files of the bureau contain a document marked ‘ copy,’ a copy of which is transmitted herewith. In this document it is stated that protest is made against the payment of taxes in the amount of $1,966,600.87. This protest was apparently filed with the first amended return for 1917, inasmuch as an office record copy of that return shows a tax liability in said amount. The essential part of the protest is as follows:
    “ ‘ The grounds among others of such protest and involuntary payment are that said acts are unconstitutional and void, and their terms ambiguous and uncertain; that the Magnolia Petroleum Company is not a corporation, joint-stock company or association or insurance company within the meaning and intendment of said acts; the regulations which have been attempted to be prescribed under said a,cts are not authorized thereby and that the method of applying the rates of taxation as is attempted in article 16 and in other articles of said regulations under the war excess-profits tax law is arbitrary and unjust, and without the sanction of said act.’
    
      “ It will be noted that this protest is general in terms and does not contain a specific or detailed basis. Inasmuch as this document is not specific and does not set forth in detail the basis of and reasons for such protest, thus advising the Government specifically of the taxpayer’s basis for alleging that the tax had been improperly assessed and collected, and further does not specify the basis upon which the refund for the year involved was made, it is held that such protest is insufficient under the terms and provisions of section 1324(a) of the revenue act of 1921, to require the payment of interest from the date of payment of the tax upon any part of the amount refunded for 1917.”
    XYI. Under date of July 2, 1924, the Commissioner of Internal Revenue addressed a communication to plaintiff through its counsel as follows:
    “ Reference is made to your letter dated February 23, 1924, transmitting an appeal to the commissioner from the conclusions reached by this office in connection with proposed allowances of interest on refunds of taxes overpaid for the years 1916 and 1917 by the above-named taxpayer.
    “ Upon consideration of the appeal, it is held that interest is payable in the amounts indicated in the letter from this office dated January 18, 1924, except that in view of the fact that the claim for the refund of taxes paid for 1917 was apparently filed September 20, 1920 (instead of October 26, 1920, as indicated in said letter), interest is payable on $105,556.34 from March 20, 1920, six months after such date.
    “ The interest found due, therefore, amounts to $19,171.21 on the refund of 1916 taxes, and $16,197.84 on the refund of 1917 taxes.
    “ In connection with the claim that interest should be paid upon the amounts refunded from the respective dates of payment of the taxes, you are informed that bureau files contain no copy of a specific protest with regard to the payment of the 1916 taxes, and it is held that the protest under which it is contended that the 1917 taxes were paid is not a specific protest setting forth in detail the basis of and reasons for such protest. The language used in the protest in question is general, and the taxpayer merely contends that the regulations and the method of applying the rates of tax are arbitrary and unjust, but no attempt was made to specify in what manner the regulations or the method of imposing the tax was improper. Such a general statement is not a sufficient protest within the meaning of section 1324(a) of the revenue act of 1921.
    “With respect to the contention that the claims filed, especially those attached to the third amended returns, covered the grounds upon which the refunds were made you are informed that a claim must set forth specifically the grounds upon which the refund is sought, and a claim covering certain items can not be subsequently amended to include others. After a careful review, it is held that the analysis of the allowance of claims included in bureau letter dated January 18, 1924, is correct, and that interest has been properly computed with respect to such part of the refunds attributable to the points raised by the taxpayer in the claims filed. The fact that the certificates of overassessment recited that the refunds were based upon the taxpayer’s claim is not controlling for interest purposes. Accordingly the taxpayer’s appeal was denied with respect to all points except the date upon which the claim for the refund of 1917 taxes was filed, as indicated above.
    “ The interest found due will be scheduled for allowance and payment.”
    XVII. On the 21st day of July, 1924, plaintiff received Treasury warrant payable to its order bearing date July 18, 1924, in the amount of $35,369.05. There accompanied said Treasury warrant notices of interest allowance for the years 1916 and 1917. The notice of interest allowance for the year 1916 was in words and figures as follows:
    TeeasuRV Department,
    Internal Revenue Bureau,
    Washington, D. G.
    
    Received July 21, 1924. H. M. M.
    Form No. 7782.
    Form approved by Comptroller General IT. S. March 21, 1922.
    
