We have given most careful consideration to this appeal with the result that the decree of the Circuit Judge be affirmed and made the judgment of this Court.
We wish, however, to add the following observations to the decree:
The fact that the respondent is a foreign corporation should not in any manner affect the "method" of taxation as provided in the statute. The word "value" in Section 2451 is used merely in reference to ascertaining a taxation basis when the foreign corporation conducts business in other places than in this State. It is not used in relation to depreciation.
In 1922 an income tax law was enacted, applicable to incomes received in 1921, which adopted the federal income tax returns of all citizens of this State who made returns and which required the payment of one-third of the federal tax. This continued until 1926, when the State decided to have its separate and distinct income tax law. This was a complete breakaway from the federal law, and, as a natural consequence, the federal authorities cited by the appellant *Page 332 do not appear to be applicable to the question herein involved. We are forced to a construction of our own statute.
The Income Tax Act of 1926 recognized the right of the taxpayer to take depreciation on the property therein mentioned and this depreciation is upon the cost of the property plus improvements. The cost can be determined in only one of two methods: Either the cost of construction or the purchase price. Speculation as to what might have been is usually useless, but we cannot refrain from saying that had the Act contained the word "value" instead of "cost" all of this difficulty would have been obviated. The value in 1926 might have been favorable to one taxpayer and detrimental to another, but there would at least have been a stable foundation for the basis of depreciation.
The respondent does not claim depreciation between the years 1921 and 1926 for the reason that depreciation for those years was allowed by the federal law and the respondent obtained this advantage through the relation of the State law to the federal law. The respondent does not, however, admit the legality of this concession.
Doubtful or ambiguous language in taxation statutes is to be construed in favor of the taxpayer. As said by the Supreme Court of the United States in Gould v. Gould,245 U.S. 151, 38 S.Ct., 53, 62 L.Ed., 211: "In case of doubt they are construed most strongly against the government, and in favor of the citizen."
But where the legislative intent, as disclosed on the face of the Act, is clear, there is no need for the invocation of this rule. Here the language of the statute is unambiguous and leaves no room for doubt that it was the intention of the Legislature that the taxpayer in computing his net income for the purpose of determining the taxes imposed by the Act of 1926, and for each succeeding year, should be allowed a reasonable deduction for depreciation based upon cost of his depreciable assets used in his trade or business. *Page 333
The enactment of the Act of 1926 repealed the Act of 1922 except as to uncollected taxes under that Act and, in so far as the Act of 1926 is concerned, it was as though no former Act had ever been passed. A new starting point was fixed by the Act of 1926, and under the terms of that Act the taxpayer is allowed a reasonable depreciation based upon cost.
While the Act of 1926 fixes a new point of beginning for depreciation based on cost, it would not be equitable or reasonable to permit the taxpayer to claim the right of 100 per cent. depreciation beginning in 1926 when he has had the advantage of depreciation since 1921 through the medium of the federal law. Such per cent. of depreciation as had been, or may have been, claimed since 1921 should be deducted from his future claims for depreciation. To permit the taxpayer to commence his claim in 1926 when he has already been allowed depreciation since 1921 would not be such reasonable depreciation as is contemplated in the Act. Moreover, having been allowed depreciation from 1921, the taxpayer would be estopped from denying this benefit received by him.
In adopting the decree of the Circuit Judge we wish to say that we do not altogether approve of his frequent use of the word "value." For instance, he says: "But in 1926, the right to fix actual value was given to the taxpayer, and on its first return under the 1926 Act, plaintiff fixed the actual value of its property and based its income tax return on that value."
The allowance for depreciation, as clearly expressed in the Act, is based on cost and the arbitrary fixing of a value as of March 1, 1913, in accordance with the federal law, should have no bearing upon the question of cost, which, under the Act of 1926, is the only basis for calculating depreciation.
The Act of 1926, being concededly separate and distinct and a total breakaway from the federal Act, I do not see *Page 334 how the federal Act can be called upon to determine any feature of depreciation applicable to this case.
This opinion was written as the leading opinion of the Court, but the other members of the Court having disagreed, it is filed as a dissenting opinion.
Let the decree of the Circuit Judge be reported in connection herewith.