dissenting: I dissent from the conclusion reached by the Board upon the first point — “ Intercompany Transportation for Investment.” It seems to me that it is improper to eliminate from the gross income of the carrying company the amount which is paid to it by another company of the affiliated group for the transportation of materials used in additions and betterments. The amount received by the carrier is a part of the revenues; the amount paid therefor by the other company is a capital expenditure. These intercompany transactions do not “ wash out ”; hence, they should not be eliminated. In Helvering v. Post & Sheldon Corporation (C. C. A., 2d Cir.), 71 Fed. (2d) 930, the court said:
* * * But there are occasions when affiliates, despite their consolidation, must still be treated as separate entities, and indeed it is never a priori necessary to treat them otherwise. Burnet v. Aluminum Co., 287 U. S. 292. One such occasion is when they cannot agree to the division between them of the single tax levied on their joint income, in which case it is to be divided “ on the basis of the net income properly assignable to each.” In that division, “ intercompany transactions ” should be included, because affiliates are always separate taxpayers, and because their corporate individuality has been preserved for some deliberate purpose. For instance, it might happen that the whole of the combined income was profits made by one affiliate in sales to another which had itself sold at cost. The first ought to bear the whole tax, and for purposes of the division the incomes would be stated without regard to affiliation.
The maintenance and operating expenses paid by the carrying company constitute “ordinary and necessary expenses” and are legal deductions from gross income under the statute. Manifestly, *403the railroad performing the services can not estimate accurately the cost of such services. The figure of 7 mills per ton mile used by the Board is merely an estimate of what the cost was. That may have been far less than 7 mills per ton mile, as estimated by the officers of the petitioner. I can not believe that it was the intention of Congress that the Board should “ guess ” at a figure to represent such cost.