      NOTICE OF INTEREST ALLOWANCE
    49734.
    Claim No. 118905 : District 2 — Texas : Date of (schedule) allowance October 11, 1923. Schedule I. T. A-7264; Item IT: Ad: R: CC: ECW.
    Magnolia Petroleum Co.,
    Dallas, Texas.
    
    Sirs : Reference is made to your claim filed in connection with an overpayment of-corporation income-tax erroneously or illegally collected for the_year 1916_, which has been allowed by the refund of $105,571.95 _credit of $_
    Under sec. 1324(a) of the revenue act of 1921, interest in the amount of $19,171.21 is payable on $22,360.22 from December 18, 1918, and on $85,853.32 from March 20, 1921 (six months after the date of filing claim), to October 11, 1923 (the date of allowance of the claim). No interest is allowable on the balance because that portion of the refund was not allowed on the bases of claims.
    A check by the disbursing clerk of the department for the amount of such interest is inclosed herewith.
    Respectfully,
    J. G. Bright,
    
      Deputy Commissioner.
    
    The notice of interest allowance for the year 1917 was in words and figures as follows:
    Treasury Department,
    Internal Revenue Bureau,
    
      Washington.
    
    Received July 21,1924. H. M- M.
    Form No. 7782.
    Approved by Comptroller General U. S., March 21, 1922.
    NOTICE OE INTEREST ALLOWANCE
    Claim No. 128432 : District 2-Texas : date of (schedule) allowance October 11, 1923. Schedule I. T. A-7264; Item IT: AD: R: CC: ECW.
    Received July 21,1924. G. L. J.
    Magnolia Petroleum Co.,
    
      Dallas, Texas.
    
    Sirs : Reference is made to your claim filed in connection with an overpayment of-corporation income tax erroneously or illegally collected for the year 1917_, which, has been allowed by the refund of $1,181,075.86 _credit of $_
    Under sec. 1324(a) of the revenue act of 1921, interest in the amount of $16,197.84 is payable on $105,556.34 from March 20, 1921 (six months after date claim was filed), to October 11, 1923 (the date of allowance of the claim). No interest is allowable on the balance as that portion of the refund was not allowed on the basis of the claim.
    A check by the disbursing clerk of the department for the amount of such interest is inclosed herewith.
    [Respectfully,
    J. G. BRIGHT,
    
      Deputy Gortwnissioner.
    
    XVIII. Plaintiff made an indorsement on the back of the aforesaid Treasury warrant in the amount of $35,369.05 as follows:
    “ Indorsement of this warrant for interest on account of refund of internal revenue taxes erroneously collected in the years 1916 and 1917 and the acceptance of the proceeds thereof are solely upon the condition that by doing so the Magnolia Petroleum Company in nowise waives, modifies, or restricts its rights to further claim in the Treasury Department and/or to institute suit in the courts for the recovery of the balance of interest which said company claims it is entitled to under the law, as set forth in printed brief heretofore filed in the office of Commissioner of Internal Revenue on the 23d of February, 1924.”
    The above-mentioned warrant was paid by the United States bearing the above indorsement thereon.
    XIX. “ Regulations No. 33 (revised) governing the collection of the income tax imposed by the act of September 8, 1916, as amended by act of October 3, 1917,” promulgated ■January 2, 1918, were vague and ambiguous, especially in reference to depletion, inventories, and depreciation so that it was impossible for plaintiff when it filed its first amended return on May 27, 1918, to correctly calculate the amount of depletion and depreciation deductions to which plaintiff was entitled under the law and it was likewise impossible for plaintiff, because of the aforesaid conditions of said regulations, to correctly calculate its opening and closing inventories and the conditions aforesaid continued up to and subsequent to the date of payment of said tax for said year.
    
      XX. It had been for many years the consistent practice of the Burean of Internal Revenue, where claims were filed within the statutory period, for taxpayers to amend their claims by asserting new grounds for refund and such amendments were accepted regardless of whether the statutory period within which claim might have been filed had expired or not. However, the amount claimed could not, under such practice, be increased by amendment. This unbroken practice of the bureau continued until partially modified by the action of the Commissioner of Internal Revenue by his letter to plaintiff, dated January 18, 1924, and also partially modified by Law Opinion 1116, issued May 26, 1924, Internal Revenue Cumulative. Bulletin III-l, page 350.
    XXI. The Commissioner of Internal Revenue declined and refused and still declines and refuses to pay to plaintiff interest upon the refund of $1,236,641.81 made on November 22, 1923, in excess of the interest which he paid plaintiff thereon on July 18, 1924, in the amount of $35,369.05.
    XXII. No action upon this claim, other than that herein-before set forth, has been taken before the Congress or any of the departments of the Government.
    The court decided that plaintiff was entitled to recover interest at the rate of 6 per cent per annum to October 11, 1923, on $95,199.09 from. June 14, 1917, on $9,772.88 from August 7, 1917, and on $1,131,075.86 from Juné 15, 1918, less $35,369.05 paid to the plaintiff July 18, 1924, which leaves the amount of recovery $365,799.42.
    
