McKenney v. United States

LITTLETON, Judge. This suit is for the recovery of interest under section 1324 (a) of the Revenue Act of 1921 upon an overpayment for 1917 of $101,031.27 allowed by the Commissioner of Internal Revenue on March 18, 1923, and refunded by treasury cheek of March 26,1923. The question whether plaintiffs are entitled to recover interest upon the refund depends upon whether the statements set forth by the partnership, of which plaintiffs were members, in an application filed with the commissioner May 2, 1922, for determination of the excess profits tax for 1917 in accordance with the provisions of section 210 of the Revenue Act of 1917, which was allowed by the commissioner, were sufficient to constitute a claim for refund within the meaning of section 1324 (a) of the Revenue Act of 1921 entitling plaintiffs to interest on the refund from six months after May 2, 1922, to the date of allowance on March 18, 1923. The partnership insisted before the Commissioner of Internal Revenue, and insists here, that the document of May 2, 1922, was sufficient to constitute a claim for refund authorizing the payment of interest of the amount of the refund, and that since the commissioner allowed the claim he was required by law to compute and allow interest. The commissioner refused to pay interest on the ground that no formal claim for refund had been filed and that the document of May 2, 1922, did not meet the requirements of article 1036 of Regulations 62 with respect to the filing of claims for refund in that it was not sworn to by the taxpayer. The commissioner gave as a further reason for refusing to pay interest that he allowed and paid the refund within the five-year period of limita [670] tion provided in section 252 of the Revenue Act of 1921 and not as the result of the filing of a claim for refund. We are of opinion from the facts in this ease that the plaintiffs are entitled to judgment for interest under section 1324 (a) of the Revenue Act of 1921 upon the refund in question. The document was sufficiently certain to advise the commissioner and to put him upon notice of the grounds of the claim, the facts relied upon in support thereof, and the amount by which the taxpayer claimed that its tax had been overpaid. The taxpayer, with remarkable certainty for a ease of this kind, set forth the amount of the correct tax liability and the amount of the overpayment made. The amount by which the taxpayer in this document claimed that the tax had been overpaid differed from the overpayment finally determined by the commissioner by only $315.36. It is clear from the statements made by the commissioner to the partnership in his letter of October 5, 1922, and the certificate of overassessment of March 26, 1923, that he had allowed.the claim made and had determined and allowed the overpayment upon the basis of the statements therein set forth. The reason given by the commissioner for his refusal to pay interest, that he had allowed and paid the refund within the period of limitation within which he was authorized to make such allowance and payment, and not as the result of the claim, was contrary to fact because the five-year period within which the commissioner was authorized to allow and pay the refund in this case expired on March 1, 1923, which date was the expiration of the five-year period after the return for 1917 was due. Plaintiffs’ income and profits tax returns for the calendar year 1917 were due on March 1, 1918. Section 13 (b) of the Revenue Act of 1916 (39 Stat. 770); section 205 of the excess profits tax act of March 3, 1917 (39 Stat. 1001); and section 211 of the Revenue . Act of 1917, approved October 3, 1917 (40 Stat. 307). The refund in this ease was allowed by the commissioner March 18, 1923, and was paid March 26, 1923. His only authority for allowing and paying the refund was the claim filed by the partnership. After the commissioner had received, considered, and allowed the claim and paid the refund, it was too late for him to say that because of its informality it was not sufficient to permit the allowance of interest. His allowance and payment of the refund upon the basis of the claim made was within the scope of his authority. There is no suggestion that the'allowance and payment of the refund was induced or resulted from fraud or mistake. As was stated by the Supreme Court in Bonwit Teller & Co. v. United States, 51 S. Ct. 395, 397, 75 L. Ed.-, decided April 13, 1931: “The facts found disclose that there was a reasonable or substantial compliance with the amendment. [The statute.] The Commissioner within the .time allowed was advised of the grounds on which plaintiff’s right to refund rested, and was not misled or deceived by plaintiff’s failure to file formal claim and was fully warranted in holding that the waiver and earlier documents wer^ sufficient. Tucker v. Alexander, 275 U. S. 228, 231, 48 S. Ct. 45, 72 L. Ed. 253.” The document in this ease claimed a refund with as great if not greater certainty than the documents in the Bonwit Teller & Co. Case and, as pointed out in that ease by the court: “No statute provides for review of the Commissioner’s determinations in favor of taxpayers when made within the scope of his authority. Such rulings are entitled to much weight.” The fact that the question here is a suit for interest, rather than for a portion of the overpayment allowed but not paid, does not change the situation. A claim that is sufficient for one purpose is sufficient for another. Having allowed and paid the refund upon the basis of the statements and claims set forth in the application, which he could not have done without treating the document as a claim for refund, it was thereafter too late for him to change his opinion about it and refuse to pay the plaintiffs the interest which the statute makes mandatory as the result of his allowance of the claim. See Lasher v. United States, 65 Ct. Cl. 295. The facts in this ease distinguish it from Stauffer, Eshleman & Co., Ltd., v. United States, 66 Ct. Cl. 277, and Maas & Waldstein Co. v. United States, 37 F.(2d) 196, 68 Ct. Cl. 613. The last-mentioned ease turned upon the question whether a request for special assessment without any claim or showing that there had been an overpayment constituted such a protest as would entitle the plaintiffs to interest under the 1921 act. The opinion indicates that this court would be without jurisdiction of a suit for interest upon a refund allowed by the commissioner as a result of special assessment as to do so would be to change the amount found by the commissioner, and, further, that section 1324 (a) does not apply to a request for special assessment, but only to claims where the action of the commissioner is subject to review by the [671] courts. These statements went beyond the necessities of that ease, since the court had already decided that the request for special assessment did not constitute a protest. The interest provisions of the statute are general and apply to all refunds falling within their terms. They are mandatory and repose no discretion in the commissioner beyond the determination of the fact whether the tax was paid under protest, or pursuant to an additional assessment, or whether a claim for refund or credit was filed; a fact which does not require the exercise of any discretion or knowledge of accountancy but only the deterjnination of an ordinary fact concerning which the courts constantly review the decisions of administrative officers. The matter of interest in no way enters into the amount of profits tax that the commissioner may determine under the special assessment provisions. Once he has made a computation of the tax under the special assessment provisions, the discretionary authority vested in him, which the courts can not review, is at an end. The question whether the taxpayer is entitled to interest on an overpayment resulting from the computation of tax under the special assessment provisions is as much within the jurisdiction of the courts as is the question whether a taxpayer is entitled to interest on an overpayment resulting from any other cause. Plaintiffs are entitled to judgment for $2,942.57, representing interest at 6 per cent, on $5,530.94 from November 19, 1920, to March 18, 1923, and on $95,500.33 from November 2, 1922, to March 18, 1923. Judgment in favor of plaintiffs for $2,942.57 will be entered. It is so ordered.