      
       Writ of certiorari granted.
    
   Moss, Judge,

delivered the opinion of the court:

On June 17, 1918, plaintiff, the Magnolia Petroleum Co., filed a claim for a refund of income taxes paid for the year 1916 in the sum of $30,217.11. On September 20, 1920, it filed a supplemental claim for the refund of taxes for the same year in the sum of $114,565.44 or such greater amount as may be refundable.” On June 12, 1920, plaintiff filed claim for the refund of $1,966,600.87 paid on account of its income tax for the year 1917, and on September 20, 1920, it filed a supplemental refund claim on account of the same year for the sum of $1,005,519.42, “ or such greater amount as may be legally refundable.” On October 8, 1923, plaintiff’s claim for the refund of $114,565.44 for the year 1916 was allowed for $105,571.95 and was rejected for the sum of $8,993.49; the claim for the refund of $30,217.11 for the same year was rejected in full; the claim for the refund of $1,966,600.87 on account of the 1917 taxes was allowed for $1,131,075.86, and was rejected for $835,525.01; and the claim for $1,005,519.42 for the same year Was rejected in full. On November 19, 1923, plaintiff received'certificates of overassessment in respect of the year 1916 in the amount of $105,571.95, and for the year 1917 in the sum of $1,131,075.86, and these certificates were accompanied by Treasury warrants for the total amount, $1,236,647.81. The letter of the Commissioner of Internal Eevenue transmitting the payments contained the statement “ interest status will be determined as soon as necessary data can be assembled.”

After certain negotiations between plaintiff and representatives of the Internal Eevenue Bureau on the question of interest plaintiff was allowed, and there was paid to it, the sum of $19,171.21 on the refund- for 1916 and $16,197.84 on the refund of 1917, a total of $35,369.05 on the refund of $1,236,647.81.

Plaintiff contends that it was entitled to receive the sum of $365,964.54 as interest on the allowance of refund. This suit is for the recovery of that amount.

The right of taxpayers to receive interest on amounts refunded as illegal or erroneous collections was first recognized and provided for by section 1324(a) of the revenue act of 1921, approved November 23, 1921 (42 Stat. 227), which reads as follows:

That upon the allowance of a claim for the refund of or credit for internal-revenue taxes paid, interest shall be allowed and paid upon the total amount of such refund or credit at the rate of one-half of 1 per centum per month to the date of such allowance, as follows: (1) If such amount was paid under a specific protest setting forth in detail the basis of and reasons for such protest from the time when such tax was paid, or (2) if such amount was not paid under protest but pursuant to an additional assessment from the time such additional tax was paid, or (3) if no protest was made and the tax was not paid pursuant to an additional assessment from six months after the date of filing such claim for refund or credit. The term 4 additional assessment ’ as used in this section means a further assessment for a tax of the same character previously paid in part.”

By the same act section 177 of the Judicial Code was amended to read as follows:

44 No interest shall be allowed on any claim up to the time of the rendition of judgment by the Court of Claims unless upon a contract expressly stipulating for the payment of interest, except that interest may be allowed in any judgment of any court rendered after the passage of the revenue act of 1921 against the United States for any internal-revenue tax erroneously or illegally assessed or collected, or of any penalty collected without authority, or any sum which was excessive or in any manner wrongfully collected under the internal revenue laws.”

The above act was followed by the revenue act of 1924, approved June 2, 1924, 43 Stat. 253, section 1019 of which contains the following provision:

44 Upon the allowance of a credit or refund of any internal-revenue tax erroneously or illegally assessed or collected, or of any penalty collected without authority, or of any sum which was excessive or in any manner wrongfully collected, interest shall be allowed and paid on the amount of such credit or refund at the rate of 6 per centum per annum from the date such tax, penalty, or sum was paid to the date of the allowance of the refund, or in 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. The term 4 additional assessment’ as used in this section means a further assessment for a tax of the same character previously paid in part.” 48 Stat. 346.

By the act of 1924, section 177 of the Judicial Code as amended was reenacted without change.

By the terms of section 1116 of the revenue act of 1926, 44 Stat. 119, the essential provisions of the act of 1924 were reenacted.

It is the contention of the Government that the applicable statutes for the determination of this case are sections 250(b), 252, and 1324(a) of the act of 1921.

Section 250(b) of that act, 42 Stat. 264, reads as follows:

“As soon as practicable after the return is filed the commissioner shall examine it. If it then appears that the correct amount of the tax is greater or less than that shown in the return, the installments shall be recomputed. If the amount already paid exceeds that which should have been paid on the basis of installments as recomputed, the excess so paid shall be credited against the subsequent installments; and if the amount already exceeds the correct amount of the tax, the excess shall be credited or refunded to the taxpayer in accordance with the provisions of section 252.”

Section 252, 42 Stat. 268, provides—

“ That if, upon the examination of any return * * * it appears that an amount of income, war-profits, or excess-profits tax has been paid in excess of that properly due, then, notwithstanding the provisions of section 3228 of the Revised Statutes, the amount of the excess shall be credited against any income, war-profits, or excess-profits tax, or installment thereof, then due from the taxpayer under any other return, and any balance of such excess shall be immediately refunded to the taxpayer * * *.”

These two sections have no connection whatever with a claim for refund, but are intended to relate to mistake in overpayment by the taxpayer appearing on the face of the return itself, discoverable by the examination provided for in section 250(b), directing the proper credit of such excess payment to taxes due by the taxpayer under any other return, “ and any balance of such excess shall be immediately refunded to the taxpayer.” They are based upon the correct theory that in the event of an overpayment of taxes by mistake, immediately discovered and corrected, the taxpayer should not be entitled to interest. But that is not the case here. In 1918 plaintiff filed claims for refund. These claims were pending and under investigation for five years or more when the commissioner made an allowance of refund amounting in the aggregate to $1,236,641.81, but denied interest on certain items included in the total amount refunded on the ground, as stated in a letter to plaintiff, that “interest is not allowable upon any amount allowed, other than on the basis of the claim, the latter amount being allowed under the general authority of section 252 of the revenue act without reference to a claim having been filed.”

In the enactment of the various statutes on the subject it must have been the general purpose of Congress to save the taxpayer from whom taxes have been illegally or erroneously collected from all loss by paying interest on the amount refunded during the whole time the money was illegally retained by the Government. No interest is provided under section 252, for the simple reason that the excess payment is immediately refunded, and there is consequently no loss to the taxpayer.

Such a situation is in no sense analogous to the case of a taxpayer whose excess payment was retained by the Government for more than five years and was finally discovered in an investigation resulting from the filing of a formal claim for refund.

It is, however, the opinion of the court that the allowance of interest in this case is controlled by the revenue act of 1924. Under this view of the case it will not be necessary to determine the question as to the sufficiency of the protest filed with the payment of the 1917 taxes.

Except in certain particulars not important to the question involved the act of 1924 became effective upon its enactment, the necessary effect of which was to repeal section 1324(a) of the act of 1921. Section 1019 of the act of 1924 eliminated the hard provisions of the earlier act. Under its terms the allowance of interest was not made to depend on the filing and the allowance of a formal claim, nor does it require that the tax shall be paid under protest. It provided, without restriction or condition, for the allowance of interest on amounts refunded at the rate of 6 per cent per a.nrmm to the date of the allowance of the refund. It was not amendatory, in a strict sense, of the act of 1921. It was a substitution of the latter statute for the former, and it was effective on and after June 2, 1924. The final determination and allowance and also the payment of interest occurred after the act of 1924 became effective, at which time the sole existing provision of law for the payment of interest on refunds was that contained in section 1019 of the act of 1924.

It is therefore the opinion of the court that plaintiff is entitled to interest at the rate of 6 per cent per annum on the whole amount of the refund as calculated in the findings herein, amounting to the sum of $365,799.42, and it is so ordered.

Graham, Judge; Hat, Judge; Booth, Judge; and Campbell, Chief Justice, concur.  